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Lower Income Groups Drive Brazilian Retail Growth in 2010
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Lower Income Groups Drive Brazilian Retail Growth in 2010

Eduardo Ragaso, Nielsen Brazil Managing Director

With its political stability, economic development and improved income distribution, Brazil stands out among world economies – even among the other “BRIC” countries. It possesses an adequate energy supply, abundant raw materials and an absence of ethnic or territorial conflicts. So it should be no surprise that the retail sector posted solid growth of 5.7 percent in volume and 5.5 percent in value in 2010. But what might surprise some observers is that much of that growth is being driven by consumers in the lower socioeconomic levels (SELs).

Consumers from lower and middle SELs shop more frequently than others and contributed 65 percent of the total increase in Brazilian consumption. These groups – which combined make up about 59 percent of all consumers – are now playing an important role in the future of the economy.

These same consumers now have access to categories with greater added value and to brands with price positioning above the market average, all of which have become part of their shopping baskets. This has influenced the growth of several categories, through the different drivers mapped in 2010.

Brazilians are also more open to trying new products and different categories, thereby prompting new product uses and changing consumers’ habits.

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To meet the demands of these consumers, manufacturers of fast moving consumer goods (FMCGs) stepped up their games in terms of product variety and innovation. Nielsen found that those factors, along with offering price and assertive distribution, formed the pillars of solid growth in 2010. The top 40 FMCG manufacturers have grown by 7.4 percent, with the top 10 contributing additional revenues of R$ 9.4 billion.

This growth has been achieved by understanding the dynamics of consumption, by taking strong action on growth drivers, and by focusing on innovation, launches and precision in execution. Manufacturers have become more assertive in their decisions and offer more affordable products to the low and middle classes. As Brazil’s economy continues to grow, we expect these trends to continue for the foreseeable future.