Angelica Salado, Senior Research Analyst provides insight on food and drink trends in Brazil.
How do you interpret the innovation movement of the last few years in Brazil?
Healthfulness and convenience are the main innovation drivers of the food and beverage industry. In relation to food, snacks, together with dairy products and ready meals, is presenting the major innovations, and the main ones are being introduced by small and regional players. In non-alcoholic beverages, on the other hand, there have not been many changes in the last two years. What we have seen lately is the introduction of new flavours in pre-existing categories.
Which food categories presented more launches on the previous year? Which were able to maintain their sales in the market amid the economic recession?
The food industry was able to keep moving somehow in relation to launches. Snacks was repositioned and launched new products to the market. We highlight the root snacks, like cassava, beet and potato chips that bring a healthier positioning to the category. Some niche initiatives also gained the spotlight, with the introduction of the tapioca bar, a really trendy product at the moment, and ‘trail mixes’ as well, which are a mix of nuts and dry fruits that also have a positioning related to healthfulness and convenience.
Were any food and beverage categories able to conquer new markets? If so, which ones?
We always say that a crisis forces people out of inertia. Therefore, consumers begin to try products that they considered of low value added and, sometimes, they like the product and don't go back to the consumption pattern they had pre-crisis.
There was also movement in products offered in smaller packages. This is the case of chocolate, which presented a decline in the preference for tablets and bigger bars and a rise in indulgence products, like Kit Kat and Lacta5Star, for instance. These products offer a new consumption experience and different textures and flavours, like for instance, with the launch of Bis Oreo.
With the economic crisis, the social classes that were gaining purchasing power saw this greatly reduced. What is the situation of products that had been profiting from the lower social classes?
The population is more rational about the products they really need and those that they cannot leave behind. Categories considered superfluous and not essential, like chocolate confectionery and energy drinks, which had been growing strongly in recent years, were the most affected by the crisis. Consumers took these kinds of products out of their baskets or opted for cheaper brands, resulting in a drop in value sales.
Are there other changes regarding the size of packages resulting from the economic crisis? (Example: family size packages)
We have been seeing two trends relating to product packaging. On one hand, there has been a rise in demand for individual pack sizes of up to 500ml, which satisfy the need to consume on-the-go, especially among products that are sporadically consumed. On the other hand, the ‘family size’ packages, of more than 1.5-litres, have also grown, especially among products consumed more frequently, like carbonates and water.
Compared to other markets, has the food and beverage industry suffered less because it comprises essential products?
The food and beverage industry has suffered less than other markets considered less essential. This is evident in the following numbers: the increase in the value of packaged food and non-alcoholic drinks between 2015 and 2016 was 9% and 7%, respectively. While sales of electronics and electrical appliances declined 3% and 10%, respectively, during the same period.
Packaged food has been growing in Brazil with the offer of products that promote healthfulness. Given that many of those products are more expensive, was there a decrease in demand due to economic recession?
Over the last five years, the value sales of the Health and Wellness industry has grown at an average rate of 12% in current terms. In 2016, there was a slowdown, but its appeal was not lost, so health and wellness presented a good performance in Brazil even during the crisis. In 2016, this market moved BRL93.6 billion, and 67% of this gain came from healthy food.
Euromonitor International estimates that this industry will see a value CAGR of 4% at constant 2017 prices, to 2021. This will be crucial to making these kinds of products more accessible to the population as a whole. As demand grows, big companies will be able to produce on a larger scale, reducing the cost of products that, although trendy right now, are still niche due to higher costs.
To conclude, how do you summarise the current Brazilian food and beverages industry?
The current Brazilian crisis has led to a slowdown and even a retraction in the volume growth of many categories, mainly among those that are not considered priorities, like chocolate and sugar confectionery. Despite this negative situation, packaged food reached BRL309 billion in 2016, with sales growth of 1% on the previous year. Non-alcoholic beverages has retained its fifth place globally, reaching BRL91 billion in 2016 in retail sales, which is actual growth of 7% when compared to the previous year; still a poorer performance compared to the double-digit growth seen pre-2014.
This growth in revenue during an agitated period was caused by many factors, such as rising prices and sales of premium products, but mainly by producers’ and retailers’ promotional activity and marketing efforts to stimulate consumption even during a period when the purchasing power of consumers has decreased.
Nathalia Ariza, Communications Executive at Euromonitor São Paulo, also collaborated on this piece.