One indelible image of Latin America is the independent “mom-and-pop” shop: ubiquitous retailers that range from street stands and kiosks peddling soft drinks and snacks to corner stores selling groceries—roughly a million such businesses in Brazil, more than 800,000 in Mexico, and 400,000 in Colombia, for example. Despite the inevitable consolidation as large modern retailers (such as Carrefour, 7-Eleven, and Wal-Mart Stores) grow, mom and pops will represent a significant share of retail sales in Latin America and many other emerging markets for quite some time.

Traditionally, large packaged-goods companies have earned healthy margins by selling directly to mom and pops. Small shopkeepers, who have only limited negotiating leverage, often provide favorable or even exclusive distribution deals in return for support such as coolers, shelves, and merchandising services. In this environment major Latin American (and some multinational) packaged-goods companies have enough scale and standardized service to fend off smaller competitors and earn favorable returns.

But it’s becoming more difficult for consumer goods companies to earn easy profits from mom and pops. The appeal of serving them has attracted an increasing number of...