The size of large retailers can be gauged from the fact that the total retail revenue generated by four top retailers amounted to $19 billion in 2020. These retailers (Magazine Luiza, Via Varejo, Lojas Americanas and Raia Drogasil) feature in top 250 Global Retailers, a ranking assigned by Deloitte Consulting. The services sector including retail segment employs almost 71% of the active workforce, while agriculture employs 9% of the country and industry sector employs 20% of the total active workforce.

Brazilian Consumer Profiling

Like many other developing countries, the majority of Brazil’s population is young; 35.2% of Brazilians are aged 24 or under and more than half of the population is less than 35 years. According to latest data, 47% of households have of two or three people while 32% four or five.

Brazil is sparsely populated and the majority of the population lives along the coast, particularly around São Paulo and Rio de Janeiro. Throughout the country, most people live near or in urban areas. In 2022, 87.5% of the population of Brazil is urban. However, some areas of the country are essentially deserted, mainly in the Amazon region.

In Brazil, GDP per capita reached USD 14,835 PPP in 2020, according to the latest data by the World Bank. The average monthly salary of a Brazilian is BRL 1,921 in 2021. Different regions of the country have different standards of living, with the best ones in the southern areas of Brazil and the poorest living conditions in the north and northeast.

Consumer Behavior/ Preferences

The Global Consumer Sentiment index, issued by Ipsos, has continually weakened over the past eight months and is now three points lower than it was before the invasion of Ukraine in February. In total, 17 of the 23 countries surveyed now show a National Index score that is significantly lower than it was in February with the exception of Brazil and other three (Saudi Arabia, India, and Turkey) which show one that is significantly higher.

However, many Brazilian consumers have reservations about buying non-essential goods and are easily manipulated by price tags. It’s the norm to shop at discount chains, atacarejos (stores that combine retail and wholesale) and retailers selling luxury products at the lowest price. Brazilian consumers tend to shop around for deals before buying, place a strong emphasis on the value they’re getting and are willing to switch to brands that offer the most value for their real. However, they still expect quality products. Furthermore, customers demand high-quality sales service and customer support.

Challenges & Opportunities

Brazilian retail landscape has several similarities of developing countries though there are some retailing trends parallel to developed countries particularly product portfolio offered by supermarkets and advanced trade marketing tools being used. These similarities and differences need to be understood for better awareness of Brazil retail market:

Uneven distribution of Wealth:

Income inequality is a big issue in Brazil, a country where the six richest persons have the same wealth as poorest 50% of the population (which is around 100 million people), and where the richest 5% of the population have the same income as the remaining 95%, according to Oxfam latest figures. Such a vast gap poses a real challenge for retail channels since they need to cater shoppers and consumers having extremely different profiles.

Brand Loyalty:

We observe brand loyalty by Brazilian consumers though they purchase the product if they consider the price right, according to research. About a fifth consumers shop around to find retailers selling a specific brand’s products at lower prices; like any other country, they prefer product on ‘sale’ to get value for their money. Research further shows that despite brand loyalty, Brazilians tend to do product research and look for deals before making a purchase. For that purpose, they often shop in popular discount chains.

Prominence of Supermarkets:

According to Brazilian Association of Retail Stores, the Brazilian retail market in 2020 was composed of 91,351 retailer operators. The stores were generally divided into five categories: convenience, neighborhood stores, supermarkets, hypermarkets, and wholesale clubs. Hypermarkets and supermarkets are the most widespread. The top 50 retailers accounted for almost 52% of overall sales in 2020, reinforcing the concentration of the market.

Within the supermarket category, Carrefour and Assai Atacado were the most popular supermarket chains in Brazil. According to research by McKinsey, Brazilian consumers are shifting some of their spending to discount chains and cash-and-carry format known locally as atacarejo, which combines both retail and wholesale.

Price Sensitivity:

The buying and spending habits of Brazilian consumers have significantly changed following recession and outbreak of Covid-19 pandemic. Economic conditions have resulted in the great majority of Brazilians looking for ways to spend less. But the good news is that the consumers continue to prefer quality and after sales service, if applicable. As mentioned earlier, there is brand loyalty by the consumers, but consumers are looking for value deals. In these circumstances, the product innovation is required for making the overall portfolio relevant and affordable for the shoppers.

Actionable Insights

There are many learnings from the above-mentioned facts and comments which Brazilian companies do consider making the necessary changes in their ‘route-to-market’ strategy. With many consumers seeking savings opportunities, for instance, brands must give consumers solid reasons to choose their product over lower-priced alternatives. Further, a robust ‘revenue growth management’ strategy is needed to operate in such challenging environment that may result into creation of exclusive SKUs, second-tier brands, or new pack sizes.

Both companies and retailers need a granular, data-driven approach to identify growth areas and optimal product portfolio. They should also have a clear and complete price architecture, with a premium offering to attract up-traders and a compelling low-priced offering aimed at down-traders and mass consumers.

Sources

Food and Grocery Retail in Brazil - Market Summary, Competitive Analysis and Forecast to 2025

Global Powers of Retailing 2022 by Deloitte