In search for intense professionalization, better performance, efficiency, productivity and profitability and following the changes implemented in the Corporate Governance model, CBD defined guidelines that will drive its performance in the coming years.
Strategic Planning
The new guidelines scope, which has been spread among all employees of the organization includes the Company's Mission and Vision and contemplates a growth plan for CBD in the 2004-2008 period. Such goals, established over the coming five years, have being build with the introduction of an innovative long-term planning culture, which is not very usual in the retail industry, where immediate outlooks prevail.
In order to execute our strategy, we also intend to continue to expand our selling space through store openings and acquisitions, further improve efficiencies, improve our margins, offer new products to increase revenues, customer traffic without increasing our fixed costs, and continued attention to improvements in corporate governance.
Expand our selling space
 We seek to continue our expansion plan, which is designed to maximize growth opportunities available to us and to capitalize on the economies of scale afforded large chains in the Brazilian food retail industry. We believe significant opportunities exist to profitably increase our selling space in areas in which we currently operate and in other markets currently underserved by supermarkets.. Most of our organic growth will be in regions where we already have a presence in order to increase our area of coverage and, as a result, to achieve greater market penetration and economies of scale. We carefully evaluate potential store sites based on market research, the ability of the relevant geographic market to support a new store at the selected site, as well as our ability to supply the site. We also evaluate a potential site’s attractiveness and the appropriate store format through analysis of demographic data covering population and income shifts, consumption patterns, traffic patterns and the proximity to one of our distribution centers. We continually explore strategic acquisition opportunities of supermarket chains or individual supermarkets for existing markets or new geographic regions to add to or substitute for new store openings. For example, our association with Sendas in the state of Rio de Janeiro resulted in the association of 68 new stores and significantly increased our presence in this market. When entering new markets, we have historically sought to acquire local supermarket chains to benefit from their existing know how of the geographic region and to begin operating new stores more quickly and in a more cost-efficient manner than through construction.
Further improve efficiencies
We continually seek to improve operating efficiencies in connection with our supply chain. We were one of the first supermarket chains in Brazil to equip its stores with a point of sale, or POS, system and utilize a computer automated ordering system that automatically replenishes our inventory. We intend to improve operating efficiencies in other stages of the supply chain, particularly product outflow, by increasing the volume of merchandise going through our distribution centers. In 2004, approximately 85% of our inventory came directly from one of our distribution centers instead of our suppliers. In 2004, we combined our perishable and groceries divisions into one unit in an effort to rationalize and reduce costs and we consolidated our non-food product area and our flower division in order to achieve operating efficiency. Also, as part of our strategy, we intend to substantially increase our cross-docking capability, which should result in working capital savings and lower inventory levels. We also intend to improve handling to further decrease stock-outs, breakage and shrinkage and delivery costs.
 Improve our margins
We have been increasing our focus on reductions and dilution of costs to improve our operating margins. We regularly examine our mix of products and product brands in all of our store formats with a view to increasing sales of higher margin products, and we believe that, as total net sales increase, our negotiating position with suppliers will be further strengthened, allowing us to obtain better prices for the products we purchase. We recently reevaluated and relaunched our private label product line. We believe we may offer our private label products to customers at approximately a 15% to 25% lower cost than leading brands, but at greater margins in relation to average of each category. From 2001 to 2004, our sales of private label products grew 317% and the number of items increased from 125 in 2001 to approximately 3.4 thousand in 2004.
Offer new products and services to increase revenues and customer traffic without increasing fixed costs
We continue to implement measures to increase revenues and customer traffic without increasing our fixed costs. We have begun to offer high-margin products such as extended warranty policies on household appliances and insurance on the payment of household appliances in the event of unemployment or death. We also offer customers the ability to pay their utility bills at checkout counters, for which we receive a fee. We also intend to continue finding alternative uses of non-sales space at our stores, such as the area in front of our checkout counters. Our Itaú CBD partnership to provide credit products and services at CBD’s stores is expected to increase customer traffic and sales. Other initiatives include the addition of gas stations and drugstores in our stores, with the main target of increase customer traffic.
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