In July 2009, as he drove home in the Caracas evening rush hour traffic, José Vicente Aguerrevere (JVA) (HBS MBA 2002), CEO of Día Día (DD), could not be more excited as he thought about tomorrow‟s meeting, when the board of directors would make the final decision regarding a merger with La Diadema (LD). For five heady years, DD had grown from a dream shared among friends into a 32 store retail chain of fast moving consumer goods (FMCG) focused on Venezuela‟s base of the pyramid, well on its way to annual sales of over 284 million Bolívares ($45 million1). Thirteen of the stores had come from the purchase just months ago of the hard discount chain of Groupe Casino, the French global retail giant. To follow this with the incorporation of LD, an established household name with 29 stores, would cap an extraordinary year. However, unlike Casino‟s Q’Precios, LD was not in exactly the same line of business. As a FMCG specialist, DD was specifically designed to meet the daily needs of the family. In its target market, the lower income segments that make up the majority of the Venezuelan population, these needs revolve around the family‟s meals, and DD‟s product line was dominated by food items such as fresh produce, meats, packaged foods, dairy products, beverages, sauces and related household items. LD, on the other hand, was known for its perfumes, cosmetics and toiletries, and household cleaning items. Nevertheless, there were similarities in the retail approach and the clientele of the two chains shared demographic and socioeconomic characteristics, and shopping patterns. Initial tests were positive when the product mix of one chain was included in the offerings of the other, and vice-versa. Additionally, the deal required no cash, bringing 29 stores into the DD system in return for 20% of DD‟s shares, at a time when obtaining investment capital for the private sector in Venezuela was, to say the least, a challenge.
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