MercadoLibre seeks to expand in fresh foods amid record volumes

Latin American e-commerce powerhouse MercadoLibre Inc is looking to fresh foods to maintain sales growth, after posting record gross merchandise volume of US$7.3 billion in the third quarter.

Just a month after starting to offer fresh food items in Brazil through a partnership with local retailer Mambo, MercadoLibre is looking to replicate the model with partners in Argentina and Mexico, said Andre Chaves, a senior vice-president at the Buenos Aires-based firm.

“It’s early on – we’re focused on the operations to make sure everything is working and ready to escalate,” Chaves said. “This is one of the first steps to the experience.”

Chaves declined to give a timeline for possible partnerships in Argentina and Mexico but said they’re “not far away.” He noted that signing with more vendors in Brazil also remains a possibility.

MercadoLibre, Latin America’s most valuable company, posted net revenue of US$1.9 billion in the third quarter, in line with analyst estimates, according to a statement Thursday. The company reported earnings per share of US$1.92 and gross merchandise volume was at a record, even though they fell short of analyst estimates. The company has boomed since 2020 as the coronavirus pandemic led a growing number of Latin Americans to buy more online and increasingly turn to digital payment options.

“User growth was more modest, but frequency per user is ticking up quite dramatically,” Chaves said.

Analysts have also been closely following positive key performance indicators (KPIs) on the fintech business. The firm’s credit portfolio grew to over US$1.1 billion in the third quarter, up from US$810 million in the previous three months.

Pax concerns

The company said it’s confident it won’t be impacted by a recent FBI raid on Chinese hardware supplier PAX Global Technology, which provides point-of-sales terminals. MercadoLibre counts on five hardware suppliers for its point-of-sales terminals, and uses its own in-house software in them. Brazil fintech competitors PagSeguro Digital Ltd and Stone Co Ltd saw shares plummet last week due to their connection to the supplier.

“Privacy and security is a hot topic for us so we’ll be tracking the developments, but we’re more confident that the firm won’t be impacted,” Chaves said.

He added that the company is not yet facing “major issues” as part of global supply-chain disruptions. The reason is that it has a large base of sellers and that it has a lower role than other competitors in selling consumer electronics, which is one of the key categories affected by the disruptions, Chaves said.

Leadership change

In an earnings call with analysts Thursday, chief financial officer Pedro Arnt announced that Stelleo Tolda, one of the company’s founders, is leaving his full-time role after over two decades at the firm.

Tolda will become an strategic advisor to MercadoLibre from April 1, 2022, while senior vice-president Ariel Szarfsztejn will replace him as commerce president.