From sweet shop to retail giant: the origins of Pão de Açúcar – 02/18/2024 – Market

Grupo Pão de Açúcar, responsible for elevating businessman Abilio Diniz to the select list of Brazilian billionaires, had a timid beginning: it began as a sweet shop on Avenida Brigadeiro Luiz Antônio, in the center of São Paulo.

The year was 1948, and immigrant Valentim dos Santos Diniz, Abilio’s father, decided to name the little shop in honor of the first vision he had of Brazil, when the ship that brought him from Portugal entered Guanabara Bay. Some crew member on the side shouted “look at Pão de Açúcar!”, and the image of the two Rio hills was engraved in the memory of the founder of the retail chain, today one of the largest in the country.

The inauguration date for “su Santos”, as Valentim was known, also has a symbolism with the homeland. It was September 7th, “the day Portugal lost Brazil and I won Pão de Açúcar”, he said in an interview with Revista Exame, in 2002.

The sweet shop offered buffet services, with packaged sweets and savory snacks that became a rage at weddings, baptisms and company parties. The business prospered. Four years after the opening, two more branches were opened nearby, and, in 1959, there was an opportunity to buy land next to Brigadeiro Luiz Antônio’s sweet shop. Valentim wanted to build a cinema, but Abilio, who at the time was finishing his studies in business administration at FGV (Fundação Getulio Vargas), convinced him to open a supermarket.

The first Pão de Açúcar unit was born there, also in the wake of the great innovation among the markets: self-service. Until then, customers requested products directly at the sales owner’s counter, and the Diniz family supermarket opted for the model of removing items directly from the shelves.

In 1963, the supermarket’s second unit was opened on Rua Maria Antônia, also in the center of São Paulo. The first acquisition operation came in 1965, when the Sirva-se chain was incorporated into the operation, taking Pão de Açúcar to 11 stores. From then on, the chain spread and, in 1968, it already consisted of 64 supermarkets. That year, the International Division was created, with units in Portugal, Angola and Spain.

The 1970s were busy for the Group, which was expanding rapidly. At the beginning of the decade, the Jumbo hypermarket was opened in Santo André, in ABC Paulista – the first of its kind in Brazil, which experienced a real buzz for the hyper model until the following decade. You can understand the predilection: at the time, the country was beginning to experience the so-called “hyperinflation”, when consumers stocked up on products at home to escape daily price fluctuations. Jumbo immediately became an attraction for the Pão de Açúcar chain, which diversified its portfolio into wholesale.

The following years were also marked by the purchase of Eletroradiobraz, until then one of the titans of the retail market and owner of Baleia, a hypermarket that competes with Jumbo. Two years later, the Diniz family company acquired more supermarket chains, such as Superbom, Peg-pag and Mercantil, to open up its range with new establishment formats in the 1980s.

From then on, it wasn’t “just” Pão de Açúcar, Jumbo and Assaí, but also Mini-Box, a “simple store” with a few items at low prices, Sandiz, a department chain, and Peg & Faça, focused on DIY. Such an operation led “su Santos” to make a difficult decision: he gave up the affectionate name of Grupo Pão de Açúcar to adopt the more generalist Companhia Brasileira de Distribuição, still in force today, although less known.

In the same decade, the company invested in a business restructuring to focus on the retail sector, and part of this movement began with a reformulation of Jumbo into Extra, aiming to intensify competition in the hypermarket sector.

The new structure, however, was not by chance. In addition to the country’s economy being in bad shape, there was an imbroglio in Valentim’s family: his sons Abilio, Alcides and Arnaldo, who had shares in the company, were at odds. It was then that Abilio stepped away from business and was invited by the then Minister of Planning, Mario Henrique Simonsen, to be part of the CMN (National Monetary Council), coordinating economic bulletins.

Without Abilio, Grupo Pão de Açúcar began to sink and almost went bankrupt. In 1989, after a series of disagreements, Alcides and Arnaldo agreed to sell their shares to their brother, and Abilio, at his father’s invitation, assumed the executive presidency. Valentim, aged 76 at that point, became a member of the company’s Board of Directors.

There began the recovery of the retail giant. In 1995, with Abilio already as the majority shareholder, the Group carried out its first IPO (Initial Public Offering), when it obtained US$ 112.1 million in capital on the Brazilian stock exchange. Two years later, it expanded to New York, and the second IPO raised US$172.5 million. Pão de Açúcar was the first retail company in the country to be listed on the ADR, a North American security backed by shares in foreign companies.

From the IPO in New York until the turn of the millennium, Pão de Açúcar once again expanded its operations, purchasing neighborhood supermarket chains, such as Barateiro and Peralta.

The exodus of the Diniz family

After IPOS, the next step outlined by Abilio Diniz was to find a strategic partner outside the country. It was in 1999 that the Casino Group, a French retail giant, purchased 25% of the total shares, becoming a minority partner in Pão de Açúcar.

From then on, the Diniz family’s participation in the Pão de Açúcar business began to decline. With Valentim’s retirement, Abilio assumed the presidency of the company’s Board of Directors in 2003, passing the baton of executive president to Augusto Marques da Cruz Filho, the first outside the founding family. In 2005, a new holding company was created, and control of Grupo Pão de Açúcar began to be shared: 50% for Abilio, 50% for the Casino group. In 2007, the Group joined Assaí Atacadista, entering the wholesale market once and for all.

While the family was losing ground, the blow came in March 2008: Valentim had died at the age of 94, a victim of multiple organ failure.

At the same time as the family dealt with grief, the acquisitions operation continued at full steam. In 2009, the Ponto Frio chain was purchased. In the same year, Pão de Açúcar joined Casas Bahia, becoming the largest distribution group in Latin America.

It was in 2011 that the dispute for control of the retail chain came into the spotlight. Frustrated, Abilio tried a maneuver: he proposed a merger with the Casino Group’s archrival, also French Carrefour. The plan would create a giant valued at US$41.899 billion, since Carrefour’s operations in Brazil shared the podium with Pão de Açúcar as the largest retail and distribution companies.

As expected, the Casino Group vetoed the agreement, and Abilio suffered a difficult defeat. Shortly afterwards, Jean-Charles Naouri, CEO of the French company, took charge of Pão de Açúcar, in a change that had been announced since 2006.

On September 6, 2013, the eve of the 65th anniversary of the founding of Grupo Pão de Açúcar, Abilio resigned as president of the Board of Directors and ended, once and for all, the family’s participation in the company founded by Valentim.

“On the eve of the day that symbolizes Brazil’s freedom, I also embrace my freedom to continue pursuing my dreams”, said the businessman at the time. Several times during the announcement, Abilio stated that the previous two years had not been easy and, at the end, he thanked his family for having “endured” him during a period “that was not pleasant”.

Since then, Grupo Pão de Açúcar has adopted the acronym GPA as its official name, even though, formally, it is Companhia Brasileira de Distribuição. The objective is to detach the company from the supermarket sector, showing that the brand covers different sectors of the economy.

In recent years, the company has lost its position as the largest retail chain in the country. In 2019, it sold all the shares it held in Via Varejo, the controlling group of Ponto Frio and Casas Bahia, and, in 2021, Assaí Atacadista ceased to be part of GPA and purchased Extra’s operations.

Even though the Diniz family is no longer active in GPA, the roots are still alive: the group’s headquarters continues to be at the same address as the sweet shop founded by Valentim.