Brazil: An Emerging Powerhouse

The economic potential of Brazil, supported by an abundance of natural resources, has stimulated consumer demand, fueling growth nearly everywhere, including the confectionery segment. 

During a presentation by Getulio Ursulino Netto, president of the Brazilian Chocolate, Sugar Confectionery and Peanut Manufacturers Association (ABICAB), to a team of confectionery journalists, the dean of the country’s sweets industry provided the group with an impressive array of statistics. 

First, since 2009, the Brazilian sweet and chocolate industry have invested more than $350 million in modernizing and expanding production capabilities. As the world’s eight largest economy with a population of nearly 191 million people, Brazil has both the natural resources and the consumer base to support a healthy confectionery marketplace. 

And the numbers support that claim: Volume has grow from slightly more than 800,000 tons in 2002 to 965,000 tons in 2009, a 21.5% jump. Brazil ranks third, behind only the United States and Germany when it comes to chocolate production; fourth in non-chocolate sweets (including gum), trailing only the United States, China and Germany. Of the 108 confectionery companies based in the country, 11 are multinational and 97 local, 46 of which export their products to 146 countries abroad. 

Exports by Brazilian confectionery companies totaled $294 million, with the United States and Argentina accounting for 14% and 12%, respectively. Regionally, South and Central America represent 48% of the Brazil’s external sales. 

 And despite a strong currency - at press time one U.S. dollar was trading at 1.7 Brazilian reals - the forecast for continued growth looked promising. According to ABICAB, Brazilian chocolate and peanut exports have grown by 9.1% and 12%, respectively in the first quarter. 

 So what’s fueling this confectionery engine? 

First, it should be noted that the Brazilian economy has  - unlike most of the industrialized world - escaped the Great Recession of 2009 with minimal damage. According to General Atlantic, a global investment firm, domestic growth did flatten during the first half of 2009, but quickly restarted in the second half in of the year. As a result, the economy grew 9% in the first quarter of 2010. Economists predict the country gross domestic product (GDP) to hit 6-7%, maybe even higher in 2010. Like so many Western economies, the consumer is driving the growth, thanks to increasing buying power. 

 As Netto points out, factors such as a low inflation rate, stable and sustainable economic growth and ongoing foreign investment has helped generate population, income and industry gains. 

 The “good times” have spurred upward income movement as evidenced by the following factoid: The percentage of Brazilians in the lowest income brackets (classified as D and E) has shrunk from 56% in 2000 to 35% in 2009. In real numbers, that represents about 20 million Brazilian having more cash to buy a variety of goods, everything from flat-screen television sets to fancy confections. 

The impact behind consumers having more reals in their wallets has opened up the confectionery segment to more sophisticated confections and increased consumption in chocolate. 

As the chart points out, chocolate volume has consistently grown while sugar confections have fallen off their peak of 509,00 tons in 2004 to 448,000 tons in 2009. But as the following profiles on Garoto and Riclan detail, both segments - including sugar confections - remain ripe for innovation and further growth. 

For the longest time, Brazilians have heard that their country has great potential, Netto told the invited media at the end of his presentation. The last few years have tweaked that forecast considerably. As the ABICAB president pointed out, it’s clear to everyone in Brazil, and specifically confectionery companies, that this potential isn’t about some far-off ideal. Rather, the potential “is occurring now!”  

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