Building the largest e-commerce product business in Latin America

April 28, 2021

The vibrant fast-growing online ecosystem of Latin America and the unprecedented digital acceleration caused by the COVID-19 Pandemic are key macro factors driving this opportunity.

There is a massive growth potential in online retail Online sales have been growing at a ~25% clip over the last 5 years in Brazil, but penetration is still at only ~10-12% of retail, compared to ~22%+ in the United States and ~35% in China, demonstrating a massive room for growth. Mexico is also one of the fastest growing e-commerce markets in the world. In the next five years, we should expect to see at least $50B USD being moved from the offline to the online environment in the region, a trend that will create unparalleled opportunities;

Digital native companies are here to stay Similarly to what we saw happening in other markets, the movement of disintermediation of parts of the supply chain is already happening in Latin America. Multiple brands are connecting directly to the end-consumers throughout the entire customer journey, from product ideation to after-sales support. This shift has laid the foundation for the development and growth of direct to consumer digital native companies;

Building great brands into great companies is not easy There are several companies creating a narrow set of SKUs that very rapidly achieve best-in-class ratings on online channels, but in order to go from there towards a billion-dollar business, much more is necessary: an experienced team, access to low-cost capital, development of procurement and international sales capabilities, among other factors. Most entrepreneurs in Latin America would greatly benefit from developing and having access to such skills and capabilities.

Merama believes that adopting a hands-on and collaborative approach with leading-companies is much more powerful than having a pure roll-up strategy.

Merama’s business model starts with one simple principle: partnering with some of the best brands and category-leading merchants across Latin America, and using Merama’s playbook, access to low-cost capital, comprehensive operational experience, portfolio of digital brands, and proprietary technologies, to fuel additional growth. 

Unlike several aggregators that have popped up over the past few years worldwide, Merama wants to work with few companies – carefully and selectively chosen -, purchasing a stake in their equity but keeping in place key attributes of the businesses, starting with their highest-quality executives. Merama understood, right upfront, that succeeding in Latin America requires a lot of hard work, local expertise, and an integrated understanding of the unique challenges of the region.

Merama is building a Latin American conglomerate with a top-notch and diverse team, and a global mindset.

Valor has a strong belief that international connectivity is key to unlocking value throughout the region. Merama was co-founded by American CEO Sujay Tyle, who formerly was Co-Founder and CEO of Frontier Car Group (FCG), which was sold to Naspers for ~$700M USD; French Olivier Scialom (formerly co-founder of Petsy, a pet-focused e-commerce that sold to Maskota); Mexican Felipe Delgado (formerly CEO of Beetmann Energy), and Brazilians Renato Andrade (formerly McKinsey Brazil) and Guilherme Nosralla (formerly Wildlife Studios).

The company, which is HQed in São Paulo and Mexico City, also has teams in Santiago and Buenos Aires, with dozens of operators and visionaries amassing a deep and international expertise in topics such as marketplaces, retail, technology, marketing, operations, finance, and strategy, accumulated from years of experience in companies such as Mercado Libre, Amazon, Falabella, Google, Facebook, Uber, McKinsey, Goldman Sachs and XP. The company was already born with a truly regional DNA and a holistic view of how Latin America works.

Moreover, the Merama team has an ambitious vision of how the globalization of supply chain and sales channels could become unique sources of capturing unparalleled advantages. For individual brands, it is very hard to navigate the challenges and bureaucracies of the international markets, with large obstacles from a customs, price asymmetry, and logistical complexities standpoint. Brands partnering with Merama capture these possibilities, leveraging the platform’s economies of scale and developing a competitive moat.

Merama is growing impressively, building a first mover advantage that will help it consolidate its vision for the region.

Despite having less than 5 months of operations, Merama has already built a team of 40 tier-1 employees all over Latin America, is in talks with dozens of promising companies, and expects to end the year at $100MM USD plus in revenues. 

Some similar models have already been proved abroad such as in the USA (raised ~$1.7B USD in funding) and The Hut Group (publicly traded British company, with a valuation around $9B USD), but Merama is well positioned to be a Latin American winner.

Summarizing his vision for Merama, Sujay Tyle said to us: “we seek to give our partners an unfair advantage. When we decide to work with a team, it is because we believe they will be the de facto category leader and can become a $1B business on their own. Merama’s team, capital, and technology allows them to do this”.

Valor is fully aligned with Sujay’s vision and the opportunity to build a highly valuable product conglomerate that will help a new class of entrepreneurs shape the future of Latin America.