Outback in Brazil: Possible Sale by Bloomin' Brands
Bloomin' Brands, the American company responsible for operating Outback Steakhouse in Brazil, recently announced that it is considering the sale of its operations in the country. The decision was revealed during the release of results for the first quarter of this year, when the company reported that it is "exploring and evaluating strategic alternatives" for its largest business outside the United States.
Financial Impact and Context
In the first quarter, Bloomin' Brands' global operations recorded a net loss of US$83.8 million, reversing a profit of US$91.3 million compared to the same period of the previous year. Revenue totaled US$1.2 billion, representing a decline of 4%. The company attributes part of this drop to the impact of value-added tax exemptions in Brazil in 2023.
Performance in Brazil
In the Brazilian market, Outback comparable sales fell slightly by 0.7% in the first quarter compared to the previous year. The brand has been present in the country since 1997 and currently has 159 Outback restaurants, four of which will open in 2023. Even with the expansion, the chain was unable to increase its revenue last year. In addition to Outback, the company operates 37 Abbraccio and Aussie Grill restaurants in Brazil.
Mergers and Acquisitions (M&A) Perspectives
Bradesco BBI assesses that the possible departure of Outback's controlling shareholders in Brazil could boost new mergers and acquisitions in the Brazilian restaurant segment. The bank identifies two potential buyers for the Australian chain: Alsea and Zamp, owner of Burger King in Brazil.
Possible Developments
The possible sale of the Outback in Brazil does not yet have a definitive schedule. According to the newspaper Valor Econômico, the Bloomin' Brands group has been considering this exit since 2022. The company is one of the largest casual dining restaurant chains in the world, with a presence in 13 countries, operating brands such as Carrabba's Italian Grill, Bonefish Grill and Fleming's Prime Steakhouse & Wine Bar.
The departure of companies from Brazil is not necessarily linked only to the security they see in the current government, but to a series of factors that influence companies' decisions to seek new markets or reduce their operations in the country. Some important points that may be leading companies to leave Brazil include:
- Economic Instability : Brazil has been facing economic instability for years, with high inflation rates, exchange rate fluctuations and fiscal challenges. This lack of economic predictability can affect companies' confidence in maintaining their operations in the country.
- High Brazil Cost : Brazil has one of the highest production costs in the world, due to a series of factors such as high taxes, poor infrastructure, excessive bureaucracy and labor costs. This makes the business environment less attractive for companies, especially those seeking greater efficiency and competitiveness.
- Tax Complexity : The Brazilian tax system is known for its complexity, with a large number of taxes, fees and contributions that make tax planning difficult and increase company costs.
- Legal Insecurity : Legal uncertainty in Brazil, with frequent changes in legislation and inconsistent interpretations of laws, can create uncertainty for companies, especially foreign ones, which may prefer countries with a more stable legal environment.
- Corruption and Lack of Transparency : Corruption and lack of transparency in business can affect the image of companies and hinder their operations in the country, especially those that value business ethics and compliance with laws.
- International Competition : Globalization and the opening of markets have increased international competition, leading companies to consider the possibility of expanding to other countries with better business conditions.
These are some of the main reasons that may be leading companies to leave Brazil or reduce their operations in the country. Each company may have specific reasons, but these factors are often considered important in decision making.
Concluding
The possible sale of Outback's operations in Brazil by Bloomin' Brands could represent a significant change in the country's restaurant market. The company's departure could open space for new strategies and investments by other companies in the sector, bringing potential changes and opportunities to the segment. Monitoring the developments of this process will be essential to understand the impact on the Brazilian food and beverage market.
