Arlon buys stake in Brazilian wholesaler amid appetite for ‘affordable’ foodstuff

The firm, which launched its Latin American fund in 2013 with a target of $400m, has since raised at least $147m for the vehicle.

Arlon Group, a buyout house backed by Rabobank and trading firm Continental Grain, has purchased a “substantial minority” stake in Brazilian wholesaler OK Superatacado.

The company provides “affordable” products to retail customers and food service companies including restaurants, bars and distributors. Based in the southeastern state of Espirito Santo, the ‘cash-and-carry’ wholesaler currently has six stores.

Financial details were undisclosed and Arlon declined to comment.

In 2013, the food and agribusiness-focused firm launched its Arlon Latin America Partners fund with a target of $400 million. The vehicle has since raised at least $147.35 million, SEC filings show.

Arlon appears to be responding to a change in the shopping habits of Brazilian consumers recently highlighted by the US Department of Agriculture, which said Brazil’s changing social fabric could help increase demand for US agricultural products. While there have lately been signs of a move towards healthier and organic offerings among the country’s middle class, high food prices at the height of the recession in 2015 forced a change in Brazilian’s spending habits.

“Retailers and importers began re-branding well-known premium brands to create less expensive products,” the USDA said in September. “Offering ‘bonus packs’ and ‘price discounts’ became important tools for promoting product sales.”

Beware the rebound

An industry source familiar with the market told Agri Investor that the wholesale model had gained traction in Brazil gradually over the past decade, beginning with local supermarkets purchasing wholesale operations. The source added that while the recession, which officially ended in Q2 2017, did make consumers more price-conscious, that might not prove the dominant trend.

“We’re starting to come out of the recession, so if that was the entire rationale, you have to careful because whatever drove the trend for the past three years into that channel is not going to be the same going forward.”

Arlon’s stake in OK stands at 35 percent, according to a local report, which added that the firm will have the option to increase its ownership to 45 percent sometime before 2024, when plans call for the firm’s position in the company to be sold to a new buyer.

“Our partnership will not only strengthen us financially, but also bring us their management expertise and knowledge of global food and retail chains,” OK director of expansion Samuel Roncetti said. “We will leverage their resources and contacts to further consolidate OK’s presence in the region by opening new stores.”

Any Brazilian city with more than 100,000 inhabitants will be considered for expansion, reports said.