Middle-Class Retreat and Retailers in Latin America

Latin America has been marked by years of economic and political crisis, an unusually strong US dollar, and inflation – and these conditions have impacted consumer´s confidence and expenditure patterns. While the Latin America’s retail scenario is forecasted to improve in the near future, habits built during the crises will not disappear overnight. Middle-class consumers will continue to focus on getting the most for their money and optimizing their limited resources. These shifts in consumer habits are part of the Middle-Class Retreat megatrend identified by Euromonitor International.

Middle-Class Retreat: Changing Values

The poor economic conditions faced by Latin America in the past few years have struck not only the consumer´s confidence in the economy but also their expenditure patterns. Tight budgets continue to affect consumer spending and saving priorities. Over 48% of Latin Americans – the highest percentage among all regions – intend to decrease their overall spending over the next year, according to Euromonitor International’s Lifestyle Survey 2017.

Source: Euromonitor International

While consumers reassess their values and priorities and scrutinize non-essential purchases, they are also willing to continue spending on experiential purchases, occasional indulgences and small luxuries. Consequently, a few product categories are growing in importance, such as food and drink products with a premium positioning. In Brazil, for instance, sales of premium lager beer have outperformed standard lager beer. This growth is fueled by the fact that consumers are increasingly opting to reproduce at home the premium experiences they would typically have when dining out.

Source: Euromonitor International

How Can Retailers Leverage the Middle-Class Retreat Megatrend?

Consumers are increasingly prioritizing experiences over possession of goods and looking for quality in the products they buy. Hence, smart retailers will build an experience around purchases made in their stores to take advantage of this consumer preference. Carrefour is an example of a retailer that has taken advantage of this megatrend by introducing an exclusive alcoholic drinks section called “Bar em Casa” (bar at home), in its Brazilian stores and on their website.

To find out more about how retailers can incorporate the Middle-Class Retreat megatrend into their strategy, watch our webinar Megatrends and Retail in Latin America.