Category crunch: Brazil's biscuit makers jostle as growth eases
Biscuit sales in Brazil jumped by almost 40% between 2005 and 2010 but, in a fragmented market, competition has proven tough and there are signs that growth - while still healthy - is slowing. In just-food's latest Category crunch article, we look at how the industry's largest players are reacting.
In 2005, biscuit sales in Brazil stood at BRL8.3bn, or a not insubstantial US$4.5bn. Just five years later, according to data from Euromonitor, sales had jumped 38.6% to BRL11.5bn. Over that time, volumes increased 9.3%. Two of Brazil's top three biscuit manufacturers are multinationals - Nestle and Kraft Foods - but both saw their market share slide for most of the period at the expense of domestic rivals M. Dias Branco and Marilan. It is a very fragmented market: the top five biscuit makers in Brazil - M. Dias Branco, Nestle, Kraft, Marilan and a third domestic firm, Pandurata Alimentos - accounted for 48% of sales, although this was up from 45% in 2010.
Competition is expected to remain fierce as growth, with Brazil's biscuit market forecast to slow in the next few years. Euromonitor forecasts that Brazil's biscuit market will grow by 9.4% between 2011 and 2016 - not weak growth by any means but lower than was seen in the five previous years and less optimistic than the 2010-2015 estimate of 19.4%. Volumes are expected to increase by 4.6% between 2011 and 2016.
Between 2010 and 2011 volume growth was forecasted to be 1.8%. Actual growth was less, at 1.1%
Kraft, for one, is not resting on its laurels. In May, it opened a $80m manufacturing facility in Pernambuco and, while the site is initially going to produce chocolate and powdered drinks, a biscuit line is set to be added next year.
Sanjay Khosla, Kraft's president of developing markets, was as effusive about Brazil, describing it as one of the company's priority developing markets. Kraft has also announced plans to increase its investment in marketing and product development in the country.
Growth may be slowing in Brazil's biscuit sector - Euromonitor states that biscuits in all formats and flavours are present in more than 98% of Brazilian households - but manufacturers are looking to, for example, new products to increase purchase frequency and better reflect increased awareness of health concerns.
According to the national statistics office, IBGE, the percentages of obese men and women above 20 years old reached 8.9% and 13.1% in 2010. There are no official figures for obesity rates in children in Brazil, but it is estimated that 10% of children are obese, and this figure is likely to continue to grow.
Some manufacturers have reacted to increasing anxiety about health among Brazilian consumers with new products. Leading Argentine confectioner Arcor, which has a major presence in Brazil, last year launched Triunfo Menos Sal with 85% reduced salt and high fibre, while Nestlé Brasil released Passatempo Júnior with added calcium, zinc and minerals.
Meanwhile, Kraft launched Mini Trakinas in a pack of just five sandwich biscuits - reduced pack sizes fulfil the needs of parents who are keen to control their children's biscuit consumption.
Growth may be easing in Brazil's biscuit sector but opportunities remain and growth rates remain higher than what multinationals would see in Western markets. The opportunities for growth are undelrined by the macro situation in Brazil. The country's economy is expected to continue to grow over the coming years thanks to higher wages (the minimum wage has been increased by 50% since 2004) and the expanding middle class is expected to drive demand for packaged food.
The growth that remains in Brazil's biscuit sector, combined with its fragmented nature, has even attracted new entrants.
Last month, PepsiCo, which was only present in Brazil's savoury snacks sector, acquired Brazilian biscuit manufacturer Mabel in a deal said to have cost around $520m.
John Compton, CEO of PepsiCo Americas, said the deal was intended to strengthen PepsiCo's business in a "key" sector in a vital emerging market for the US food and drink giant. "Brazil is an extremely important market for PepsiCo and this acquisition well positions us in a key segment in the snack category there," he said at the time.
For the full Euromonitor report, click here.
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