Assaí (ASAI3) Faces Persistent Impact from Sports Betting on 2025 Earnings

• Why Is Assaí’s Growth Lagging Behind Inflation?
• How Is Sports Betting Reshaping Consumer Behavior?
• What’s Behind the "Reduflation" Crisis?
• Can Private-Label Products Save Margins?
• Will Selling Medicines Be a Game-Changer?
• FAQs: Your Burning Questions Answered

Assaí Atacadista (ASAI3) continues to grapple with the Ripple effects of Brazil’s booming sports betting industry, as consumers shift spending from groceries to wagers. CEO Belmiro Gomes highlights a stark "trade-down" trend, especially in the Northeast, where disposable income is increasingly diverted to betting platforms. Despite a 4.6% same-store sales growth in Q2 2025, results fell short of inflation-adjusted targets. The company is pivoting to private-label products and exploring pharmacy sales to offset margin pressures. Meanwhile, food manufacturers shrink package sizes to mask price hikes—a tactic Assaí calls "reduflation." Here’s the full breakdown.

Why Is Assaí’s Growth Lagging Behind Inflation?

Assaí’s Q2 2025 same-store sales ROSE just 4.6%, below the company’s inflation-beating target. CEO Belmiro Gomes pinned this on a perfect storm: high interest rates, household debt, and the explosive growth of sports betting apps. "When extra cash lands in consumers’ pockets, it’s more likely to fund a bet than a grocery run," Gomes told analysts. TradingView data shows ASAI3 shares dropped 3.8% post-earnings, underperforming the Ibovespa’s 0.22% dip. The "trade-down" effect—where shoppers swap branded items for cheaper alternatives—has hit hardest in the Northeast, where betting platforms like Bet365 and Blaze dominate ad spaces.

How Is Sports Betting Reshaping Consumer Behavior?

Gomes didn’t mince words: "Sportsbooks are outspending us on marketing 10-to-1." With Brazil’s betting market projected to hit $2.5 billion in 2025 (per H2 Gambling Capital), low-income households now allocate ~7% of discretionary income to wagers—up from 2% in 2023. The CEO noted surreal cases where customers buy single eggs or half-loaves of bread to free up betting funds. "It’s not just poverty; it’s a prioritization shift," said BTCC analyst Carlos Menezes. "For many, a R$5 accumulator bet now trumps a liter of milk."

What’s Behind the "Reduflation" Crisis?

VP Wlamir dos Anjos revealed food manufacturers are aggressively shrinking packages while holding prices steady—a practice locally dubbed "reduflation." Chocolate bars that weighed 150g in 2024 now clock in at 120g, while cream cans shed 20% volume. "We expected this to ease by mid-2025, but suppliers are still playing musical chairs with package sizes," dos Anjos said. The BTCC team’s analysis of 100 SKUs showed average volume reductions of 12-18% since January, with no corresponding price drops.

Can Private-Label Products Save Margins?

Assaí plans to launch 200+ private-label items in H2 2025, targeting 30% gross margins vs. the current 22% average. "Our ‘Casa Própria’ brand will cover staples from rice to detergent," Gomes shared. The MOVE mirrors Carrefour’s successful "Qualitá" line, which now drives 18% of its Brazilian revenue. However, industry veterans caution that private labels require massive scale—something Assaí’s 1,023 stores may struggle to deliver versus GPA’s 2,100+ outlets.

Will Selling Medicines Be a Game-Changer?

Assaí confirmed it’s lobbying to sell OTC drugs, currently a pharmacy monopoly. "Logistically, it’s simpler than our butcher shops," Gomes argued, noting 85% of stores already have refrigerated sections that could stock medicines. But regulatory hurdles loom—Brazil’s pharmacy lobby spent R$38 million in 2024 fighting such proposals. If approved, Assaí could tap into the R$25 billion OTC market, though analysts warn margins WOULD be razor-thin (~8%) due to price controls.

FAQs: Your Burning Questions Answered

How much has sports betting impacted Assaí’s sales?

While Assaí hasn’t quantified the exact impact, BTCC estimates betting-related spending shifts could be shaving 1.2-1.8% off annual revenue growth based on consumer surveys in low-income neighborhoods.

What’s Assaí’s stock outlook after the Q2 miss?

TradingView charts show ASAI3 testing key support at R$14.80—a break below could signal further downside. Of 25 analysts, 12 now rate it "Hold" (vs. 8 "Buys" in Q1), with average PT of R$17.20.

Are other retailers facing similar "trade-down" pressures?

Yes—Carrefour reported a 290bps increase in budget-brand sales last quarter, while GPA noted a 15% rise in installment purchases for basic groceries.