Brazil Cash & Carry: Food Inflation to Accelerate, but Sales Area Productivity Unlikely to Follow. Remain Cautious on the Sector.

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Brazil Cash & Carry: Food Inflation to Accelerate, but Sales Area Productivity Unlikely to Follow. Remain Cautious on the Sector.

Morgan S.A.

~19%/12% downside to a (blurry) ’27E consensus net income for Assaí/Mateus, we Froylan Mendez

prefer to stay on the sidelines and see the sector as net funding. (52-55) 5540-9482

froylan.mendez@jpmchase.com

• High household leverage, record increases in betting and GLP-1 drugs are J.P.MorganMorganGrupoCasaFinancierode Bolsa, S.A. de C.V., J.P.

hurting sector momentum. According to ABAD (Brazilian Association of

Wholesalers and Distributors), Brazilian households are diverting a growing

share of a stressed budget away from food/beverages toward online gambling

and, increasingly, GLP-1 weight-loss drugs. According to NielsenIQ, already

~5% of households have someone using GLP-1 drugs, while 26% of total

households regularly engaged in betting during 2025—almost ~2x vs. last year

and with a higher incidence in mid-to-low income classes—normally the target

of cash&carry. In terms of magnitude, March-26 data points to inflows on the

order of ~R$30bn per month into gambling platforms (link), while total GGR

(Gross Gaming Revenues, i.e., the amount wagered minus the amount won /

net household loss) crossed at R$37bn in FY25, equivalent to ~5% of total

ABRAS sales. According to ABAD, among bettors who substitute spending,

the categories they cut are led by food (47%) and household bills (45%).

• Food inflation to continue accelerating, potentially reaching ~5%-6% by

year end... Having said this, it should only catch up to general CPI by

November. Overall, we believe the environment for SSS remains weak, and

top-line growth should remain under pressure, hurt by continued trade-down.