Dallas, TX -- (SBWire) -- 10/14/2010 -- Strong private consumption in Brazil is continuing to drive the country’s overall economic growth spurt, supported by the rising affluence of middle class consumers. This is reflected in our forecasts for food and drink consumption which are expected to outpace the country’s overall economic growth rate. Foreign investment flows into Brazil continue apace – Barry Callebaut has laid out ambitious plans for the region, saying that it wishes to be the number one chocolate maker in South America. The decision, however, to focus its initial investment in Brazil highlights the unparalleled opportunities available in this rapidly growing consumer market.
Headline Industry Data
2011 per capita food consumption = +7%; forecast to 2014 = +36%
2011 alcoholic drink sales = +4%; forecast to 2014 = +16%
2011 mass grocery retail sales = +5%; forecast to 2014 = +26%
Key Macroeconomic Data
2010 Real GDP growth = +6% (2009, -0.2%)
2010 Consumer Prices = +5.3% chg year-on-year (period average) (2009, +4.3%)
Key Company Trends
Adapting Products for Different Regions – Swiss giant Nestlé has disclosed that its sales growth in north east Brazil is twice that of other regions and that it has adjusted its new product development to focus on specific regional tastes and income levels. In a country with such huge cultural and economic diversity this strategy is certainly essential in the short and medium term, and it would be a mistake for any company to attempt to adopt a one-size fits all strategy when attempting to tap the lucrative Brazilian market. In line with this, Nestlé has announced plans to launch a 'floating supermarket' as part of its strategy to reach isolated Brazilian communities along the Amazon River. Nestlé Brazil's CEO said the service fits with the firm's concept of regionalisation, with the company adapting its strategy depending on the local consumer profile.
Brazil Controls Global Orange Juice Sector – The world’s largest orange juice producer was created in May 2010 with the announcement of the merger of Citrosuco and Citrovita in Brazil. The combined group will have annual revenues of around BRL2bn (US$1.1bn) and will control around a quarter of global production, overtaking local rival Cutrale, which currently produces a fifth of all the orange juice drunk worldwide. The move comes as global orange juice demand continues to rise and puts the combined company in a strong position to drive down costs and harness economies of scale.
Key Risks to Outlook
Rising Inflation – The strength of consumer demand clearly poses a risk of inflation and we are pencilling in several rate hikes over the coming year as the government looks to avoid allowing the economy to overheat. Reining in credit availability is likely to be one such measure, subsequently weighing on private consumption as we move into 2011. Growth will consolidate at a slower pace in the months ahead as more fiscal stimulus measures are wound up and aggressive monetary tightening begins to weigh on consumer demand.
Slowdown in China – In 2009 China became Brazil’s main trade partner and strong Chinese demand for strategic raw materials helped to prop up Brazilian exports. However, overly accommodative fiscal and monetary stimuli in China have led to an overheating that could result in a sharp withdrawal in 2011. As a major commodity-exporting country, Brazil now faces the additional challenge of shifting its exports to markets with more promising longer-term demand than the US and possibly even China.
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ReportsandReports – Brazil Food and Drink Report Q4 2010