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BOGOTA, Colombia -- Carulla Vivero here is in the midst of an aggressive growth program designed to make it a major player in Latin America.The company, created last August through the merger of the 70-store Carulla chain and the eight-unit Vivero operation, has nearly doubled its size to 155 stores over the past nine months, with plans to continue expanding in Colombia and, within three to five years,

BOGOTA, Colombia -- Carulla Vivero here is in the midst of an aggressive growth program designed to make it a major player in Latin America.

The company, created last August through the merger of the 70-store Carulla chain and the eight-unit Vivero operation, has nearly doubled its size to 155 stores over the past nine months, with plans to continue expanding in Colombia and, within three to five years, to seek opportunities in neighboring Venezuela and Ecuador.

With only about half of Colombia's consumers opting to shop at supermarkets, growth opportunities abound, Sam Azout, president of Carulla Vivero, told SN.

"We are on a fast-paced growth track, and although Colombia has many problems, there are also many opportunities.

"Only 51% of Colombians shop at supermarkets while the other 49% still use mom-and-pop-style tiendas and public markets, so there is a lot of opportunity for us as customers migrate from the traditional outlets to more formal retail stores."

According to Azout, the high percentage of shoppers who still patronize smaller outlets is not unusual in Latin America.

"The percentage is down to 15% to 25% in countries like Argentina, Brazil and Chile," he noted, "because global companies like Carrefour and Wal-Mart have been there for several years. But it's taken longer for globalization to get to Colombia."

Among the reasons, he explained, are an economy still suffering from a recession that struck in the late 1990s, and ongoing problems resulting from occasionally violent conflicts between the government and guerrilla groups.

"But it's still one of the best-kept secrets that Colombia is a country full of excellent opportunities. So we look forward to taking full advantage of the retail opportunities that are here.

"And as the No. 2 market-share chain in the country, we have to try harder."

Efforts by Carulla Vivero to "try harder" are evident. Since creating a 78-store chain last summer, the company has added 77 stores through a series of acquisitions that included the following:

Magali, a seven-store operator in Cartagena, Colombia, with sales of $40 million, acquired last October.

Confama, a 35-store chain in Medellin, with sales of $100 million, acquired in April.

El Cafetero, a 16-store operator on the outskirts of Medellin, with sales of $15 million, also acquired in April.

A series of smaller acquisitions that added 19 independent units.

As a result of its growth activity, Carulla Vivero expects sales this year to reach $600 million, Azout said -- a 33% increase over last year's $450 million.

Azout said the source of its initial growth capital was Newbridge Andean Partners, a Washington-based investment banker involved in the Latin America market.

Newbridge invested $20 million in Vivero, his family's company, in 1998, Azout said, and $25 million in Carulla in 1999 before overseeing the merger of the two companies last year under Vivero's younger, more aggressive management team.

In April, Carulla Vivero developed its own source of financing when it sold bonds totaling $35 million to Colombian institutional investors to help fund its ongoing growth, Azout explained.

The success of Carulla Vivero is reflected in its stock price, he added, which has risen from about $2 a share to $3.50 a share over the last six months.

According to Azout, the inspiration for the merger was the desire to create a multiformat chain. Those formats are:

Carulla, a conventional neighborhood-store format. The company operates 85 Carulla stores, primarily here in the nation's capital, that average 12,000 square feet of selling space; it also has 12 Carulla Express convenience stores.

Vivero, a supercenter format with 13 locations, primarily in Barranquilla, on Colombia's northern coast, that averages 85,000 square feet of sales space.

Merquefacil, a limited-assortment discount grocery format, operating primarily here and in Medellin. The company has 45 Merquefacil stores averaging 4,500 square feet, with plans to take the banner nationwide beginning next year, when it plans to open five stores a month for a total of 60 units in 2002.

Azout said the Carulla and Vivero stores utilize the same high-low pricing approach, although prices at Carulla have been falling as the chain seeks to broaden its appeal beyond just high-end shoppers to include more middle-income consumers, Azout said. The Merquefacil stores use a combination of promotional and everyday low pricing, he added.

As the company acquires stores, they are being converted to one of the three existing banners, Azout said.

Howard Solganik, a Dayton, Ohio-based consultant who works with Carulla Vivero said it is "a phenomenal company. Its appetite for growth is extraordinary, and its ability to execute multiple formats simultaneously is something I've never seen in a company this size."

In addition to retail stores, Carulla Vivero operates a produce distribution center, a centralized bakery, a meat processing plant that also produces sausages and tamales, and a water purification and bottling facility.

Azout said Carulla Vivero is adding five new stores this year -- three of which are already open -- with the expansion pace scheduled to pick up next year when it opens three Carulla units, two Viveros and 60 units of Merquefacil.

"Over the next three to five years we are looking at expansion into Venezuela and Ecuador, possibly through acquisition," he added.

The company opened its most unusual store in March -- a 12,000-square-foot Carulla unit in the Rosales section of Bogota, "which is the most upscale neighborhood in Colombia," Azout said.

After the company acquired the property, it learned it could not demolish the old mansion that stood on the site, so it took a unique approach to refurbishing it -- leaving the exterior unchanged but adding a 7,000-square-foot grocery and produce section on the lower level that runs underneath the store's parking lot, while merchandising deli, bakery and wine on the ground floor and second floor of the building.

The layout requires shoppers to move up and down stairs using steps or an elevator, "but it has such a nice flair to it that people seem happy to go up and down," Azout said. Azout, 42, was born and raised in Barranquilla, where his family operated Vivero, which was originally a chain of mass-merchandise stores. After earning a bachelor's degree in economics from Cornell University and an M.B.A. from Georgetown University, Azout returned to Colombia and helped move the family business into food.

"We began adding groceries in the late 1980s, and by the early 1990s we were in the supercenter business," Azout explained.

In 1996 his father retired and Azout took over. The following year he began seeking investors to help grow the company, ultimately selling a minority portion of Vivero to Newbridge in 1998.

"After Newbridge invested in our company and saw the kind of business that was being done in Colombia, it decided to invest in Carulla, with whom we competed only slightly," he said.

Carulla, founded in 1906, was a food importer that opened Colombia's first self-service supermarket in 1953, "and over the years it developed a strong name and brand. But by the mid-1980s management had become rather complacent, and inertia had set in," Azout said.

"And when global operators like Carrefour, Makro and Casino began moving into Latin America in the 1990s, Carulla lost a lot of market share, though it always maintained its reputation for quality perishables and freshness."

The merger of the two companies -- and the subsequent acquisition activity -- made Carulla Vivero Colombia's second largest chain, with a market share of 16%.

According to Azout, the country's leader is Exito Cadenalco (a company in which France-based Casino has a 30% stake), with a 28% share and sales of $1.2 billion, and in third place is Olimpico, a locally based food-and-drug operator, whose share is 12%, with volume of $400 million.

"Our goal is to be the leading chain -- not necessarily the largest but the most profitable and the most efficient," he said.

Carulla Vivero is already very profitable, with operating cash flow last year of 6.1% -- "which is the average in Latin America," Azout said.

"Because of the synergies and the purchasing power we're picking up from the mergers, we expect operating cash flow to exceed 6.5% this year," he added.

Azout noted that the move of global operators like Carrefour and Casino into Colombia has helped promote better store standards very quickly, "and today our stores compare very favorably with operations in other developing countries," he said.

According to Solganik, the Carulla Vivero stores "are as clean as any U.S. supermarket. And they offer a full supermarket assortment, although the mix is different."

He said Colombia could be a self-sustaining country, "given that it has more natural resources per square mile than many other nations and is a major oil exporter. And it is the major supplier of flowers for this country.

"But most of its people are very poor, with 21% unemployment and 13% of the people living in absolute poverty in a country where a salary equivalent to $50 a week is generally considered a good income."