Economic growth and rising disposable incomes in Brazil are fostering growth across a number of premium food categories. As consumers become more sophisticated in their consumer choices, Euromonitor International notes, sales of impulse and indulgence foods are growing, along with products offering health benefits.
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Economic growth in Brazil is boosting demand for impulse and indulgence products, according to research by Euromonitor International, as rising disposable incomes allow consumers to spend more on non-essential food products.
Strong GDP growth has increased purchasing power particularly among middle-class urban consumers, but it has also impacted on overall food expenditure. Increased consumer buying power has also meant that health and wellness are playing a more important in role in consumer decisions.
In particular, more affluent consumers are willing to pay a premium for products offering indulgence as well as a health benefit. Benefiting from this trend has been the emerging fruit snacks category. Fruit snacks sales increased by 11% in volume terms in 2007 against 7% for overall sweet and savoury snacks. Fruit snacks sales take place almost exclusively in supermarkets, hypermarkets and specialist health food stores in more affluent neighbourhoods. These premium snacks are proving very popular among better-off consumers, willing to pay a premium for a snack offering both indulgence and health benefits.
Health awareness has also bolstered growth in snack bars, with retail sales reaching R$270m (US$161m) in 2007, up 11% on 2006. Energy bars, mostly targeted at athletes and sports enthusiasts, grew by over 20% in retail value in 2007, according to Euromonitor estimates. Nestlé Brasil remains the market leader in this segment through well-known brands such as Protein Plus and PowerBar. The Pan American Games, held in Brazil last summer, played a key role in boosting sales, while Nestlé invested heavily in the promotion and advertising of its product range during the games, increasing consumer awareness of energy bars in general.
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By GlobalDataIncreased purchasing power and changes in lifestyles have driven up sales of extruded snacks, which saw volume growth of nearly 13% in 2007. Meanwhile, popcorn is becoming a popular snack for at-home consumption among middle-class consumers. Popcorn sales grew by 15% in value terms last year, driven by the strong demand for microwave formats.
In contrast to growing demand for all other impulse food products, sugar confectionery sales declined by almost 1% in value in 2007. Low profitability and more shelf space in retail channels for value-added snacks, such as chocolate tablets and sugar-free gum, contributed to the weak performance of products such as mints, boiled sweets and chews. Furthermore, research shows that low margins and maturing consumer demand is discouraging manufacturers from investing in NPD in this area, resulting in a lack of product differentiation, further depressing consumer interest and demand.
However, economic growth is driving demand for chocolate products, with retail volume sales growing by 10% during 2007. Boxed assortments, mainly purchased as gifts, are particularly popular, accounting for 31% of chocolate retail value sales in 2007. Brazilian manufacturers often include miniature versions of popular assortments, such as Sonho de Valsa (Kraft Foods) and Serenata de Amor (Garoto), in their ranges.
Furthermore, in spite of increasing health concerns, sugared products posted the strongest performance within gum, growing by 14% in value terms during 2007. Functional gum sales were hit by new legislation introduced by ANVISA (Brazilian National Health Authority) in 2006 which establishes strict criteria for advertising functional properties, including those related to oral care.
In the bubble gum sector, collectables of all types, including stickers, tattoos and licensed characters, have played a key role in maintaining Brazilian children’s interest. This category still accounts for an important share of overall gum sales, claiming 33% of total retail value sales in 2007.
Impulse ice cream is another category that has benefited from rising consumer expenditure on indulgence products. Retail value sales of these products increased by 11% in 2007, according to Euromonitor estimates, with low-calorie ice cream representing around 8% of sales and showing double-digit growth on the previous year. Research shows that the latest Brazilian legislation on trans-fat labelling has prompted a number of manufacturers, including Nestlé, to reformulate their products.
One of the key features highlighted by Euromonitor International in 2007 was the entry of private-label brands into the low-calorie ice cream segment. Retail chain Pão de Açucar’s Taeq brand, for instance, is a low-calorie premium ice cream and sorbet priced on a par with Nestlé desserts.
One impulse category which has been hit by increasing health concerns is the biscuits market. Research shows retail value growth of just 2% in this segment in 2007 which Euromonitor attributes to competition from other food products perceived to be healthier, such as snack bars.
Brazilian parents, for instance, are increasingly opting to buy healthy snacks such as granola/muesli bars or single-portion cakes for their children to eat during school breaks. In São Paulo and Rio de Janeiro, consumers are increasingly replacing biscuits with alternative healthy baked goods such as packaged/industrial bread. Biscuit manufacturers have reacted by stepping up investment in the development of ‘healthy ranges’. For example, last year Kraft launched Trakinas TrakMix, which includes trans-fat-free plain biscuits enriched with fibre and vitamins, targeted at more health-conscious consumers.
With sustained economic growth forecast to continue over the next few years, the trend towards more expensive health-focused products is expected to expand across Brazil, with products such as snack bars, dark chocolate and functional gum the main beneficiaries. Euromonitor International expects producers of functional gum to adapt their offerings and product claims to meet new legislative standards in the medium term, fostering future sales growth.
Sugar confectionery, in contrast, will see a continued, if not accelerating, sales decline. Euromonitor International believes manufacturers in this segment will need to step up investment in innovation in order to maintain consumer interest and demand, particularly among more sophisticated and increasingly health-conscious consumer groups.
