For years, major food retailers in Brazil have focused on serving the country’s wealthiest consumers. This strategy has largely run its course. The three largest food retailers in the country still control only about 25 percent of the grocery market and are losing share, even after spending more than $2.5 billion on acquisitions since 2001. To keep growing, they will have to set their sights on a bigger target: 130 million mass-market consumers,¹ who account for almost 70 percent of food consumption in Brazil (Exhibit 1).

Serving these shoppers will be difficult. They expect an elusive combination of value, convenience, selection, and service because that is what they find at the country’s many thousands of unregulated informal retailers, whose questionable business activities—including tax evasion and copyright infringement—allow them to set prices aggressively. How can major retailers compete?

For starters, they can improve their understanding of the mass-market consumers they increasingly hope to serve. Recent McKinsey research (see sidebar “How half the world shops”) sheds light on the shopping behavior and attitudes of Brazil’s mass-market consumers and offers retailers clues...