Our main competitive strengths are our different retail food store formats, our extensive network of distribution centers, our economies of scale, our prime locations in densely populated urban areas and growing provincial urban areas, and our high level of customer service.
 Different retail food store formats
We conduct our retail food operations under Business Units, Pão de Açúcar, CompreBem-Sendas and Extra, each of which has a distinct merchandising strategy and a strong brand name. We are the only food retailer in Brazil that offers a variety of formats, which enables us to effectively target different classes of consumers.
Extensive network of distribution centers
 We operate distribution centers strategically located within the cities of São Paulo, Brasília, Fortaleza, Curitiba, Rio de Janeiro and Recife. Our distribution centers have a total storage area of 350,000 square meters of built-in area. Our management believes that our network of distribution is the most extensive and technologically advanced product distribution center network in the Brazilian retail food industry. We believe that our facilities are capable of servicing substantially all of our distribution requirements, both for our existing stores and for the stores that we currently plan to open in the near future. Approximately 85% of our inventory in 2004 came directly from a distribution center, a substantial increase from 64% in 2000, resulting in higher bargain power with suppliers, fewer inventory shortages, lower shrinkage and improved working capital management. Many of the functions of our distribution centers are automated, allowing for quicker and more efficient handling of products.
Economies of scale
We enjoy significant economies of scale resulting from our position as the largest food retailer in Brazil. Our large scale gives us increased bargaining power with suppliers, resulting in lower prices for consumers, higher operating margins and more favorable payment terms. Our size permits us to benefit from important marketing channels including prime time television advertising, one of the most effective means to promote sales, which would be prohibitive for smaller retail chains. Our scale also enables us to make major operational investments, such as in technology, which generates attractive returns.
Prime locations in densely populated urban areas and growing provincial urban centers
Since we started our operations in 1959, we have been able to accumulate store locations for our Pão de Açúcar and Extra stores in prime sites that offer significant competitive advantages. Our older stores in São Paulo and Brasília are located in high traffic residential neighborhoods and, as a result, the average monthly sales per square meter in these stores is substantially higher than that of the average supermarket in Brazil. Since prime real estate in these urban areas in Brazil is scarce, new stores would be prohibitively expensive for competitors. Our recent association with Sendas in the state of Rio de Janeiro enabled us to add numerous high quality locations.
 High level of customer service
All of our store formats offer a broad selection of quality products in a pleasant shopping environment that emphasizes customer service. We believe that our emphasis on employee training and our commitment with quality, lead to higher levels of customer service which differentiates us from our competitors. We have also developed customer loyalty and recognition programs which we believe enhance our competitive position. For our Pão de Açúcar, CompreBem-Sendas and Extra formats, we offer a preferred shopping card, which customers present at checkout and which collects information on the shopping patterns of our customers.
Offering of additional products and services
In the past several years, we have begun to expand our range of complementary products and services in an effort to enhance our customer satisfaction and provide additional revenue sources. For example, with respect to the Extra hypermarket format, we have begun to provide additional services tailored to the specific needs of the division’s broad base of customers, such as gasoline stations within the parking area of Extra stores. In addition we are incorporating drugstores into our existing store formats. Our recent association with Sendas has greatly expanded our presence in both gas station and drugstore services.
Our partnership with Itaú Holding, to exploit financial products and services at CBD’s stores, was one of the main highlights for 2004. The Financeira Itaú-CBD (FIC) partnership allows CBD, to offer its customers a wider variety of credit products and facilities. |