Retail Sector

According to Euromonitor, retail sales in the packaged food market in Brazil had been estimated to reach US$94.9 billion in 2019.  That makes it the largest in Latin America and the 5th largest in the world.  That also represents a growth rate of 24.3% or US$18.5 billion since 2015.  The forecast for growth in this market is also quite promising.  By the year 2024, the retail sales in the packaged food market in Brazil is expected to reach US$131.1 billion, a growth rate of 30.8%, or coincidentally US$30.8 billion.  High growth rates in the forecast included:

• Sauces Dressings and Condiments
• Processed Fruit and Vegetables
• Baked Goods
• Ready Meals
• Confectionery
• Processed Meat and Seafood
• Dairy
• Rice, Noodles and Pasta

Post reports that for the food retail sector, 2019 was considered a positive year.  The industry totaled R$378.3 billion (US$96 billion) in 2019, a 6.4% increase in nominal terms, compared to the previous year.  Due to the COVID-19 pandemic, 2019 will likely become a new benchmark as the Brazilian economy starts to recover.

In 2019, France’s Carrefour maintained its leadership as Brazil’s largest retailer, with reported sales equivalent to R$62.2 billion (US$16 billion).  Carrefour expanded the number of stores in 2019 by 7% compared to the previous year and maintained its investments mainly on the cash-and-carry format, which accounted for R$42 billion (US$11 billion).  Sales of Atacadão, Carrefour’s cash-and-carry stores, increased 12% compared to 2018.  The company opened 20 cash-and-carry store locations throughout the year and ended 2019 with 186 Atacadão stores.

Grupo Pao de Acucar (GPA), also controlled by a French group, Casino, ranked second on the list of major Brazilian retailers.  In 2019, GPA registered sales of R$61.5 billion (US$15.6 billion), which represented an increase of 14.7% compared to the prior year.  As the leading company, GPA concentrated investments on the cash-and-carry format, 19 stores were turned into Assai, GPA’s cash-and-carry brand. Assai amounted sales of R$30.4 billion (US$8 billion) in 2019.  ABRAS did not include Grupo Big, former Walmart, in the 2019 ranking, as the new company did not provide its sales results to the association.  Nevertheless, Grupo Big is listed as the third largest Brazilian retailer. Grupo Big operates 550 stores in 18 Brazilian states, plus the Federal District.  The company maintains seven hypermarkets brands in addition to its cash-and-carry format, Maxxi and Sam’s Club.

In 2019, the retail industry represented 5.2% of the country’s GDP.  Food retail executives considered the year of 2019 as an important shift of trends and, before the COVID-19 outbreak, an upward trend was expected for 2020.  Despite the unprecedented demand for food items in the beginning of the social isolation period, the forecast for 2020 is uncertain.  However, as an essential segment, the food retail sector will likely perform better this year compared to other sectors of the Brazilian economy.

In Brazil, the 500 leading retail companies represented 78% of the industry’s overall revenues of R$378.3 (US$96 billion) in 2019.  With R$296.8 billion (US$75.1 billion) in gross sales, this group registered an increase in revenues of 11.2% compared to 2018. Although these leading retailers have always registered better results compared to the sector as a whole, in 2019 the 500 largest companies achieved higher efficiency levels vis-à-vis the past years.  In 2019, the group operated 8,042 stores, in which supermarkets represented 45% and convenience stores summed 42%.  Other operations include cash-and-carry, neighborhood stores, and hypermarkets, which accounted for 6%, 5%, and 2% of the total number of stores.  

Brazil is a country of continental size and regionalism plays a crucial role.  The country’s 26 states and the Federal District are divided into five regions: Southeast, South, North, Northeast and Center-West.  According to the Brazilian Supermarket Association (ABRAS) research, in 2019 the Southeast region, which includes the states of Sao Paulo and Rio de Janeiro, accounted for 53.6% of retail revenues and 51.7% of total stores.  The Southeast region registered expansion and was responsible for more than half of the retail business.  Alone, the state of Sao Paulo represented 27.8% of total industry sales.  The South region, the second largest in retail sales, represented 29% of the overall revenues.  The South also accounted for 27.7% of all stores.  The Northeast region, one of the least wealthy regions in Brazil, accounted for 9.9% share of sales and 11.5% of stores.  The Center-West and North regions remained relatively minor players in the retail sector.  The Center-West accounted for 4.6% of sales and 6.2% of total stores, while the North had registered 2.7% of overall revenues and 2.9% of total number of stores.

Although imported products are not part of the basket of goods typically purchased by Brazilian middle-income households, rising income plays a key role in generating changes in consumption of these items. The improvement of economic indicators affects consumption as it expands the base of consumers and consequently the number of individuals willing to trade up. The Brazilian Institute of Geography and Statistics (IBGE) considers that 69 million households exist in Brazil. According to a research publicized in October 2018, Brazilian families had lost income in the past nine years, while wealthy families became even wealthier, showing the inequality gap continues to widen. Upper-income households have an average monthly income of R$23,850 (US$6,037) and 69% of this amount is earned from work. The wealthiest comprise 1.8 million families with an average of 3.07 individuals per family. This group concentrates 20% of overall income.

Post advised 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.  Post advises 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

Post 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, fresh fruit, processed fruit, processed vegetables, fruit and vegetable juices, tree nuts, chocolate and cocoa products, snack foods, breakfast cereals, condiments and sauces, prepared food, wine, beer, distilled spirits, non-alcoholic beverages (ex. juices) and fish products.  Other food categories that are getting more supermarket shelf space are products for special diets, such as lactose and gluten free products.

Food Service Sector

Post reports that in the Pre-Covid 19 environment the Brazilian food service industry registered a 5% increase compared to the previous year, reaching R$428.5 billion (US$117 billion).  According to food service operators, Brazil has a solid food service industry which is becoming more dynamic.  The performance of online delivery platforms and changes on nutritional habits will likely change the profile of the industry. In the near future, new trade agreements may also play a key role.  After twenty years of negotiations, Mercosul and Brazil concluded a trade deal to be ratified.  The current government has also demonstrated willingness to negotiate a trade agreement with the United States.

Post reports that according to the Brazilian Food Processors’ Association (ABIA), there are approximately 1.3 million foodservice outlets across Brazil, with over 95% of establishments characterized as small-to-medium size, family-owned operations.  Large and multinational foodservice chains represent less than 5% of food service companies. The food service sector is marked by informality; therefore analysts frequently reference sales of the food processing industry directly to this channel in order to estimate the size of the sector.

In 2018, the food service sector purchased US$47.2 billion.  ABIA estimates total revenues of the Brazilian food service sector at US$117 billion.  Analysts reported that the food service sector expanded 3% in 2019.  Restaurants and Fast Food Chains detain the lion’s share of 35% of the segment, followed by Bakeries (15%), Bars (13%) and Snack Bars (11%), Institutional Catering (7%), Hotels and Motels (4%) and Air Catering (2%). 

Although large processing companies have the necessary logistic structure to supply these small-medium size companies throughout Brazil, wholesalers seem to be the most viable option for many suppliers trying to reach the overwhelming majority of small and medium-sized food service operators. Within all eight segments there are opportunities to identify buyers willing to import directly; however, it is fair to say that restaurants, bars, bakeries, snack bars, and hotels/motels tend to purchase imported products solely through wholesalers and distributors while fast-food chains and catering (all types) are more likely to reach volumes that justify a direct import. Brazilian companies are considered conservative when it comes to importing.

Aversion to risk becomes even more accentuated during challenging economic scenarios.

Volume is the determining factor for a direct import operation.  If the foodservice buyer cannot be cost efficient to justify logistics and bureaucracy, wholesalers, distributors, and trading companies become important players.  In Brazil, there are very few distributors of imported foods specialized in the HRI sector, the companies that provide such services are the ones that manage imports or processed products for large fast-food chains, such as McDonald’s, Burger King, and Taco Bell.  In general, distributors and trading companies deal with retailers and food service customers if the imported product is branded.  If the product is an ingredient, the local distributor and trading company tend to target the food industry and food service.  Recently, the market share of the various food service segments has been quite stable, which has helped suppliers understand the needs of each group and aggregate services.

Post 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.

Food-Processing Sector

Post reports that in 2019, Brazilian food industry sales amounted to R$699 billion (US$177 billion), an increase of 7% percent compared to the previous year.  The outstanding result is due to several economic and social factors, including the relatively low interest rates and inflation being at the lowest levels in years.  These factors increased disposable income and stimulated consumption.  In 2019, Brazil imported US$2.8 billion of intermediate products, a decrease of 2% compared to the previous year. 

U.S. exports of intermediate goods to Brazil decreased by 10% in the same period.  A severe depreciation of the Brazilian real against the U.S. Dollar in 2019 was a challenge for U.S. companies.  Despite a decrease in exports, the United States remains the second largest exporter of intermediate products to Brazil, only behind Argentina, which benefit from duty-free treatment as a Mercosul member.

For 2020, Brazil continues to present opportunities for U.S. exporters of intermediate products.  High performance ingredients that add value to products present good market potential as trends such as health and wellness expand in the country.  However, the COVID-19 pandemic is expected to cause severe economic impacts in Brazil, leading to higher risk aversion from importers who are waiting to see the adverse effects in the market.

The sector is comprised of over 36,100 companies in which the vast majority is small and medium sized industries.  The sector is composed by 36,100 companies, where approximately 94% are considered micro and medium sized firms.  The retail sector sales amounted to US$95 billion and the food service purchases from the local food processing industry accounted for US$46 billion, an increase in local currency of 5.9% and 6.9% respectively.  The food and beverage sector is responsible for 9.6% of the Brazilian GDP and employs approximately 1.6 million workers.  The food and beverage sector represents 80% and 20% in sales value, respectively.  The product category with the highest growth rate in 2019 was meat, with an increase of 11% compared to the previous year.

Following an international trend, Brazilian consumers are increasingly moving towards a healthier lifestyle.  Also, an increasing number of consumers are giving more importance to transparency from manufacturers about the ingredients used in their products.  They are interested in how the product is manufactured, and they are considering products with cleaner labels with nutritional ingredients described in simple terminology.  Although still a niche, the plant-based products market has been growing considerably year-over-year in the country and it will likely remain an important trend for the next few years. There is also a growing demand for on-the-go healthy products and also products fortified in supplements, nutrients, and vitamins.

For 2020, the food industry is expected to keep growing as the Brazilian economy slowly recovers from the recession, though it is still uncertain how the COVID-19 outbreak will affect the food industry.  In addition to that, the Brazilian Health Regulatory Agency (ANVISA) is revising the current nutritional labeling legislation.  The objective of the review is to make nutritional data on labels more visible and readable.  Therefore, although consumers continue to be price-sensitive and more careful with food purchases, premium products and ingredients with competitive prices, more differentiation, and perceived added value still have a competitive advantage.

Best Product Prospects

The U.S. exports eight categories of intermediate products present in list of major products exported to Brazil.  They are:

• Food Preparations
• Animal Feed Prep
• Enzymes and Prepared Enzymes
• Other edible mixtures preparations of fats, oils, etc
• Odoriferous Substances
• Essential Oils
• Hop Cones, In the Form of Pellets
• Peptones and Derivatives
• Mucilages and Thickeners
• Vegetable Saps And Extracts of Hops