Brazil: Growth Market for the Future Executive Briefing

February 2008

Executive Briefing

Brazil: Growth Market

Euromonitor International >

Factors Affecting Consumer Spending

Socio-Economic Economic + political stability (though poverty remains widespread) Emergence of new middle class Poor infrastructure, though FDI on the rise High level of contraband + piracy Companies Vast informal market limits growth of legal business Manufacturers use heavy marketing + NPD to remain competitive Neighbourhood stores take share from large grocery outlets Retailers diversify their product ranges Expansion of manufacturers + retailers into north/north-east of Brazil

Demographic Population 189 million Young (median age 27 years) but beginning to age Highly urbanised concentrated in south/south east Smaller households increasing with affluence

Consumers With economic stability consumers buy more on credit Women in paid for employment able to spend Trend towards packaged convenience foods High emphasis on looking and feeling good, eating healthily

Executive Briefing

Brazil: Growth Market

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Market Trends: Packaged Foods

Rising incomes enabled the mass market to have access to a limited number of sophisticated packaged food products for the first time Bakery and dairy products have largest share within packaged foods, with sales of US$21.0 billion and US$15.4 billion in 2007 respectively Demand for convenience means strongest growth (2002-2007)seen in emerging sectors such as: - baby foods (+227%) - chilled processed foods (+188%),. Packaged food companies focused on innovation, - healthier alternatives, - small-sized packaging for low-income consumers.
Top Five Packaged Food Sectors 2007 (Sales in US$ mn)
Bakery products Dairy products Dried processed food Confectionery Oils and fats 0 5,000 10,000 15,000 20,000 25,000

Executive Briefing

Brazil: Growth Market

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Market Trends: Drinks

Drinks Markets 2007 (Sales in US$ mn)
12,000 10,000 8,000 6,000 4,000 2,000 0 Soft drinks Alcoholic drinks Hot drinks

Drinks performed well over the 2002-2007 period; most sectors witnessing triple-digit growth in value, despite pressure on prices Soft drinks sector characterised by flavour innovation - local fruits such as graviola, caj and aa in concentrates - watermelon and pear in fruit juices - tangerine in carbonates, and flavoured waters. Carbonates formed largest sector of soft drinks, but lost share to healthier alternatives Beer and wine achieved dramatic growth as a result of strong marketing, the introduction of new imported brands and packaging developments. Strong growth in the coffee sector driven by heavily promoted gourmet coffees

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Brazil: Growth Market

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Market Trends: Cosmetics & Toiletries

One of the world's largest market for cosmetics & toiletries - all sectors saw triple-digit value growth over the 2002-2007 period . Drivers of growth: - continuing importance of personal appearance - large youth market - more working women with disposable income - ageing of the population and body conscious culture - product innovation.- local brands strong and sold direct Hair care the largest sector -boosted by segmentation catering to different hair types Skin care the most dynamic sector, fuelled by technological developments, including nanotechnology. Sun care expected to grow strongly from a small base as consumers become more aware of sun damage and trade up to more sophisticated products.
Top Five Cosmetics & Toiletries Sectors 2007 (Sales in US$ mn)
Hair care Fragrances Skin care Oral hygiene Deodorants 0 1,000 2,000 3,000 4,000 5,000 6,000

Executive Briefing

Brazil: Growth Market

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Market Trends: Other FMCGs

Top Five Other FMCG Sectors 2007 (sales in US$ mn)

Tobacco Household care OTC Healthcare Disposable paper products Pet food and pet care products 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

Tobacco was the largest of the other FMCG sectors but also worst performing. Hit by falling number of smokers (due to anti-smoking measures and contraband products) Household care achieved 108% value growth from 2002-2007, fuelled by manufacturers attempts to target low-income consumers with specially designed products, small pack sizes and low prices. The OTC market remains strictly regulated and continues to be hindered by the availability of under-the-counter/illegal medicines. Herbal products performed particularly well, due to a trend towards all things natural. Disposable paper products and pet foods achieved respective value growth of 121% and 152% as consumers upgraded from economy to standard and premium products.
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Executive Briefing

Brazil: Growth Market

Euromonitor International >

Market Trends: Non-FMCGs

Spurred by currency stabilisation, higher purchasing power and increased credit options, Brazilians are spending more on leisure goods
Clothing & footwear the largest sector, with sales of US$32.9 billion in 2007. Volume sales continue to rise strongly (driven largely by the childrens market), but value sales were hit by declining prices (influx of cheaper items on the informal market)

Rising incomes and the opportunity to pay for items in instalments boosted many electronics sectors, including computers, mobile phones, hi-fis and DVD players.
The availability of cheap, Chinese toys drove growth in the toys & games sector, although value declined due to price pressure.

Top Five Non-FMCG Sectors 2007 (sales in US$ mn)

Clothing/footw ear Housew ares/home furnishings Computers DIY and gardening Domestic electrical appliances 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000

Executive Briefing

Brazil: Growth Market

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Market Trends: Services

Services such as retailing, consumer foodservice and tourism all benefited from economic stability and rising disposable incomes All foodservice sectors achieved triple-digit value growth from 2002-2007, most low-income consumers can still only afford to eat in cheap local establishments. Starbucks and other specialist coffee chains in Brazilin 2006 and fast food progressed strongly Brazilians began to travel more, - domestic tourism expenditure up by 127% - outgoing tourist expenditure up by 174% Retailers responded to consumers preference for shopping locally by developing more neighbourhood concepts and discounter chains. Retailers diversified their product ranges and offered more credit lines, reflecting consumer demand. Direct selling remains popular in Brazil, and Internet shopping is beginning to take off as a result of increasing PC ownership.

Executive Briefing

Brazil: Growth Market

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Forecast Trends
Discovery of a new oilfield off Brazils coast, plus Brazils development as an alternative energy superpower, may herald a further economic boost Steady gains in real incomes and employment, lower inflation and rapid growth in household credit will contribute to economic growth However, economic reforms are necessary before Brazil can achieve sustainable, longterm growth. Brazils large population of young, increasingly well-off consumers, more working women and more single and dual households favour future growth Manufacturers will continue to invest heavily at both ends of the price spectrum: expensive niche products for the elite as well as low-end generics for low-income consumers. The next six years will see a shift towards the historically poor regions of north and northeast Brazil, but problems of infrastructure will need to be overcome.

Executive Briefing

Brazil: Growth Market

Euromonitor International >

About this Presentation

This presentation distils some of the main findings of Euromonitor Internationals Strategy Briefing: Brazil: Growth Market for the Future It is designed for clients to use in their own forum and should provoke lively discussion at senior level. It is also an ideal way into the report itself.

About Strategy Briefings Strategy Briefings is a series of reports that alert you to global trends predicted to influence consumer markets. They offer insight to changing market conditions and the opportunities and challenges companies need to consider to maintain a competitive advantage. For other titles in the series, see http://www.euromonitor.com/Strategy_Briefings

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Brazil: Growth Market

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