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August 30, 2013

Navigating Brazil’s slowdown: Quote, unquote: FMCG giants upbeat about long-term prospects

Brazil has become an exciting investment prospect for both domestic and foreign FMCG firms looking to offset weakness in other markets. Here we offer quotes from a number of firms commenting on Brazil in their recent second-quarter results.

By Dean Best

Brazil has become an exciting investment prospect for both domestic and foreign FMCG firms looking to offset weakness in other markets. Here we offer quotes from a number of firms and analysts commenting on Brazil in their recent second-quarter results. 

“Brazil … is growing with less speed than it used to grow in the last, let’s say, eight years at least” – BRF CFO Leopoldo Saboya

“As we’ve been continuously pointing out to you, there also continues to be noticeable slowdown. Brazil, Russia, India and China have all seen downgrades to growth forecasts, and the markets in which we operate certainly have slowed” – Unilever CEO Paul Polman.

“The ones we are competing and we’re not seeing dramatic slowdown, we’re seeing mid single-digit growth rates and we’re able them to grow frankly double-digit on top of that” – Chris O’Leary, international COO, General Mills.

“I have seen a movement towards more value-for-money products and I expect this will be the main focus of investment by manufacturers” – Euromonitor International analyst Meika Nakamura.

“I think the really important story is the long term in Brazil. We remain very bullish about our business down there. And Brazil is an economy for the long haul, so we think we’re very well positioned to take advantage of that long-term growth” – MeadWestvaco president James Buzzard.

“During the second quarter, the Brazilian beer industry still face the two main headwinds we discussed during our Q1 call, namely, food inflation at very high levels and the deceleration of disposable income growth. We began seeing signs of deceleration in food inflation growth year-over-year, but it remains growing double digits on a rolling 12-month basis” – AmBev CEO João Mauricio Giffoni de Castro Neves.

“Despite that, we have double-digit growth in Brazil. We see our Knorr brand, behind the baking bags and the bouillons, getting stronger. We see Magnum growing behind a very focused plan on ice cream and doing well there, thank you very much. And Latin America will always have its ups and downs in some of the countries, depending on the political situations or some of the other battles, but we are getting good returns and we continue to grow double-digit there” – Polman.

“We know that with all the currency volatility that we have seen in Brazil and some of the other countries in Latin America, the protests that we have seen in the streets, the disenchantment with a government that we are — that is being reflected in some of the polls, I think that we will go through 1 or 2 or 3 quarters that are — might not be — necessarily be that good” – Coca-Cola FEMSA CFO Héctor Treviño Gutiérrez.

“Not in China, not in Brazil, not in the CIS, not in Indonesia, and in all these markets we’ve not seen [the] slowdown that The Economist cover was showing this week” – Danone CFO Pierre-André Terisse.

“The slowdown in Brazil came in stronger than we thought. In Brazil, our volume performance was constrained by slowing economic activity, higher food inflation, and a period of civil unrest, as you all know” – Heineken CEO Jean-François van Boxmeer.

“We saw further strong performances in India, China, Brazil and a number of other emerging markets” – Reckitt Benckiser CFO Adrian N. Hennah.

“The consumer in Brazil continues to be cautious as a response to lower economic growth, higher inflation and growing unemployment” – FEMSA CFO and strategic development officer Javier Gerardo Astaburuaga Sanjinés.

“We do think there is a difference between an everyday health and wellness, and indeed in Brazil, pet nutrition business to perhaps more discretionary types of categories” – Colgate-Palmolive CEO and president Ian Cook.

“While this is a concern for the short term, we remain optimistic about the medium- and long-term prospects of the Brazilian consumer and economy, as demonstrated by our willingness to invest in our operations. It is a territory with great long-term potential, in spite of the short-term issues it faces today – Sanjinés.

“The first quarter was more challenging and now in the second quarter, the challenge is even greater” – CBD CEO Enéas César Pestana Neto.

“I think that in the second half of the year, we will have to face more challenges. But I do believe that this country is working based on good fundamentals. For those of you that are older than 20, 25 years of age, you know that Brazil is experiencing a very special moment in history. Therefore, we have many reasons to believe that the consumer market will grow. The unemployment level was very low and we see an emerging class looking for products with better added value” – Neto.

“We do not see a significant change in consumers’ behavior, apart from this migration of products so that they can have a more economical solution to their needs” – José Roberto Coimbra Tambasco, vice president of retail business, CBD.

“We saw things in Brazil that we hadn’t seen before, the economy slowed, there were social unrest. It didn’t last very long, things are slowly getting back to normal and we expect a better performance sequentially as we progress through the year in Brazil” – Coca-Cola Co. Americas president Steve Cahillane.

“We think that the government policies will stabilise their economy. We believe that there’ll be continued infrastructure being built for the World Cup and the Olympics and both people getting ready for that and attending. And so we’d expect activity around those sporting events” – Ingredion chairman and CEO Ilene Gordon.

“So far this year, we’ve gained market share in somewhat softer emerging markets, like Russia and Brazil” – Beam CEO and president Matt Shattock.

“Brazil delivered strong growth, despite an increasingly challenged economic environment and softening category trends” – Mondelez International chairman and CEO Irene Rosenfeld.

“The consumer there is beginning to run out of steam. We’re proud of the current portfolio we’ve got, [we’re] watching it very closely. But I do think that the turmoil in emerging markets will create more opportunities” – Carlyle CEO William Conway.

“Slightly below our expectations for the year, the result of the weaker top line growth in Asia and the slowdown we’ve seen in Brazil. However, we don’t see anything in these recent trends to change our confidence in the long-term growth of these markets” – Diageo CEO Ivan Menezes.

“We’ve talked about it in previous calls also and we remain very encouraged by the progress we are making in building an infant formula business in Brazil” – Mead Johnson CEO and president Peter Kaspar Jakobsen.

“Its clearly we’re seeing the growth, the GDP growth of Brazil soften and its running at well below its – what should be a much stronger run rate” – Ford president and CEO Alan Mulally.

“We are excited about the opportunity we have in Brazil” – Neil Ashe, Wal-Mart Stores CEO global eCommerce.

“We do believe in the economic forecasts. We believe in the President and in our future. We are investing, we have not stopped investing, not a single moment” – CBD chairman Abilio Diniz.

Click here to view the full management briefing.

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