Final day..
Today is our last official day of the trip. We’re meeting with four important people and will finish the day with an amazing “End of the World” party 😉
So let’s start..
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Groupo Pão de Açúcar
Grupo Pão de Açúcar (literally “Sugar loaf group” as you probably can see from their logo) is one of the biggest retail company in Brazil. They have different brands of stores, mostly targeting middle and upper class people. In total they have 1,900 points of sales and are present in all parts of the country, however with a strong focus on the Southeast (Rio & Sao Paolo).
Here is one of their stores I visited in Rio:
Really nice supermarket.. felt absolutely the same like in the US or in Europe..
The interesting thing is that they see themselves as a logistic company instead of a supermarket chain. Their official slogan is even “the largest distributor in Latin America”. However, when we asked them about how they make the logistics in the rural parts of Brazil work, he mentioned that they always have to make a profit analysis. And as a result, they are less focused on less populated regions such as the north.
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Key takeaways:
- Inflation & price sensitivity: In the past, high inflation made it very difficult to compare prices. Therefore, since the inflation has been lower and more stable, people started to compare prices more and to search for the cheapest price available. In general, Brazilians are not loyal shoppers.
- Change in consumer behavior: The consumer basket is getting more diverse: more categories, more foreign products, more brands. Furthermore, people from lower income classes also want to have the products the middle & upper class uses. Therefore, they usually develop smaller product sizes in order to make if more affordable to them. In the US and Europe it’s the total opposite. You try to buy in bulk so that it gets cheaper.
- e-commerce: So far there is low trust in e-commerce. They had a lot of issues with fraud, stolen data and so on. Therefore, people are still more willing to call and order than to fully buy online.
- Product penetration: Change in the last couple of years: Washing machine: 36 > 44%, fridge: 89 > 93%, TV: 90 > 96% (so there are more TV’s than refrigerators in this country?!??), Computers: 15 > 39% (no wonder e-commerce is not developed yet)
- Demographic bonus: Similar to what the CEO & CFO from Camargo Corrêa mentioned, Brazil will have a demographic bonus in the next couple of years because the baby boomers are entering the workforce. However, this will effect will decline over time, so they have to make us of it as much as possible.
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The life of Roger Agnelli
The next meeting was one of the most fascinating of our trip! We met with Roger Agnelli (apparently part of the wider Italian Agnelli family), former CEO of Vale, one of the biggest mining companies in the world. He was recently named one of the most valuable CEOs by the Harvard Business Review for his work at Vale (total shareholder return was about 1,000% – not bad) > check out the analysis.
However, he was kicked out of Vale, because he apparently disagreed with Dilma (oh boy, no woman with whom you want to disagree with). Anyway, now he has more time to speak with interested Stanford students 😉
The cool thing about this meeting that he just did Q&A. He basically talked for an hour about life in general and his outlook about Brazil in particular. And he definitely had some strong opinions..
A short summary how Mr. Agnelli sees the world:
- China: Incredible economic boom and grow of urbanization. In his view, all the negative opinions about China are just rumors. China will continue to grow and consume more commodities and especially proteins. They have money and people, but not enough resources.
- Brazil: And this is where Brazil comes into the game. Brazil has the most advanced agriculture technology in the world (e.g. yield per hectare). However, in order to connect those two countries, logistics are key (roads, ports etc.)
- Europe: He sees no future in Europe. Maybe they might be able to do a little bit of tourism (boom, wow..)
- Africa: For him this is the place to go!!! It’s unbelievable how excited he is about Africa. In his view, it is like Brazil 50 years ago! They have a lot of natural resources and about one billion people, however they don’t use it! They import everything! So if you really want to make big business and change something – go to Africa!
- Investing in Africa: A lot of Africans are very rich. But there are not many good opportunities to invest in Africa. So they hide all their money in Switzerland.
- About supporting the community: “If you don’t include the community into your business, you’re done! It’s not a matter of being good, it’s a matter of making money”
- “You are rich, because you are young!” He literally used this slogan twenty times during our meeting 😉 Maybe his in a midlife crisis ;)??
- Advise for us: Build a legacy! Do something! Think long-term, be smart short-term!
In general, his opinions were mostly common sense. But the way he presented them was incredibly charismatic. He probably really likes to hear his voice 😉
For me the main takeaway was that we have to align our careers and lives with the long-term prospect of the world. I definitely want to go back to Switzerland. But as he correctly pointed out, Europe is not the future of the world.. rather the opposite.. So this will definitely affect my life..
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Meet Mr. Central Bank
In the afternoon, we met with Henrique Meirelles, former president of the Brazilian central bank from 2003-10. During his period at the central bank, he was able to reduce the inflation and improve the stability of the country.
He is almost 70 now, but still an incredible knowledgeable and wise man. He is also on the board of J&F, the biggest meat producer in the world, and Azul Airlines, which we met earlier in this week. Furthermore, he’s an advisor to KKR.
Key takeaways:
- About the inflation decades: From 1900-70, Brazil had one of the highest growth rate in the world. However, in the 70ies the government started to leverage more and more. So when the FED stopped the liquidity, Brazil basically went bankrupt.
- About Lula: When Lula won the elections in 2003, he made a smart move. Although he is from another party, he elected Meirelles as president for the central bank. This was a completely unexpected move, but it increased the respect and the independence Meirelles had in his role.
- About his beginning: He made the joke that you can clearly see who is the current “problem child” in the global financial system. So in the early 2000, he was always the center of attention during the meetings of all the central bankers.
- About the current politics: He was very wise in saying that he has a rule of never commenting on the current government or central bank policies. I felt this was a very intelligent and mature decision. He was probably also glad when his predecessor did the same.
- Why Brazil’s growth rate is slowing down: Their growth rate basically dropped from 10% to 2% without any problems or increase in unemployment. Everything is still going smooth. For him this drop is mainly a problem of success: no enough skilled labor, not enough credit to finance all their projects etc. However, Brazil might open up its borders (e.g to people from Portugal or Spain) to improve the labor market.
- Low savings rate: Compared to other countries, Brazil has a very low savings rate. In his view, this is because people didn’t have money before, so they want to enjoy their new wealth.
- BNDES vs. capital markets: The government thinks the financial system doesn’t invest enough in Brazil. So they force BNDES to do it. But in his view, it might also be that BNDES is draining the market with their low interest rates.
I can’t even write down all the details he mentioned, because it was such a dense meeting. He had a really interesting life!
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Banking, banking, banking..
The last meeting of our trip was with the CEO of Itau Unibanco, one of the biggest banks in Latin America. They basically have branches everywhere you go!
Key takeaways:
- Global banking system: The banking system is a reflection of the power of a country. E.g. in the 80s the global banking system was dominated by Japanese banks. Today two of the Top 5 banks in the world are Chinese.
- High inflation: During the time with high inflation, the main goal of the bank was to protect its assets. This totally changed in the past couple of years. Furthermore, since the inflation decreased investors are more interested in long-term products.
- Their clients: Most of the people have their bank account through their job. Therefore, they don’t do for example student financing, because the students will switch their bank account anyway once they start working.
- Investors: As mentioned by other speakers as well, most of the companies are controlled by BNDES, institutional investors and pension funds and of course foreign investors. So there is actually not a big free flow of capital.
Because we already had a lot of other meetings, it was actually difficult to find new insights. However, the meeting was very good to confirm a couple of statements we already heard from other speakers.
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End of the world!!!!!
Or not..
Anyway, we still celebrated accordingly by partying all night long in Sao Paolo 😉 One of the best parties ever :)!!!!
Thank you Sao Paolo!
Tags: Sao Paulo
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