Executive Summary
Chile punches above its weight in terms of the prestige and business impact its retailers make in Latin America.
While Chile has the third largest absolute number of top 250 regional retail brands in LATAM, it generates the most retail revenue dollars per citizen, and has the fewest number of citizens to support each of its top 250 brands.
The leading Chilean retailers (i.e., Cencosud and Falabella) generate around 45% of their revenues from the rest of Latin America.
Mexican and Brazilian retailers have had the luxury to rely almost exclusively on domestic consumption to fuel growth.
Falabella and Cencosud, combined, own 8 shopping malls in Colombia comprising 282,306 m² (i.e., 3.1 million ft²) making the Chilean retailers together a top 5 shopping mall owner in Colombia.
The intense competition between Chilean retailers has sharpened them to a point where most observers now agree that Chile contains the most sophisticated retail industry human resources and capital markets in Latin America.
Introduction
Chile punches above its weight in terms of the prestige and business impact its retailers make in Latin America. According to a 2023 Deloitte report, Chile is home to two of the top 100 global retail brands ranked by annual revenues. The only other Latin American country to make the list was Mexico, with one.
Figure 1: Countries Ranked By Number of Top 100 Retail Brands (w/ pop. over 18 million)
When the list is expanded to include the top 250 global retailers, the number of global retail brands headquartered in Latin America increases from three to eleven. While Chile has the third largest absolute number of top 250 regional brands, it generates the most retail revenue dollars per citizen, and has the fewest number of citizens to support each of its top 250 brands. This indicates the level of efficiency of Chilean retailers, and that they generate significant revenues outside of their home market.
Figure 2: LATAM Retail Companies Ranked in the TOP 250
The remainder of this article is aimed at understanding how and why Chile came to be such a relatively dominate retail player in Latin America, and the region’s top exporter of retail expertise and capital.
Large Chilean Retailers Are Regional Players
The leading Chilean retailers (i.e., Cencosud and Falabella) generate around 45% of their revenues from the rest of Latin America, with the remaining coming from their domestic operations. The limiting factors of having a relatively small population and economy, and intense domestic retail competition, forced Chile’s major retailers to trade in the region if they wished to grow beyond a certain point.
Figure 3: Share of LATAM Top 250 Revenues From Domestic and Rest of LATAM
Mexico’s FEMSA derives much of its revenues outside of Mexico, however, its major shareholder is Coke-a-Cola, positioning the company as Coke’s regional bottling operating company. Brazil’s Natura & Co is also an interesting case in that it is a truly global company with a relatively small amount of its revenues coming from Brazil. Apart from these two exceptions, Mexican and Brazilian retailers have had the luxury to rely almost exclusively on domestic consumption to fuel growth.
Chile’s major retailers are locally derived and owned. This isn’t the case in every country in the region. For example, Colombia’s largest retailer is Exito, which is majority controlled by the French retail behemoth, Casino Group. As aforementioned, Mexico’s largest retailer, FEMSA, is heavily influenced by its largest shareholder, Coke-a-Cola.
Cencosud and Falabella own impressive shopping mall properties throughout Latin America. Operating in the foreign markets were they trade as landlords gives them valuable perspectives and insights into these foreign economies. To put their holdings in context, Colombia’s largest mall owner is Viva Malls which has 15 malls in the country comprising 483,997 m² (i.e., 5.2 million ft²). Falabella and Cencosud, combined, own 8 malls in Colombia comprising 282,306 m² (i.e., 3.1 million ft²) making the Chilean retailers together a top 5 shopping mall owner in Colombia.
Figure 4: Shopping Malls & GLA Owned in LATAM by Falabella and Cencosud
Chile’s Economic Miracle
A variable which has assisted Chile’s retailers is the incredible economic revival it has recently experienced which is often refereed to as, Chile’s economic miracle. The miracle began in the 1980s when a group of economists began implementing reforms promoting economic liberalization, privatization of state-owned enterprises, and stabilization of inflation. These reforms led to inflation never exceeding 10% since 1995, a landmark for Latin America. In 1990, the poverty rate was 29% and by 2013 it was down to 2%. GDP per capita in 1970 was $6,384, and in 2022 had increased to a region-leading $16,906. The country’s economy grew by $20 billion in 2017, the same year when Argentina’s fell by $123 billion. The business conditions in Chile have been favorable to grow sophisticated retail businesses, develop human resources, and support specialized capital markets.
Figure 5: Selected Country GDP, Population, and GDP Per Capita
Beyond Falabella & Cencosud
A list of the top 8 Chilean retailers, ranked by market cap, indicates on one hand the dominance of Falabella and Cencosud which represent 83.6% of the total market cap of the sample. On the other hand, it shows the competitiveness of the Chilean retail environment. The intense competition between Chilean retailers has sharpened them to a point where most observers now agree that Chile contains the most sophisticated retail industry human resources and capital markets in Latin America.
Figure 6: Chile’s Top 8 Retailers by Market Cap
The third largest retailer on the list is SMU, a holding company of mainly supermarket brands which also trades in nearby Peru. Its main brand is Unimarc, which has 289 Chilean stores, followed by Mayorista, Alvi and Super 10, with 96 combined stores. The company recently sold its 131 OK Market stores to the Mexican company FEMSA (i.e., owner of OXXO et al.) making it the dominate convenience store operator in the country. SMU’s Peru operations contain 1 distribution center and 26 supermarkets, with revenues from the country representing around 2% of the total. SMU is therefore likely the best representative of the size a retailer in Chile can expect to grow without significantly expanding outside of its home market.
Forus is next on the list of top Chilean domiciled retailers and they specialize in footwear and accessories with operations in Chile, Peru, Colombia and Uruguay. 84.8% of sales are derived domestically, with Chile, Uruguay and Peru contributing 3.5%, 5.6% and 6.1%, respectively. The company’s business model is primarily to be the regional franchisee for major international apparel brands. In Colombia, for example, Forus owns and operates the Hush Puppies, Cat and Merrell stores with 54 shops in the country.
The remaining retailers on the list generate more than 90% of their revenues domestically. Colombia and Peru have been the most popular secondary markets for Chilean retailers, followed by Argentina and Brazil.
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