Despite possessing all the hallmarks of a prime market for the Cash & Carry model, Brazil remains an underutilized opportunity for the bulk grocery, hard discount (stores that sell a limited selection of products at rock-bottom prices) format. Cash & Carry, known in Brazil as “atacarejo” (a Portuguese portmanteau of varejo for retail and atacado for wholesale), blends elements of both traditional retail and wholesale shopping. By offering steep discounts through limited product assortments, streamlined operations, and a focus on bulk sales, it remains highly appealing in price-sensitive markets.

MERE is a Russia-based group that began expanding into Europe before geopolitical challenges got in its way and now seems to have its sights set on Brazil. The economic landscape, a growing geopolitical shift away from the U.S., shifting consumer preferences, and increasing global investment in low-cost retail could accelerate its entrance into the Brazilian market.

Despite the format’s long-established presence in Brazil, operators frequently find themselves diluting the model’s core principles by expanding product variety, incorporating premium concepts, and adding services to attract higher-income consumers. These shifts have gradually eroded the fundamental strength of ‘Cash & Carry’—low prices—which, in turn, has left the sector increasingly vulnerable to competition from hard discounters eyeing entry into the Brazilian market.

The Rise of Hard Discounters

As the retail world continues to evolve, hard discounters are emerging as the next wave of low-cost grocery shopping. Aldi and Lidl, two of the most well-known hard discount chains worldwide, have aggressively expanded and now operate in over 20 countries, each with more than 12,000 stores. Their growth is not limited to high-income nations; they have also gained a significant presence in lower-income countries, disrupting traditional retail models, and proving that the format is highly adaptable beyond Western Europe.

In China, Aldi has strategically positioned itself as a budget-friendly alternative in an increasingly price-sensitive retail environment, leveraging a mix of local sourcing and private labels to keep costs low. In Mexico, Aldi’s entry reflects its ability to compete in a market historically dominated by regional grocers and convenience stores, appealing to middle- and low-income consumers looking for no-frills, cost-effective grocery options.

Similarly, Lidl has made strides in Serbia and Bulgaria, where it has rapidly expanded by offering deep discounts and a highly efficient supply chain, reshaping the grocery landscape. These success stories mirror the growing influence of Cash & Carry formats in other developing markets.

The key factors driving the success of the hard discount model boil down to three core principles:

• Cost Leadership: Hard discounters maintain low prices through bulk purchasing, a streamlined product assortment, and highly efficient operations.
• Operational Efficiency: By eliminating unnecessary overhead and offering a true self-service shopping experience, these retailers minimize operating costs.
• Strategic Discipline: Strict adherence to these efficiency-driven practices ensures scalability and sustained growth in competitive markets.

While private-label products are often associated with hard discounters, they are not the foundation of the model. Instead, these retailers introduce private brands only after achieving significant scale. In the early stages, their competitive edge relies on an ultra-efficient cost structure and a highly curated product selection that keeps expenses—and prices—as low as possible.

Global Expansion of Hard Discounters

The rapid global spread of hard discount grocery chains is striking. Apart from Aldi and Lidl, several other players are making significant inroads across the developing world and Eastern Europe:

• Biedronka (Poland): Owned by Portuguese retail giant Jerónimo Martins.
• ARA (Colombia): Another Jerónimo Martins venture.
• BIM (Turkey): Over 11,000 stores in just two decades.
• 3B (Mexico): More than 2,000 stores and expanding into Bolivia.
• Femsa (Mexico): The company behind OXXO convenience stores is now entering the hard discount segment with its BARA chain.
• D1 (Colombia): Over 2,000 stores competing with ARA.
• Penny Market (Eastern Europe): Owned by the REWE Group, this discount chain is expanding rapidly across countries like Romania, Czechia, and Hungary.

So, What About Brazil?

With a population of 212 million and a low-middle-income economy, Brazil seems like a natural fit for the hard discount grocery model. Aside from the poorest segments, Brazilian consumers have long favored product variety, shopping experiences, and customer service over bare-bones, budget-focused retail. This preference has kept food prices elevated, as many consumers willingly pay more for their groceries—an ingrained habit that experts say has had a direct impact on inflation.

So pronounced is this tendency to overpay that President Luiz Inácio “Lula” da Silva has taken the unusual step of publicly urging low-income shoppers to stop buying overpriced goods. By highlighting consumer behavior as a key driver of food costs, Lula has made it clear that price sensitivity—especially among those struggling financially—can shape market dynamics.

Lula’s influence on food policy stretches back to his first term when he introduced programs aimed at stabilizing food prices, subsidizing essentials, and supporting local agriculture. Initiatives like PRONAF (National Program for Strengthening Family Agriculture) and Fome Zero (Zero Hunger) boosted the purchasing power of low-income families, making food more affordable across all retail formats. Some experts who watch the Brazilian grocery space closely, including The Robin Report’s Phil Lempert, believe that while these efforts improved food security, they also undercut the appeal of local discount grocers by narrowing the price advantage that once set them apart from traditional mass grocery chains.

The rapid rise of online grocery shopping in Brazil has only intensified the challenges facing traditional discounters. With smartphone adoption at 88 percent as of 2023, digital-savvy shoppers – even ones in lower income brackets – now find it relatively easy to compare groceries prices online. For hard discounters like Cash & Carry, this shift means they are no longer just competing on price but must also navigate an increasingly digital marketplace where convenience and accessibility are becoming just as critical.

These market dynamics help explain why Brazil’s bulk discounters have deviated from their original low-cost mission. Once focused solely on price, the Cash & Carry model has had to evolve—broadening product assortments and enhancing services to stay competitive. However, this strategic pivot has come at a cost, steadily eroding the price gap between discount and traditional supermarkets. As a result, the door is now open for international hard discounters to step in and capitalize on Brazil’s growing demand for truly budget-friendly grocery alternatives.

Brazilian Brand Leaders

It’s worth noting that in Brazil, several domestically owned hard discount grocery brands have established significant footholds by catering to cost-conscious consumers.

• Atacadão, a prominent player in the wholesale and retail sector, operates over 250 stores nationwide, offering a no-frills shopping experience with products often displayed on pallets and sold at reduced prices. The chain is particularly prevalent in urban centers and has recently expanded its footprint internationally.
• Another notable brand is Epa Supermercados which focuses on serving economic consumer classes C, D and with a strong presence in the states of Minas Gerais and Espírito Santo.
• Additionally, Assaí Atacadista has emerged as a key player in the hard discount segment having expanded its presence across various regions, offering competitive prices and catering to both individual consumers and small businesses.

Cash & Carry at Risk

However, as local incumbents are quickly discovering, merely replicating the hard discount model and then “Brazilianizing” it is not enough. The success of the Cash & Carry format demands an unwavering, almost obsessive commitment to a disciplined business strategy. Companies that have attempted to introduce hard discount concepts in Brazil without fully embracing the model have struggled. A prime example is Grupo Pão de Açúcar’s launch of Minibox in the 1980s—a venture that ultimately failed due to its perception as a low-end store with outdated inventory, rather than a true hard discounter driven by operational efficiency and cost leadership.

When all is said and done, the Brazilian Cash & Carry market remains highly contested and ripe for disruption. While well-capitalized local players currently dominate, its sheer scale and growth potential make it an enticing opportunity for new foreign entrants who will find it difficult to resist.

A case in point is the Spanish-owned DIA, a hard discounter with a strong presence across Europe and South America. Recognizing Brazil’s potential, DIA has already planted many flags in the country and now operates over 600 stores steadily expanding its footprint in the competitive retail landscape. And more international flags are on their way.

MERE is a Russia-based group that began expanding into Europe before geopolitical challenges got in its way and now seems to have its sights set on Brazil, according to Brazilian retail analyst Marcos Escudeiro. The economic landscape, a growing geopolitical shift away from the U.S., shifting consumer preferences, and increasing global investment in low-cost retail could accelerate its entrance into the Brazilian market.

It’s the Economy, Stupid

The global grocery retail industry is undergoing a significant transformation driven by the increasing demand for lower-priced groceries. Across multiple markets, hard discount retailers are gaining traction as consumers prioritize affordability over traditional shopping experiences. In Colombia, the hard discount sector has surged, with over 4,800 stores now in operation. Canada has witnessed a shift where hard discount sales have surpassed those of conventional supermarkets, prompting major retailers like Metro to expand their discount chains, Super C in Quebec and Food Basics in Ontario, to fend off competition. In the United Kingdom, 65 percent of shoppers have migrated to Aldi or Lidl for the majority of their grocery purchases, with hard discounters now accounting for 20 percent of the market. France is experiencing increased pressure on traditional hypermarkets as discount chains like Action and Netto capture a growing share of price-conscious consumers. In India, the emergence of small-format hard discount retailers is reshaping the market, catering to a growing middle class that is increasingly seeking budget-friendly food essentials. These developments underscore a broader global shift toward cost-efficient grocery models, further solidifying the dominance of hard discount retailers in the evolving retail landscape.

Brazilian retailers and investors must critically assess whether the country can continue to resist the global shift toward hard discounting. Local operators in Brazil need to ask themselves some very hard questions: Is Brazil’s consumer base truly more insulated by higher disposable income compared to other markets, or is the future of the Cash & Carry sector increasingly reliant on foreign entrants committed to preserving the core principles of the hard discount model? The answer will determine whether domestic players adapt or risk ceding market share to international competitors that remain steadfast in their low-cost, high-efficiency strategies.

Only time will tell, but one thing is certain: Change is on the horizon, and Brazil is no longer just a battleground for local incumbents. As global Cash & Carry giants set their sights on the market, the question is not if disruption will come, but when and who will define the future of hard discounting in Brazil. Will it be homegrown players willing to double down on the model’s fundamentals, or foreign challengers ready to reshape the landscape entirely?