Retail Sector

According to Euromonitor, retail sales in the packaged food market in Brazil are estimated to reach US$89.1 billion in 2022.  That makes it the largest in Latin America and the 10th largest in the world.  That also represents a growth rate of 33.6% or US$22.4 billion since 2018.  The forecast for growth in this market is also quite promising.  By the year 2026, the retail sales in the packaged food market in Brazil is expected to reach US$122.6 billion, a growth rate of 37.6%, or US$33.5 billion from 2022.

High growth rates in the forecast included:

• Ready Meals
• Processed Fruit & Vegetables
• Processed Meat, Seafood & Alternatives to Meat
• Sauces Dressings & Condiments
• Breakfast Cereals
• Edible Oils
• Sweet Spreads
• Baked Goods

FAS Sao Paulo reports that in 2020, the retail industry accounted for US$145 billion.  This figure includes the cash-and-carry format, which continued to show an upward trajectory. Brazil’s retail sector includes 91,351 stores and is responsible for 80% of the country’s food and beverage distribution.  Although not considered a concentrated industry, the top ten chains respond for 36% percent of total supermarket gross sales.

Euromonitor reports that the most relevant events to take place in grocery retailers in 2021 were marked by leading players Carrefour Comércio e Indústria and Cia Brasileira de Distribuição SA.  The former acquired Walmart’s former banners in Brazil.  Former Walmart banners in Brazil operated under the umbrella of Grupo BIG from 2018, when Walmart Inc closed all operations in the country.  In April 2021, Carrefour announced its acquisition of Grupo BIG, enabling the retailer to increase its penetration of regions other than the southeast, as Grupo BIG operated a handful of regional chains in the north and northeast of the country.  In addition, the acquisition enabled Carrefour to penetrate discounters for the first time, through the Todo Dia banner.

Towards the end of the year, Cia Brasileira announced the sale of 71 Extra outlets to be incorporated under the warehouse club banner, Assaí, signaling the former’s strategy to terminate all operations in hypermarkets.  Assaí is an “atacarejo” player that was once under the umbrella of Cia Brasileira de Distribuição, having filed for IPO as a separate company in March 2021.  In the November, Assaí acquired part of the entire hypermarket network of its former parent company to convert them to atacarejos under the Assaí banner.  As a result, the store network of hypermarkets was significantly reduced, as was overall value sales, with Cia Brasileira’s remaining Extra stores set to be discontinued over the following years.

This reinforces the scenario where hypermarkets lose ground to channels that are either easier to expand in terms of outlet network, such as atacarejos, or that have been more successful in meeting consumer demand for convenience, such as smaller grocery retail formats.  It also highlights that leading players are resorting to opposing strategies.  While Carrefour expands its operations to other regions and formats through the acquisition of other chains, Cia Brasileira de Distribuição are reducing its structure in the country to concentrate on smaller retail formats and digital strategies focused on food and drink e-commerce.

In addition, the concept utilizes its own logistics solution to deliver orders to customers, as well as a wide assortment of Cia Brasileira de Distribuição’s private label products. Aliado Minimercado leverages the convenience store format to seize the opportunity to diversify its operations, meeting the demands of consumers from various income bands in various shopping occasions, but also targeting B2B clients by providing them with product options that are exclusive to Cia Brasileira de Distribuição, such as private label lines Taeq and Qualitá with which consumers are widely familiar.

FAS Sao Paulo advises U.S. suppliers and other stakeholders that when launching new-to-market products, Brazilian buyers are hesitant to purchase full containers of single products while, on the other hand, U.S. suppliers are often unwilling to deal with small volumes.  Oftentimes exporters are cautious to do business with a single supermarket chain as their perception of reaching consumers through a single source does not seem attractive.  They advise that this perception does not always correspond to the reality.  It is a matter of strategy, as retailers may achieve significant market penetration. 

Best Product Prospects:                                 

FAS Sao Paulo reports that Brazilian importers are generally looking for well-known brands and high-end products.  They usually prefer products with one year shelf-life or more.  In addition to the product itself, packaging, status and level of innovation are important attributes.  Products that combine these characteristics are more likely to successfully enter the market.  

The food categories that are most frequently exported to Brazil from the United States are: dairy products, processed vegetables, wine and related products, fresh fruit and vegetables, soup and other food preparations, beef and beef products chocolate and cocoa products, sausage casings and processed fruit.  

Food Service Sector

FAS Sao Paulo reports that the Brazilian food service sector was one of the most affected by the restrictions imposed by the COVID-19 pandemic.  During most of 2020, only home delivery and takeaway operations were allowed, and for many operators, it represents a relatively small portion of their revenue. Consequently, it suffered sales value declines during the year, affecting the segment’s vast majority, especially small operators.

According to the Food Service Brazil Institute (IFB), in 2020 the chains represented 22% of the market, while small-medium independent operators filled 78%.  Another important characteristic of this sector in Brazil is its informality. Its size is estimated through the food industry's sales to this channel. In 2020, the food service accounted for 24.4 percent of food processors' revenue of US$27 billion, while in 2019 it was 33% and its revenue was US$46.9 billion, In 2020, the Brazilian Food Processors Association (ABIA) estimated the food service market at US$70.8 billion, against US$117.2 billion in 2019. High inflation, high taxes, difficulties in accessing credit, and the sector's high level of indebtedness are still the main challenges.

With the market increasingly competitive, the supply of differentiated foods and beverages can make a difference in many situations for food service operators. Meat, alcoholic beverages, special chocolates are few examples of products imported by the Food Service sector.  Due to logistical costs, exchange rates, and import taxes, these products are mostly placed in the Premium category.  

Within all food service channels, buyers are willing to import products directly from foreign suppliers.  However, the size of the establishments is a limiting factor, and generally, restaurants, bars, bakeries, cafeterias, and hotels/motels tend to buy imported products through distributors and wholesalers.  Usually, only fast food and catering chains can import directly from a foreign supplier because of their size and purchase power.  In general, Brazilian companies are conservative when buying imported products initially, especially in times of economic hardship. Many importers buy small quantities first to test the market.

FAS Sao Paulo reports that the Brazilian food service sector is characterized by small-to-medium size, family-owned establishments.  Large size and multinational companies account for less than 5% of the total number of operators.  In 2019, the food service industry accounted for US$117 billion by the Brazilian Food Processors' Association (ABIA). Compared to the previous year, results were quite similar to the food processing and retail sector, 7% increase in nominal terms, and 3.1% increase in real terms.  In 2020, COVID-19 outbreak left this sector in a very critical situation.  According to a research conducted by the Bars and Restaurants Association (Abrasel), a quarter of businesses have closed their doors since March.  For the business that is still opened, 71% state revenues in 2020 are expected to reach 60%-70% of the 2019 level.

FAS Sao Paulo suggests that in this sector U.S. exporters should look for opportunities to occupy niche markets.  The growth in the Hotel Restaurant Institutional (HRI) sector has led import companies to create specific divisions to assist the sector.  Restaurants, snack shops, bakeries and pastry shops tend to buy imported products from local companies.  Direct imports rarely occur in this sector as imports seldom reach the appropriate volume to justify such an operation.  Nevertheless, executives from this sector frequently travel to the U.S. and Europe to investigate new trends.  They are opinion leaders and can influence buying decision.

Best Product Prospects:

• Food service unit packages, one-year shelf life or more is desired, especially those produced by companies that own well-known brands.
• Functional packages and innovation are considered important attributes.
• Products that optimize kitchen processes such as dehydrated, lyophilized, pre-cooked and prepared mixes are in high demand.
• Natural, organic, and healthier products are top niches among more affluent consumers (although the organic segment is an attractive niche, costs to comply with the Brazilian legal framework may make sales of small quantities unfeasible).
• Products and ingredients for consumers with food allergies and intolerances are growing segments.

Food-Processing Sector

FAS Sao Paulo reports that according to the Brazilian Food Processors' Association (ABIA), the country's food processing sector registered revenues of US$171 billion in 2021, an increase of 16.9% compared to 2020.  Although the country has suffered from the COVID-19 pandemic, the advances in vaccination and a rebound in the service sector have contributed to the industry's performance. 

When it comes to food ingredients, the country is highly dependent on international suppliers to meet its demand. Ingredients with high added value continue to present good opportunities for U.S. companies.  Brazilian food manufacturers and ingredients importers constantly look for new suppliers and innovative products.  FAS Sao Paulo will have institutional booths at the Nutri Ingredients Summit (NIS) and Food Ingredients South America (FiSA) show in Sao Paulo and plans to host a Virtual Trade Event in November for food ingredients. For more information, contact us at FASsaopaulo@usda.gov.

Brazil follows international food trends and keeps looking to launch innovative products with high added value.  The plant-based products have been increasingly available in the country, with a higher number of products being launched every year.  Food industries are also looking to launch products with immunity-boosting benefits.  In addition, there is a growing demand for ingredients that allow manufacturers to have products with a “clean” label (with claims like natural, organic, and gluten-free) and clear label (with information about the sourcing of ingredients, the manufacturing process, and more transparency about the ingredients).  Along these lines, the United States is highly competitive with some specific food products that can be used to produce innovative products to meet this demand.

The United States also has opportunities for more technological ingredients to be used in the feed & food industries.  For instance: dairy ingredients (whey protein, milk albumin, casein for infant formulas), alternative proteins (pea, soy, rice, and others), fibers (soluble and insoluble), emulsifier & stabilizers, flavors & flavors enhancers, vegetable fats, among others. Those products require more research and technological efforts to be produced in a way to meet the industry demands.  Since the United States has a diverse and robust food ingredients industry, the country can supply food processing companies in Brazil with these innovative products.

Brazil is a small producer of food ingredients, which makes the country highly dependent on imports of food ingredients.  China and some European countries are the major exporters of intermediate products to Brazil intended to be used in the food & feed industries.  The United States is also an important exporter of ingredients and additives to Brazil.  However, in many situations, China can offer the same quality product with a cheaper cost compared to the U.S. prices.

Best Product Prospects:

FAS Sao Paulo reports that U.S. products in the market with good potential include animal feed preparations (non-pet), food preparations, enzymes & prepared enzymes, other edible mixtures preparations of fats, oils, odoriferous substances & essential oils, milk albumin, including concentrates of two or more whey proteins, hop cones, in the form of pellets, peptones & derivatives, mucilages & thickeners & vegetable saps and extracts of hops and products consisting of natural milk constituents.

Products not present in significant quantities with good sales potential  wheat flour,  malt, fresh nuts (almonds, pistachios, walnuts, coconuts), fruits (cranberry, blueberry, cherries, pears) dairy ingredients,  beans, flour, pea protein and fibers as plant-based ingredients,  vegetable oils and ingredients for healthy products.