Economic growth boosts confectionery in Brazil

Stronger economic growth and higher export prices is boosting Brazilian consumer confidence. Demand for high added value indulgence products like chocolate have benefited from this favourable economic environment.

A reversal in fortunes

Sales of confectionery products in Brazil grew by 2% in retail volume terms in 2010, according to Euromonitor International’s estimates. This represents a reversal of the performance registered in 2009 when sales declined by 2%. Retail value sales reached US$9.7 billion in 2010, up 7% on the previous year (in constant 2010 fixed US$ exchange rate terms).

Demand for confectionery products in Brazil is being underpinned by the current economic recovery being witnessed across the country. GDP is set to grow in real terms by 8% in 2010, compared with the 0.2% decline registered the previous year.

Trade environment

According to local trade statistics from the Ministério do Desenvolvimento, Indústria e Comércio Exterior, Brazilian exports were worth US$163.2 billion over the January-November 2010 period, up 15% on the same period in 2009.

Brazil has an export-orientated economy. Its main exports are transport equipment, iron ore, soybeans, footwear, coffee, cars, automotive parts and machinery. Brazil accounts for 25% of global exports of raw cane and refined sugar.

Furthermore, it is the world leader in soybean exports and is responsible for 80% of global orange juice production. In addition, large iron and manganese reserves are important sources of industrial raw materials and export earnings.

According to Euromonitor International’s Countries and Consumers database, Europe and Asia Pacific were Brazil’s most important export destinations, accounting for 27% and 24%, respectively, of total export value. Total imports amounted to US$128 billion in 2009. Brazil’s largest suppliers were Europe and Asia Pacific, accounting for 27% and 23%, respectively, of total imports.

Demographic environment

One key factor behind the further expansion of confectionery sales in Brazil is the country’s relatively high birth rate, which is affecting demand for traditionally child-orientated products such as boiled sweets and pastilles, gums, jellies and chews.

According to Euromonitor International’s Countries and Consumers database, the birth rate in Brazil stood at 15.6 per 1,000 inhabitants in 2009, compared with an average of 11.7 in Western Europe and 13.7 in North America.

Industry overview

  • Chocolate confectionery recorded growth in 2010 of 17% in current value terms. Unlike in 2009, the Brazilian macroeconomic situation helped this performance, through factors such as lower unemployment, a positive outlook for Brazilian GDP and higher levels of industrial activity. Increased consumer confidence and the elections in October 2010 added to the positive scenario for the domestic economy. A notable impact in terms of higher volume and current value growth in the category was evident over the Easter period, with sales of chocolate with toys and seasonal chocolate increasing by more than 20% in current value terms when compared to the previous year.
  • In 2010, boxed assortments continued to be the largest category within chocolate confectionery, accounting for 36% of total sales in volume terms and 30% in value terms. In order to generate sales and increase margins, leading manufacturers invested in the category, launching new products, in some cases with new premium packaging. Ferrero launched Ferrero Collection in October 2009, adding two bagged selflines – Ferrero Rondnoir and Ferrero Garden Coco – to the traditional Ferrero Rocher line. Kraft Foods launched two new pack types for its well-known bonbons under the Sonho de Valsa brand – a folding carton with an innovative visual design using a heart shape and a metal tin. Both aimed to add value to the product in order to compete with other premium standard boxed assortments, and to gain a larger share of the gift segment.
  • Sugar confectionery grew faster in current value terms in 2010 (+5%) than the review period average due to higher prices as a consequence of rising sugar commodity prices. Conversely, the category’s volume decline in 2010 was stronger than the review period CAGR decline because of increased competition from other confectionery products, in particular chocolate confectionery and snack bars.
  • Toffees, caramels and nougat performed very well in 2010, recording 10% growth in current value terms. Factors such as rising sugar costs and the increasing share of premium toffees from Arcor contributed to the strong current value growth of such products.
  • Gum sales increased by 3% in volume terms and 11% in current value terms in 2010, reaching almost US$1.8 billion. Cadbury Adams introduced new value-added gum products under the leading Trident brand during the 2009/2010 period. Trident Global Connections was one of the most important launches during 2009, and was introduced in Brazil before any other country. Other important launches in 2010 were Trident Total, a new functional gum, the formula of which contains Recaldent, a proprietary ingredient designed to promote oral health and based on the protein found in cow’s milk, which is claimed to help the replacement of the minerals that the teeth lose daily.
  • Functional gum put in the most dynamic performance in 2010, with current value sales increasing by 18%. The main factor behind this strong performance was Cadbury Adams’s efforts to boost sales in the category despite its relatively small base, with only a 5% value share of total gum sales in 2010.