“The Great Deceleration” warned a front cover of The Economist in July, as the magazine reflected on slower growth in the BRIC markets.
After a robust decade, Brazil, Russia, India and China have seen growth ease, principally as the latter’s economy has cooled, hitting demand for commodities from its emerging market stablemates.
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“Collectively, emerging markets may (just) match last year’s pace of 5%. That sounds fast compared with the sluggish rich world, but it is the slowest emerging-economy expansion in a decade, barring 2009 when the rich world slumped,” The Economist wrote.
How concerned should consumer goods companies operating – or thinking of investing – in those markets be? Last week, just-food published an in-depth look at Brazil, at the country’s recent sharp slowdown and at how packaged food manufacturers are navigating the tougher trading conditions.
Listening to the world’s FMCG giants reflecting on Brazil in recent weeks, there is an acknowledgement that operating in the country has become more challenging. GDP inched up 0.9% in 2012, inflation is still stubbornly high and the fall in the value of the Brazilian real meaning prices of imported commodities are heating up, while consumers are less bullish and more wary than in recent years.
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However, executives are still confident about Brazil’s long-term prospects. “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,” the CEO of Brazil’s largest retailer, CBD, said.
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By GlobalDataThe Brazilian government, which has been under pressure (as the recent nationwide protests show), has insisted the economy is on a strong footing. Last week, Brazil’s finance minister, Guido Mantega, admitted the country’s economy was going through a “mini crisis” but said the current situation would have “minimal impact”. The economy, he claimed, “remains strong”.
On Friday, Brazil said its economy grew 3.3% in the second quarter year-on-year and 1.5% on the first three months of 2013, better than analysts expected and data that would cheer the country’s government and those that believe the economy can push through a tough period.
Brazil’s economy is expected to grow 2.5% this year, down from the 7.5% it saw in 2011. Mantega on Friday insisted 2014 was “more promising” and could see GDP return to “its recent average level of growth of around 4%”.
FMCG companies still see huge opportunities in Brazil. Dairy giant Lactalis, via its Parmalat arm, snapped up a local cheese firm last month and last week it emerged it is in talks to buy another Brazilian dairy processor. And, on Saturday, Coke bottler Coca-Cola FEMSA announced its latest acquisition in the country.
However, it could be that Brazil, along with the other BRIC markets, could be facing a period of slower growth in the next decade than they largely saw in the Noughties.
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