Warehouse Clubs Emerge and Create New Opportunities for Packaging in Brazil

In the current challenging economic scenario in the country, many families are looking for new distribution channels which are able to offer them more attractive prices for their preferred products. In this sense, one of the channels that mostly grew in recent years was warehouse clubs – locally known as Atacarejos; a channel through which consumers can purchase large quantities of products at more affordable prices than in traditional retail. Most recently, it has been less of an exclusive channel for lower income families, while it has been gaining preference among A and B social economic level families.

The “atacarejos” are especially relevant when it comes to sales of beverages. In accordance with the latest industry update from Euromonitor International, this channel (in our industries identified as part of “mixed retailers” represented in 2016 almost 13% of soft drinks retail volume sales (including carbonates, bottled water and juices), 11% of alcoholic drinks retail volume sales (including beer, spirits and wine) and also 8% of hot drinks sales (where sales of coffee and tea are captured) in the country. Although atacarejos is still a developing channel when it comes to beverages’ sales, its’ growth rates in recent years have been above the average of traditional retailers, as indicated in the graph below.

We can take as an example the hot drinks market, sales of which through atacarejos grew 10.5% between 2011 and 2016, while traditional retailers’ sales grew by 1.6% only (excluding online retailing).

Bar graph comparing Soft drinks- Mixed retailers, Soft drinks- Store based retailing, Hot Drinks- Mixed retailers, Hot drinks- store based retailing, Alcoholic drinks- mixed retailers, Alcoholic drinks- store based retailing within growth rate.

Source: Euromonitor International

However, these outlets’ physical space and configuration are very different from supermarkets or hypermarkets when it comes to the shelf set up and also product handling. For example, it is very common for these outlets to use forklifts to put products on higher shelves. As a consequence, products must have more resistant packaging materials to withstand these rougher dynamics. Besides that, shelves in atacarejos tend to be much larger, bringing a wider variety of brands side by side or piled high. That also makes it harder for brand identification at a distance, demanding packaging that is visually more attractive and easy to identify. It is no coincidence that some beer brands have changed their packaging design, introducing different logos and a stronger visual identity, so as to better position themselves to attract consumers and also to meet the new demands of this channel. Examples of success are Heineken, the iconic red star of which was made bigger on labels, and the Itaipava brand, which introduced new colours to its label and incorporated a crown as its symbol – instead of the old family crest.

Although the development of new packaging types requires considerable investment, brands must consider if their products are in line with the new consumer demands in the atacarejo channel. It is fundamental to highlight that this channel is supposed to consolidate even more over the coming years, even though consumers might recover the “pre-crisis” average income. For brands, this means that any packaging innovation undertaken at this moment will still be relevant for many years to come and they will certainly be ahead of other competitors once this channel is finally consolidated.

For more information on the opportunities for packaging innovation in Brazil during economic crisis, download our exclusive content through the link: Tendências no Mercado de Embalagens do Brasil