With approximately 54 million people, Brazil’s Northeast is a huge area comprising more than 1.5 million square kilometers. It has more people than the countries of New Zealand or Chile combined and with a GDP of US$ 206 billion, Northeast Brazil has posted above-average economic performance outranking both nations. If Northeast Brazil was its own country, it would rank as the world’s 39th largest economy. But the region’s size and unique qualities make understanding consumers’ consumption habits a difficult task.
|If Northeast Brazil was its own country, it would rank as the world's 39th largest economy|
|GDP (in US$ Billions)||Population (in millions)|
|Source: The Nielsen Company|
Consumption is Growing
According to a study by Nielsen Brazil, the Northeast is recording the most consistent growth. In addition, the increase in consumption in the Northeast also outstrips the average. While the region has grown by 8 percent, Brazil’s average consumption has risen by 6 percent in the product categories tracked by Nielsen. This growth is having very positive effects. Over the past two years, the number of low-income consumers has dropped three percentage points, from 67 to 64 percent.
On average, households in Northeastern Brazil have four to five members (43%), low incomes (64%), and consist of younger homemakers who tend to shop based on price and promotions. These households predominantly patronize traditional and wholesale channels.
Local Brands Dominate
Regional brands greatly stand out in the Northeast, exceeding national brands by double digit percentages in seven of the 12 categories Nielsen studied. In the first half of the year, regional brands of bottled water and powdered milk increased in volume by 39 and 21 percent, respectively, far outpacing the 8 and 2 percent growth rates recorded by national brands. While many of these products are manufactured by national or global companies, they are branded under names specific to the region to better fit the consumption profile there.
This growth phenomenon may also be attributed to manufacturers' adaptation to the region’s needs through more competitive pricing (30 percent below the market’s average) and packages that prioritize cost rather than benefit. Manufacturers are investing in the pursuit of customers entering a new consumption phase.
|Regional Brands Stand Out|
|Growth in Rolling Year|
|Regional Brands’ Value Importance||Regional||National|
|Source: The Nielsen Company.|
Factors such as sophistication and indulgence are also starting to emerge and influence lower-income consumers. An example is the toilet paper category’s two-ply segment, which recorded a volume increase of approximately 40 percent compared to 2009, with the Northeast again standing out. In terms of indulgence, this shift is illustrated by sandwich cookies. In value, the biscuit category (wafers, Marie, salted, water crackers, etc.) increased by 4 percent compared to 2009, with sandwich cookies accounting for 59 percent of that growth.
These are good examples of how manufacturers are innovating to meet the needs – both economic and preferences – of a local population. And in Northeast Brazil, consumers are rewarding these brands with their business, proving once again that businesses have to intimately know who their customers are and how to appeal to them.