Why OXXO's Brazilian Exit Matters: Lessons from a $20 Billion Market.

Analysis of OXXO’s Departure from Brazil: Key Insights and Supporting Stats

International Expansion has always been subject to change. In fact, nothing specific really defines internalionalization and yet, everything in the process of growing a company is relevant to a successful market entry, which, in my humble opinion, it is just the easiest part; what comes next is a deal breaker (or hopefully maker) of that success, whichever metrics are appropriate to measure it.

The departure of the Mexican convenience store chain OXXO from Brazil reflects the challenges faced by international retailers when entering a complex and competitive market. As a subsidiary of FEMSA, OXXO is no amateur and is a dominant player in the convenience store sector across Latin America. Its exit from Brazil, announced in late 2023, highlights the importance of tailoring strategies to local conditions and understanding market dynamics.

"Brazil is not for amateurs. OXXO, though, is no amateur."

Brazil, as the largest economy in Latin America, presents significant opportunities but also a unique way of doing business to get it right, which imposes barriers that can stymie even well-established international brands.

Here are 05 insights I would like to exchange with you:

1. Challenges in Competing with Established Local Players

OXXO faced stiff competition from local giants such as the American AMPM, which operates over 2,500 stores nationwide, mostly attached to petrol stations, and small, independent retailers, which command 48% of Brazil's grocery and convenience market share. Such consumer loyalty to hyperlocal options is hard to replicate as it is already inherited in the Brazilian consumer's daily routine.

Since OXXO has launched in Brazil, back in 2020, it only managed to establish approximately 140 stores by late 2023 (nearly half of what they initially targeted), a very modest footprint compared to its 21,000 global stores.

source: AmericaEconomía | Mexico Daily Post

2. Mismatch with Brazilian Consumer Behavior

Around 67% of Brazilians' last purchases were at neighborhood stores or bakeries for daily needs due to their proximity, familiarity, and community ties. OXXO did not managed to adapt to Brazil's consumer preferences. once it prevailed a standardized model.

Local retailers frequently provide several types of informal credit and payment alternatives, a practice embraced by 85% of small retailers, which contrasts with OXXO’s cash-and-card-only transactions, which likely reduced its appeal to price-sensitive and credit-dependent customers.

source: PYMNTS | Cybersource

3. Operational and Logistical Constraints

OXXO’s limited scale in Brazil may have hindered cost-efficiency, especially when compared to competitors with well-established logistics networks linked to fuel stations.

And the vast geography and infrastructure challenges in Brazil presented hurdles in securing prime retail locations and optimizing OXXO's supply chain.

4. Economic and Regulatory Barriers

The corporate tax burden in Brazil, averaging 34%, remains one of the region's highest, posing financial challenges to new market entrants.

And Brazil’s 4.9% inflation rate in 2023, coupled with high operational costs, likely eroded OXXO's profitability.

Despite its potential, the Brazilian convenience store market, valued at BRL 20 billion (USD ~4 billion) in 2022, is intensely competitive, with an annual growth rate of 7% attracting both local and international players (such as Grupo P?o de A?ucar and Carrefour, respectively).

source: Euromonitor | MarketResearch

5. Lessons for International Retailers

OXXO’s withdrawal demonstrates the importance of aligning strategies with local market realities. While the chain thrives in its home market of Mexico, which is also a Latin American culture, its inability to replicate this success in Brazil underscores the risks of a one-size-fits-all approach.

"You'll be surprised... even large enterprises make small and obvious mistakes. That, though, can cost their overall investment in new markets."

Same applies to companies of all sectors expanding to any market: comprehensive market research, deeper cultural integration, and strategic access with local stakeholders are essential for navigating different ecosystems.

If you like these insights, let me know in the comments so we can enhance our "informal think tank" and it encourages more articles on topics regarding international markets.

Ludmilla Figueiredo, @ludfigueiredo

Founder & CEO, Global Markets