1. Executive Summary

The Latin American retail sector represents one of the most dynamic consumer markets globally, valued at approximately USD 1.90 trillion in 2025 and projected to reach USD 2.03 trillion by 2026. The region is characterized by a unique blend of large-format modern retail coexisting with traditional channels, rapid e-commerce adoption, and significant cross-border consolidation by major Chilean and Brazilian conglomerates.

This sector overview analyzes the three core retail verticals relevant to Cencosud S.A.'s multi-format strategy: (1) Supermarkets & Grocery, representing 48.3% of total retail and the dominant format; (2) Home Improvement, a cyclically-linked segment driven by construction activity and housing investment; and (3) Shopping Centers, a high-margin real estate play that benefits from retail traffic aggregation.

Key structural themes shaping the sector include: the formalization of retail through modern trade penetration, accelerating e-commerce adoption (LatAm is now the fastest-growing e-commerce region globally at +12.2% in 2025), private label expansion outpacing global averages (+14.2% value growth vs. +5.6% globally), and regulatory evolution — particularly Brazil's comprehensive tax reform (CBS/IBS dual VAT system) and Chile's VAT harmonization on cross-border e-commerce.

The competitive landscape features a concentrated oligopoly in most markets, with Cencosud, Falabella (Sodimac/Tottus), Walmart Chile, SMU, Carrefour Brasil, and GPA as the principal players. Cencosud holds ~30% supermarket market share in Chile, making it the dominant player in its home market, while also maintaining significant positions across Argentina, Brazil, Peru, and Colombia.

2. Market Sizing: TAM / SAM / SOM

2.1 Total Addressable Market (TAM)

The total Latin American retail market — encompassing all formats, channels, and product categories across the region's ~660 million consumers — was valued at USD 1.90 trillion in 2025. Physical retail accounts for approximately USD 2.17 trillion (94% of total), while e-commerce contributes USD 191 billion (6% and growing rapidly). The Food, Beverage & Grocery segment alone represents 56.4% of total retail value, making it by far the largest category.

2.2 Serviceable Addressable Market (SAM)

Cencosud's SAM encompasses the modern retail market across its six operating countries: Chile, Argentina, Brazil, Peru, Colombia, and (historically) the United States via its shopping center portfolio. Filtered for modern trade formats only (supermarkets, hypermarkets, home improvement chains, and shopping centers), the SAM is estimated at USD 380-420 billion.

2.3 Serviceable Obtainable Market (SOM)

Cencosud's current SOM — measured by consolidated revenue — reached CLP 16,595 billion (approximately USD 17.4 billion) in FY2025, representing roughly 4-5% of its addressable SAM. The company operates 1,397 retail stores across six countries with over 3.5 million square meters of sales area and 117,000+ employees.

Growth vectors to expand SOM include: (1) same-store sales growth via private label expansion and omnichannel integration, (2) new store openings in underpenetrated secondary cities, (3) e-commerce acceleration through Jumbo.cl and the broader digital platform, and (4) the high-margin shopping center segment where Cencosud Shopping operates as an independently listed REIT-like structure.

3. Structural Growth Drivers

3.1 Middle Class Expansion & Formal Retail Penetration

Latin America's modern trade penetration remains below 60% in most markets (vs. 80%+ in developed economies), creating substantial runway for supermarket chain expansion. Urbanization trends — with LatAm at ~82% urbanization rate — continue to drive consumers toward organized retail. The rising middle class, particularly in Colombia and Peru, supports premiumization and format diversification.

3.2 E-Commerce Acceleration

Latin America is the fastest-growing e-commerce region globally, with retail e-commerce sales surging 12.2% in 2025 to USD 191.25 billion. Mexico's e-commerce penetration is set to reach 17.7% of total retail sales, surpassing the U.S. (17.0%) for the first time. Argentina, Brazil, and Mexico together account for 84.5% of regional e-commerce sales. Online grocery — still at low single-digit penetration — represents the largest untapped opportunity, with dark stores and quick-commerce models gaining traction in major metros.

3.3 Private Label Expansion

Private labels in Latin America grew 14.2% in value in 2025, nearly three times the global rate of 5.6%. In some product categories (milk, edible oils, shelf-stable fruit), private label share exceeds 50%. This trend directly benefits dominant supermarket operators like Cencosud, as private labels carry 200-500 bps higher gross margins than national brands. Cencosud's own brands (including in supermarkets and Paris) are a key margin lever.

3.4 Shopping Center Densification

With LatAm's shopping center GLA per capita at approximately 30-40% of U.S. levels, there is significant densification potential. Cencosud Shopping — spun off as a separate vehicle — operates premium assets including Costanera Center (Santiago), Unicenter (Buenos Aires), and major malls across Peru and Colombia. The segment benefits from inflation-linked rents, high occupancy rates, and the resilience of experiential retail.

3.5 Omnichannel Integration & Loyalty Programs

Multi-format retailers are investing heavily in unified loyalty ecosystems. Cencosud's Puntos Cencosud program, Falabella's CMR ecosystem, and fintech-linked reward systems drive cross-format spending and improve customer lifetime value. The integration of financial services (credit cards, consumer lending) remains a distinctive feature of Chilean retailers vs. global peers.

4. Competitive Landscape

The Latin American retail sector is dominated by a handful of multi-format conglomerates, primarily of Chilean and Brazilian origin. The competitive dynamics vary significantly by country and format.

4.1 Chile — Supermarket Market Share

4.2 Home Improvement Landscape

The home improvement segment is a duopoly in Chile and Peru between Sodimac (Falabella) and Easy (Cencosud). Sodimac holds market leadership across both countries, while Easy competes effectively as the #2 player. In Colombia, the market includes Homecenter (Sodimac brand) and Easy, while Brazil's home improvement market is more fragmented with Leroy Merlin, Telhanorte, and regional players.

4.3 Shopping Centers

Cencosud Shopping is one of the largest shopping center operators in Latin America with premium assets across five countries. Key competitors include Mallplaza (Falabella), Parque Arauco, Aliansce Sonae (Brazil), and InRetail (Peru). The segment is characterized by high barriers to entry, long-duration leases, and inflation-linked rental escalators.

5. Regulatory Environment

5.1 Chile

Chile's regulatory environment for retail has undergone significant changes. The Tax Compliance Law (Ley de Cumplimiento Tributario) effective October 2025 eliminated the VAT exemption for imports under $41, requiring all international purchases to carry the standard 19% VAT. This levels the playing field for domestic retailers against cross-border e-commerce platforms (AliExpress, Shein, Temu). The estimated additional tax collection is approximately USD 100 million annually.

• VAT now applies to all imports regardless of value (previously exempt under $41)
• Foreign platforms must collect and remit 19% VAT on purchases up to $500
• Pro-competition regulation (FNE/TDLC) actively monitors retail market concentration
• SERNAC consumer protection increasingly focused on e-commerce and pricing transparency

5.2 Brazil

Brazil's comprehensive Tax Reform (Supplementary Law No. 227/2026) introduces a dual VAT system replacing multiple cascading indirect taxes. The CBS (federal) and IBS (state/municipal) will be phased in from 2027-2032. For retailers, this simplification should reduce compliance costs and improve supply chain efficiency, though the transition period creates uncertainty. The combined test rate of 1% (0.9% CBS + 0.1% IBS) began in the test phase, with full implementation expected by 2033.

• Dual VAT (CBS + IBS) replaces PIS, COFINS, ICMS, ISS, IPI — massive simplification
• Phased implementation 2026-2033 creates transition costs but long-term benefits
• Non-cumulative system eliminates cascading taxes, benefiting vertically integrated retailers
• São Paulo: exclusion of goods from ICMS-ST regime starting 2026

5.3 Argentina

Argentina remains the most challenging regulatory environment due to FX controls, import restrictions, and periodic price controls (Precios Justos/Precios Cuidados programs). The hyperinflationary environment (IAS 29 adjustments required) distorts reported financials. Cencosud Argentina's Adjusted EBITDA was significantly impacted by hyperinflation accounting in 2025, though underlying revenue growth exceeded inflation in Q4 2025.

5.4 Peru & Colombia

Peru and Colombia offer relatively stable regulatory frameworks with moderate VAT rates (18% and 19% respectively) and growing support for formal retail. Peru's INDECOPI and Colombia's SIC provide consumer protection oversight. Both markets have low modern trade penetration (~40-50%), making them attractive for expansion. Colombia showed significant revenue and EBITDA growth for Cencosud in 2025.

6. Key Sector KPIs & Benchmarks

Note: Argentina metrics are nominal and subject to IAS 29 hyperinflation adjustments. SSS figures for Argentina reflect high nominal inflation rather than real volume growth. Shopping center EBITDA margins are significantly higher than retail formats due to the asset-light landlord model with inflation-linked rents.

7. Key Industry Trends

7.1 Consolidation & M&A

The LatAm retail sector continues to consolidate. Carrefour's acquisition of BIG (formerly Walmart Brasil) created the dominant Brazilian player. In Chile, the market is already highly concentrated with the top 4 supermarket chains controlling ~75% market share. Further consolidation is limited by antitrust constraints (FNE). Cross-border expansion by Chilean conglomerates (Cencosud into Brazil via GBarbosa; Falabella into Mexico) remains a key strategic theme.

7.2 Omnichannel & Dark Stores

Quick-commerce and dark store models (Rappi, Cornershop/Uber, PedidosYa) are reshaping last-mile grocery delivery. Major retailers are responding with store-pick models, dedicated e-fulfillment centers, and marketplace integrations. Cencosud's Jumbo app and Cornershop integration provide omnichannel capability. The click-and-collect model is growing faster than pure delivery due to lower unit economics.

7.3 Fintech & Credit Integration

Chilean retailers uniquely integrate financial services into their retail operations. Cencosud's financial services division (credit cards, consumer lending, insurance) generates high-margin fee income and drives store traffic. The Scotiabank-Cencosud partnership and Falabella's CMR Puntos/Banco Falabella illustrate the retail-fintech convergence that distinguishes Chilean retailers from global peers.

7.4 Sustainability & ESG

Investors increasingly evaluate retailers on ESG metrics: food waste reduction, circular packaging, Scope 3 emissions from supply chains, and labor practices. Cencosud has committed to sustainability targets including renewable energy adoption in shopping centers and reduction of single-use plastics. ESG reporting quality is a differentiator for access to international capital markets.

8. Investment Implications for Cencosud Coverage

The sector backdrop for Cencosud is constructive, with several tailwinds and manageable headwinds:

Tailwinds

• Dominant #1 supermarket share in Chile (~30%) provides pricing power and supplier leverage
• Private label expansion at +14% growth rate directly benefits largest operators with scale to source and brand
• Chilean VAT equalization on cross-border e-commerce removes a structural disadvantage vs. platforms
• Shopping center segment (Cencosud Shopping) provides high-margin, inflation-protected recurring income
• Colombia showing strongest growth trajectory — revenue and EBITDA acceleration in 2025
• Net income grew 70.4% in FY2025, demonstrating operational leverage and cost discipline

Headwinds

• Argentina hyperinflation distorts reported financials and creates IAS 29 accounting complexity
• Brazil tax reform transition (2026-2033) introduces compliance costs and uncertainty
• E-commerce disruption from MercadoLibre, Rappi, and international platforms
• Home improvement cyclicality linked to construction activity and interest rates
• FX exposure across five currencies creates translation volatility

Key Metrics to Monitor

• Chile SSS growth (real, ex-calendar effects) — core business health indicator
• E-commerce as % of supermarket sales — adoption curve trajectory
• Private label penetration rate — margin expansion proxy
• Cencosud Shopping occupancy rates and rental spreads — real estate value creation
• Argentina EBITDA ex-IAS 29 — underlying business performance net of accounting distortions
• Colombia revenue growth — validates expansion thesis in underpenetrated market

This sector overview will serve as the foundational context for the initiating coverage analysis of Cencosud S.A. (BCS: CENCOSUD) across all subsequent pipeline steps.