Euromonitor reports that the economy in Brazil expanded in real terms in 2021, driven by increasing domestic consumption, public investment and external demand. However, the persisting pandemic-related risks, supply constraints and global inflationary pressures raise uncertainty and weigh on the country’s economic outlook. Brazil is poised to see elevated short-term inflation, accelerated by a jump in global energy prices and shifts in domestic demand.
In 2022, the population reached 217.2 million, (CIA World Factbook Est.) an increase of 425.5 million since 2000. By population Brazil is the 7th largest country in the world. The median age was 33.2 years in 2022, 7.9 years greater than in 2000.
Fertility has been falling rapidly but it is still 1.8 births per female. The downward trend will decelerate in the future, reaching about 1.6 births per female by 2030. Sterilization, abortion and programs for family planning are driving
the decline.
The number of those over 65 years more than doubled in 2000-2022, reaching 20 million by the end of that period. However, this group still accounts for just 9.2% of total population – a relatively small share compared
with most countries. Demographers expect the ageing process to accelerate in the future, with the share of those over 65 years reaching 13.6% of total population by 2030.
Brazil is a member of the Common Market of the South
(Mercosur), a trade bloc that includes Argentina, Paraguay and Uruguay - Venezuela’s membership in the organization was suspended In August 2017. After the Asian and Russian financial crises, Mercosur adopted a protectionist stance to
guard against exposure to volatile foreign markets and it currently is negotiating Free Trade Agreements with the European Union and Canada.
USDA’s Agricultural Trade Office, FAS, in in Sao Paulo reports that the Brazilian food industry
is well developed, and major multinational companies' presence makes the sector very competitive. In terms of price, U.S. products do not compete with domestically produced goods or Mercosul origin products. When a product imported from
the United States (and other non-Mercosul members) reaches the Brazilian market, it will most likely fit in the premium price category due to the exchange rate and the applied import tariff.
Brazil is the 13th largest U.S. export market
for consumer oriented food products in Latin America. Total U.S. consumer food exports to Brazil dropped 2% to US$212.7 million in 2021. That represented nearly 29% of the agricultural total. Brazil imported US$206.6 million in processed
foods from the U.S. in 2021, ranking 10th in the region and an increase of 8%.
Top processed food exports to Brazil in 2021 included:
Certainly Brazil is going through a difficult time, but the food sector is a key sector for the country and has been less affected than other sectors of the economy. Brazilians spent around 17% of their disposable income on food and this remains unchanged. Brazil continues to be an attractive consumer market. Half of the country’s population of is considered middle class and around 16 million are at the top of the social pyramid, the very rich consumers.
“All of Food Export's programs were a tremendous help getting us export ready, understanding the challenges that come with international business, and learning how to navigate them.”
Katz Gluten Free
Food Export-Northeast Participant since 2018
According to Euromonitor, retail sales in the packaged food market in Brazil are estimated to reach US$89.1 billion in 2022. That makes it the largest in Latin America and the 10th largest in the world. That also represents a growth rate of 33.6% or US$22.4 billion since 2018. The forecast for growth in this market is also quite promising. By the year 2026, the retail sales in the packaged food market in Brazil is expected to reach US$122.6 billion, a growth rate of 37.6%, or US$33.5 billion from 2022.
High growth rates in the forecast included:
FAS Sao Paulo reports that in 2020, the retail industry accounted for US$145 billion. This figure includes the cash-and-carry format, which continued to show an upward trajectory. Brazil’s retail sector includes 91,351 stores and is responsible
for 80% of the country’s food and beverage distribution. Although not considered a concentrated industry, the top ten chains respond for 36% percent of total supermarket gross sales.
Euromonitor reports that the most relevant
events to take place in grocery retailers in 2021 were marked by leading players Carrefour Comércio e Indústria and Cia Brasileira de Distribuição SA. The former acquired Walmart’s former banners in Brazil.
Former Walmart banners in Brazil operated under the umbrella of Grupo BIG from 2018, when Walmart Inc closed all operations in the country. In April 2021, Carrefour announced its acquisition of Grupo BIG, enabling the retailer to increase its
penetration of regions other than the southeast, as Grupo BIG operated a handful of regional chains in the north and northeast of the country. In addition, the acquisition enabled Carrefour to penetrate discounters for the first time, through
the Todo Dia banner.
Towards the end of the year, Cia Brasileira announced the sale of 71 Extra outlets to be incorporated under the warehouse club banner, Assaí, signaling the former’s strategy to terminate all operations
in hypermarkets. Assaí is an “atacarejo” player that was once under the umbrella of Cia Brasileira de Distribuição, having filed for IPO as a separate company in March 2021. In the November, Assaí
acquired part of the entire hypermarket network of its former parent company to convert them to atacarejos under the Assaí banner. As a result, the store network of hypermarkets was significantly reduced, as was overall value sales, with
Cia Brasileira’s remaining Extra stores set to be discontinued over the following years.
This reinforces the scenario where hypermarkets lose ground to channels that are either easier to expand in terms of outlet network, such as
atacarejos, or that have been more successful in meeting consumer demand for convenience, such as smaller grocery retail formats. It also highlights that leading players are resorting to opposing strategies. While Carrefour expands its
operations to other regions and formats through the acquisition of other chains, Cia Brasileira de Distribuição are reducing its structure in the country to concentrate on smaller retail formats and digital strategies focused on food
and drink e-commerce.
In addition, the concept utilizes its own logistics solution to deliver orders to customers, as well as a wide assortment of Cia Brasileira de Distribuição’s private label products. Aliado Minimercado
leverages the convenience store format to seize the opportunity to diversify its operations, meeting the demands of consumers from various income bands in various shopping occasions, but also targeting B2B clients by providing them with product options
that are exclusive to Cia Brasileira de Distribuição, such as private label lines Taeq and Qualitá with which consumers are widely familiar.
FAS Sao Paulo advises U.S. suppliers and other stakeholders that when launching
new-to-market products, Brazilian buyers are hesitant to purchase full containers of single products while, on the other hand, U.S. suppliers are often unwilling to deal with small volumes. Oftentimes exporters are cautious to do business with
a single supermarket chain as their perception of reaching consumers through a single source does not seem attractive. They advise that this perception does not always correspond to the reality. It is a matter of strategy, as retailers
may achieve significant market penetration.
Best Product Prospects:
FAS Sao Paulo reports
that Brazilian importers are generally looking for well-known brands and high-end products. They usually prefer products with one year shelf-life or more. In addition to the product itself, packaging, status and level of innovation are
important attributes. Products that combine these characteristics are more likely to successfully enter the market.
The food categories that are most frequently exported to Brazil from the United States are: dairy products,
processed vegetables, wine and related products, fresh fruit and vegetables, soup and other food preparations, beef and beef products chocolate and cocoa products, sausage casings and processed fruit.
FAS Sao Paulo reports that the Brazilian food service sector was one of the most affected by the restrictions imposed by the COVID-19 pandemic. During most of 2020, only home delivery and takeaway operations were allowed, and for many operators, it represents a relatively small portion of their revenue. Consequently, it suffered sales value declines during the year, affecting the segment’s vast majority, especially small operators.
According to the Food Service Brazil Institute (IFB), in 2020 the chains represented 22% of the market, while small-medium independent operators filled 78%. Another important characteristic of this sector in Brazil is its informality. Its size is
estimated through the food industry's sales to this channel. In 2020, the food service accounted for 24.4 percent of food processors' revenue of US$27 billion, while in 2019 it was 33% and its revenue was US$46.9 billion, In 2020, the Brazilian Food
Processors Association (ABIA) estimated the food service market at US$70.8 billion, against US$117.2 billion in 2019. High inflation, high taxes, difficulties in accessing credit, and the sector's high level of indebtedness are still the main challenges.
With the market increasingly competitive, the supply of differentiated foods and beverages can make a difference in many situations for food service operators. Meat, alcoholic beverages, special chocolates are few examples of products imported
by the Food Service sector. Due to logistical costs, exchange rates, and import taxes, these products are mostly placed in the Premium category.
Within all food service channels, buyers are willing to import products directly
from foreign suppliers. However, the size of the establishments is a limiting factor, and generally, restaurants, bars, bakeries, cafeterias, and hotels/motels tend to buy imported products through distributors and wholesalers. Usually,
only fast food and catering chains can import directly from a foreign supplier because of their size and purchase power. In general, Brazilian companies are conservative when buying imported products initially, especially in times of economic
hardship. Many importers buy small quantities first to test the market.
FAS Sao Paulo reports that the Brazilian food service sector is characterized by small-to-medium size, family-owned establishments. Large size and multinational
companies account for less than 5% of the total number of operators. In 2019, the food service industry accounted for US$117 billion by the Brazilian Food Processors' Association (ABIA). Compared to the previous year, results were quite similar
to the food processing and retail sector, 7% increase in nominal terms, and 3.1% increase in real terms. In 2020, COVID-19 outbreak left this sector in a very critical situation. According to a research conducted by the Bars and Restaurants
Association (Abrasel), a quarter of businesses have closed their doors since March. For the business that is still opened, 71% state revenues in 2020 are expected to reach 60%-70% of the 2019 level.
FAS Sao Paulo suggests that in
this sector U.S. exporters should look for opportunities to occupy niche markets. The growth in the Hotel Restaurant Institutional (HRI) sector has led import companies to create specific divisions to assist the sector. Restaurants, snack
shops, bakeries and pastry shops tend to buy imported products from local companies. Direct imports rarely occur in this sector as imports seldom reach the appropriate volume to justify such an operation. Nevertheless, executives from
this sector frequently travel to the U.S. and Europe to investigate new trends. They are opinion leaders and can influence buying decision.
Best Product Prospects:
FAS Sao Paulo reports that according to the Brazilian Food Processors' Association (ABIA), the country's food processing sector registered revenues of US$171 billion in 2021, an increase of 16.9% compared to 2020. Although the country has suffered from the COVID-19 pandemic, the advances in vaccination and a rebound in the service sector have contributed to the industry's performance.
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