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Checking Out | Grocery Market Concentration in Brazil

brfshare

«BRF is on the table of some 90% of 45 million Brazilian households»

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Source: Escrevinhador.

Supermarket shoppers may not realize it, but a small group of multinational corporations concentrate the majority of brand-name products bought by Brazilians. Ten large corporations — among them Unilever, Nestlé, Procter & Gamble, Kraft and Coca-Cola – control  60% to 70% of a family and make Brazil one of the countries with the highest degree of market concentration in the world. The remaining portion is occupied by 500 smaller, regional brands.

faustao

Procter and Gamble is currently blitzing the media with an advertising campaign emphasizing the range and depth of its family of products, with Globo’s beloved Faustão as official spokesman.

Would you like an example? When the shopper visits the personal hygiene aisle of a commercial establishment and pick out a Gilette shaving cream, a box of Tampax or a package of Pampers diapers, they are buying three brands from the portfolio of the American giant, Procter & Gamble — which also owns Oral-B dental products.

unilever

The Power of Unilever

A housewife shops once a month for the family together with her husband and children. For the kitchen, she buys Knorr, Maizena, Ades fruit juice and Hellmann’s mayonnaise. For housecleaning, the laundry powder Omo and Brilhante. She visits the cosmetics aisle and picks up Rexona antiperspirant for her husband and Lux soap for herself. She buys  Closeup toothpaste, her daughter’s favorite brand. As they leave the supermarket, the son calls and asks for ice cream. His mother buys Kibon-brand popsicles. All of these are brands belong to  Unilever, which in 2013 was Brazil’s largest advertiser, spending R$ 4.5 billion. Omo controls 49.1% of market share in its sector, according to a study by the Nielsen Institute in 2012. Hellmann controls 55% of its market. Unilever sells more than 200 products per second nationwide. What do Coca-Cola, the energy drink Powerade, the boxed juices of Del Vale,  Crystal bottled mineral water and the Matte Leão brand of tea, have in common? … Would you like an example? When the shopper visits the personal hygiene aisle of a commercial establishment and pick out a Gilette shaving cream, a box of Tampax or a package of Pampers diapers, they are buying three brands from the portfolio of the American giant, Procter & Gamble — which also owns Oral-B dental products.

A housewife shops once a month for the family together with her husband and children. For the kitchen, she buys Knorr, Maizena, Ades fruit juice and Hellmann’s mayonnaise.

For housecleaning, the laundry powder Omo and Brilhante.

She visits the cosmetics aisle and picks up Rexona antiperspirant for her husband and Lux soap for herself. She buys  Closeup toothpaste, her daughter’s favorite brand.

As they leave the supermarket, the son calls and asks for ice cream. His mother buys Kibon-brand popsicles.

All of these are brands belong to  Unilever, which in 2013 was Brazil’s largest advertiser, spending R$ 4.5 billion. Omo controls 49.1% of market share in its sector, according to a study by the Nielsen Institute in 2012. Hellmann controls 55% of its market. Unilever sells more than 200 products per second nationwide.

And what do Coca-Cola, the energy drink Powerade, the boxed juices of Del Vale,  Crystal bottled mineral water and the Matte Leão brand of tea, have in common? They are all brands owned by Coca-Cola, which in the soft drink market alone commands 60% of the Brazilian market. And when you feel thirsty and feel like having a beer, there is a very good chance that it will have been brewed by Ambev, with a market share of 70% and such products as  Brahma, Antarctica, Skol and Bohemia. Brasil Kirin (ex-Schincariol) controls only 10%, as does the Petrópolis Group.

Brazilian Companies Also Concentrate Market

BRF – born of a merger between Sadia and  Perdigão – is the leader in the most diverse items for the shopping carts: It offers products in 28 of 30 categories of perishable food items analyzed by the Nielsen Institute, from frozen pasta entrees, say, to frozen meats.  BRF products are found in 90% of Brazil’s 45 million households. It accounts for 20% of the world poultry market. It controls 52.5% of the pizza market and 60% of frozen pasta dishes. Another Brazilian firm with a powerful presence in the Brazilian diet is JBS, owner of various well known brands — Friboi, Seara, Swift, Maturatta and Cabana Las Lilas. With this varied menu and presence in 22 countries on five continents, it serves more than 300,000 customers in 150 nations.

Has the Brazilian government encouraged market concentration?

Some economists believe that the presence of the State in the economy is an upward trend beginning in the second mandate of president Luiz Inácio Lula da Silva, when the national development bank — BNDES — began issuing credits at lower interest rates in order to promote the so-called “national champions.” In this environment, a merger between Brasil Telecom and Oi was encouraged, as was the creation of BRF, fruit of a merger between Sadia e Perdigão. The activities of the strongest Brazilian companies abroad are creating giants.

This does not necessarily mean advantages for Brazilian consumers, however, who continue with fewer options at the supermarket check-out.

I would kill for a peanut butter and jelly sandwich right now. They do not have that here. U.S. style potato chips, on the other hand, are being heavily marketed on the boob tube.

Has this activism by the State benefited the consumer? At the same time, state-owned companies were growing in size and power. In the banking sector, CEF and Banco do Brasil were among the five largest institutions in Brazil, with Caixa leading the area of housing finance and BB in the agricultural field. In energy, Petrobras is the largest oil company, while Eletrobrás led the market in generation of electricity. But this concentration of power in state-owned companies differs from that observed in the private sector. One example is in the energy sector, in which Petrobras has followed a price adjustment scheme for fuels that aligns with the federal policy on inflation.  Well-managed state-owned companies can generate handsome profits that are then paid as dividends to the federal government, which in turn can invest in essential services such as health and education.

Brazilian Companies Also Concentrate Market

BRF – child  of a merger between Sadia and  Perdigão – is the leader in various items in the shopping cart: It offers products in 28 of 30 categories of perishable food items analyzed by the Nielsen Institute, such as frozen pasta entrees to frozen meats.  BRF products are found in 90% of Brazil’s 45 million households. It accounts for 20% of the world poultry market. It controls 52.5% of the pizza market and 60% of frozen pasta dishes. It has also proven itself acquisitive in recent years. Another Brazilian firm with a powerful presence in the Brazilian diet is JBS, owner of various well known brands — Friboi, Seara, Swift, Maturatta and Cabana Las Lilas. With this varied menu and presence in 22 countries on five continents, it serves more than 300,000 customers in 150 nations.

Has the Brazilian government encouraged market concentration?

Some economists believe that the presence of the State in the economy, an upward trend beginning in the second mandate of president Luiz Inácio Lula da Silva, when the national development bank — BNDES — began issuing credits at lower interest rates in order to promote the so-called “national champions.”

In this environment, a merger between Brasil Telecom and Oi was encouraged, as was the creation of BRF, fruit of a merger between Sadia and Perdigão.

The activities of the strongest Brazilian companies abroad are creating giants.

This does not necessarily mean advantages for Brazilian consumers, however, who continue with fewer options at the supermarket check-out.

Has this activism by the State benefited the consumer?

At the same time, state-owned companies were growing in size and power. In the banking sector, CEF and Banco do Brasil were among the five largest institutions in Brazil, with Caixa leading the area of housing finance and BB in the agricultural field. In energy, Petrobras is the largest oil company, while Eletrobrás led the market in generation of electricity.

But this concentration of power in state-owned companies differs from that observed in the private sector. One example is in the energy sector, in which Petrobras has followed a price adjustment scheme for fuels that aligns with the federal policy on inflation.  Well-managed state-owned companies can generate handsome profits that are then paid as dividends to the federal government, which in turn can invest in essential services such as health and education.

The appeal to family values is interesting, engineered by Globo in its P&G campaign to assuage the moral sense of the average Globo consumer, a similar set of values used to design and execute federal poverty reduction campaigns, especially the Bolsa Família — could the family values appeal be any clearer?

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