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Brazil is the largest major appliances market in Latin America, accounting for more than half of the region’s total volume sales in 2014 due to its large population and westernised consumer base. In the last couple of years, the country has been witnessing a poor performance in major appliances, with volume retail sales growth dropping from 16% in 2012 to less than 2% in 2013. This contributed to Latin America registering the world’s weakest regional increase in volume sales of Headed in the opposite direction to this trend, however, is Brazil’s dishwasher sales – with Brazil set to be the fastest-growing dishwasher market worldwide over the next five years. Lessening of historic drags on the category as well as changing lifestyles and corporate strategy led to growth in 2014 and an optimistic forecast for dishwashers in Brazil.
Historically, the dishwashers’ performance in Brazil has been hampered by a strong hand dishwashing culture in the country. On the one hand, middle-to-high-income Brazilian households have always had a strong prevalence of employing domestic help to do household chores, including the washing of dishes. On the other hand, dishwashing by hand is a traditional activity attributed to housewives among lower-income and conservative Brazilian families. Consequently, consumers would consider it superfluous to possess a dishwasher when either maids or housewives could do all the cleaning work at home, including dishwashing.
However, the Brazilian hand dishwashing culture has been weakening in recent years, and this trend is likely to continue to be seen over the forecast period. In addition to a strong increase in the price of services in general in the last couple of years, in October 2015 a law giving new rights to domestic employees will come into effect, which is expected to lead to a direct rise in the costs of employing domestics by 66%, according to market specialist, Doméstica Legal, a specialised legal advice consultancy. As a result, middle-class consumers are switching towards charwomen – domestic workers hired on a daily basis once or twice a week. This means that these consumers now have to do their own dishwashing on the remaining days of the week, and the idea of owning an automatic dishwasher is therefore becoming less superfluous.
Additionally, the set-up of a traditional family in Brazil is likely to change in the coming years. Euromonitor International forecasts that single-person households will be the fastest-growing household type in the country over 2014-2019, with an increase of 12%. Increasing divorce rates and decreasing birth rates are contributing to family format changes. Moreover, female employment rates in Brazil have also risen rapidly over the past 10 years, jumping from 55% to 65% between 2004 and 2014. With higher incomes and less time to do household chores, there will be greater demand for appliances that provide convenience and savings in time and effort.
Another factor that has been historically hampering the dishwashers’ performance in Brazil is the negative concept consumers have of this product. It is still commonplace among Brazilians to have the idea that dishwashers are less efficient in many aspects when compared to hand dishwashing. For example, most consumers believe that these machines waste too much water and consume high levels of energy. Furthermore, there is general concern about the quality of these devices, as many consumers complain that they do not clean properly and they always have to pre-wash the dishes before putting them in the dishwasher machine.
Combined with this negative conception, there is the fact that dishwashers have a high unit price in Brazil when compared to other countries. In 2009, the unit price of This can be attributed to the fact that, at that time, production of dishwashers in Brazil was limited and imports accounted for a significant share of retail sales. As a result, unit prices were considerably higher due to high import taxes. However, over the review period players have been investing in local production and unit prices have therefore fallen considerably, from BRL2,033 to BRL1,162 in constant terms (US$888 to US$507 in 2014 fixed exchange rates). Not only has price declined, but the quality has also improved and products are now more aligned with Brazilian consumer needs.
After ending local production in the country in 2009, Whirlpool resumed such activities in 2011, and it was the first player to have a local production project approved in the Suframa (Free Trade Zone of Manaus), investing BRL227 million, or US$136 million (2011 exchange rate), in the development of its production facility. In addition, the company opened a testing laboratory in São Paulo state to develop products adapted to the Brazilian market.
The question that still remains is why dishwashers are showing a strong performance in an adverse economic scenario, while most major appliance categories will struggle to maintain growth over the forecast period. Although dishwashers would also benefit from a better macroeconomic environment, Brazil’s current market situation means that there is major potential for growth in this particular category. Furthermore, this is the appliances category in which Brazil has the greatest gap between it and the biggest market. In 2014, Austria and Norway had household penetration rates for dishwashers of 76%, which means that the Brazilian market has room to increase sales by 38 times before reaching the same levels of penetration as these markets.
Eyeing the potential in dishwashers in Brazil, brand owners are increasing investments in advertising. In 2014, Whirlpool launched television advertising, in which the appeal was to show how much time people spend on hand dishwashing and how they could use this time for other activities, such as going to the cinema, doing a work-out etc. This was a clear attempt to tap into the changing consumer habits in the country and had a positive impact on both individual company sales and overall category sales.
Another possible factor that might benefit dishwasher sales is the water crisis in the southeast region of Brazil. Since the beginning of 2014, water reserves in the region have been at minimum levels and many cities are suffering from a lack of water supply. Even if there is still little advertising targeting this, this is a good time for companies to make consumers aware of dishwashers’ low water consumption.
The economic slowdown in Brazil led consumers to tighten their purse strings, with the fear of unemployment becoming increasingly real, and the debt acquired in the boom years also acting as an additional burden. As a result, Brazilian consumers are already highly leveraged and have little room to use credit to purchase big-ticket items, which is likely to result in a slowdown in sales of consumer appliances. Within the major appliances industry, opportunities for growth will be restricted to categories with lower household penetration rates and strong convenience appeal. Therefore, we feel that dishwashers will turn into a strategic category for the Brazilian major appliances industry over the coming years.