According to the Anfavea association of automakers, Brazilians purchased more cars in 2009 than any other year. Car sales in the world’s fifth largest car market were up 11% over 2008 at 3.14 million vehicles. Comparatively, 2009 sales of cars and light trucks in the United States (US) were the lowest level in 27 years. Tax breaks and increased access to consumer credit were the primary drivers behind the sales surge, and helped protect Brazil’s auto industry, which comprises 25% of industrial gross domestic product (GDP) and 5% of overall GDP. Fenabrave, Brazil’s dealership federation, reported that sales were led by Italy’s Fiat with 24.5% of the market, followed by Volkswagen (22.7%), General Motors (19.8%), Ford (10.1%), and Honda (4.2%).

While domestic demand remains strong, exports have not been immune to the global economic downturn. Auto production in Brazil slipped 1% in 2009 as a 40.5% decline in exports to $8.3 billion more than offset robust domestic demand. The strong performance of Brazil’s currency, the real, against the US dollar is partly to blame. GM expects to export only 35,000 units from Brazil this year, down from 85,000 last year.

Overall, 2010 is expected to be a good year for Brazil. According to the central bank’s weekly survey, Brazil’s GDP is likely to expand 5.2% in 2010, up considerably from the probable contraction of 0.24% in 2009. While car sales will likely taper off somewhat, Fenabrave expects sales to rise up to 10% as consumer demand recovers with the overall economy.

Auto investment in Brazil is also not expected to slow. Ford, GM, and Volkswagen plan to invest heavily in Brazil in the years ahead. Specifically, Volkswagen will be investing a total of $3.4 billion in new products and manufacturing capacity expansion between 2009 and 2014. Ford has announced their largest ever investment in the country, approximately $4 billion over the next five years. The company estimates this will boost production and create more than 1,000 new jobs. GM has indicated that Brazil is key to its future and plans to invest in a whole new family of vehicles for the South American market and expects to increase local production above one million units a year.

China will also be expanding their presence in Brazil as Chinese vehicle manufacturer Jianghuai Automobile Co. (JAC Motors) and Brazilian group SHC have signed a 10-year contract to export Chinese cars to Brazil. This will be JAC’s first venture into the Brazilian market where it will compete with other Chinese companies including: Hafei Motor, Jinbei Automobile, Chana Motors, Effa Motors, and Chery.

Brazil’s success is partly due to the country’s favorable market as there is only one car for every 6.5 inhabitants, versus one for every two in the US and Germany. There are currently around 13 companies producing cars locally.

]]> http://lettersfrombrazil.wordpress.com/2010/01/11/brazils-auto-industry-benefits-from-foreign-investment-and-strong-domestic-demand/feed/ 0 rjwhitmore http://lettersfrombrazil.wordpress.com/2009/10/07/rio-wins-%e2%80%9cit-is-brazil%e2%80%99s-time-%e2%80%9d-%e2%80%93-lula/ http://lettersfrombrazil.wordpress.com/2009/10/07/rio-wins-%e2%80%9cit-is-brazil%e2%80%99s-time-%e2%80%9d-%e2%80%93-lula/#comments Wed, 07 Oct 2009 19:26:28 +0000 rjwhitmore http://lettersfrombrazil.wordpress.com/?p=65 ]]>

Brazil is on a hot streak. In early September Rio de Janeiro was named Forbes’ world’s happiest city. Shortly thereafter Brazil announced an early exit from the recession by posting a greater than expected 1.9% expansion in linked-quarter gross domestic product (GDP). Finally, as icing on the cake, Rio beat Chicago, Madrid, and Tokyo to become the first city in South America to host the 2016 Summer Olympic Games.

What does this mean for Brazil and the proud city of Rio de Janeiro?

According to studies by a Sao Paulo business school for the Ministry of Sports, the games will inject approximately $51 billion into Brazil’s economy through 2027 and add 120,000 jobs annually through 2016. In Rio alone the games are expected to generate 50,000 temporary jobs and 15,000 permanent ones. Brazil also plans to invest $11 billion as host. Nearly 70% of the planned investment is part of the government’s Accelerated Growth Program, which includes public-private partnerships and projects linked to the World Cup. Sales of tickets and sponsorships are expected to produce revenues of roughly $3 billion, said Marcia Penna Firme, spokeswoman for the Rio Olympics Committee.

Patrick Carvalho, an economist at the Rio de Janeiro association of industries, commented, “real estate is going to boom; they’re going to have to construct a huge amount of hotels and roads. The Olympics isn’t just 2016, there’s going to be marketing until 2016, so Brazil will have the flashlight. The purchasing power of the population will rise and tourism will get a huge boost.”

Rio will stage the games in four primary zones including: Barra, which will house the Olympic Village, media village and many of the sports venues; Maracana stadium will host the opening and closing ceremonies; Copacabana Beach will be used for outdoor competitions; and Deodoro. These four zones will be connected by a transportation ring comprised of subway, suburban rail, express buses, and Olympic driving lanes. The events will take place in 33 venues, over half of which already exist, leaving nine to be built permanently and six for temporary use.

After news of the win, Brazilian stocks (up 62% year-to-date) surged and the real rose against the dollar. The financial news, however, was overshadowed by the footage of over 50,000 Cariocas celebrating on Copacabana Beach, rejoicing in the win and the world’s recognition that this is indeed Brazil’s time.

• Pilgrim’s Pride, headquartered in Pittsburg, Texas, is one of the largest chicken producers in the U.S. The company filed for bankruptcy late last year due to a combination of high fuel and feed prices, slowing sales, and company and industry-wide overproduction. The company had $8.5 billion in sales in 2008.

• Sao Paulo, Brazil-based JBS SA is the largest beef producer and exporter in the world and the third largest beef and pork producing company in the U.S. market. Acquisitions are the cornerstone of JBS’s growth as the company has acquired more than 30 units over the past 15 years. The company’s operations span four continents with 2008 sales of 145.1 billion Reals ($12.7 billion).

A successful deal would make JBS USA the second-largest chicken producer, after Tyson. It would also make the company the third-largest beef and third-largest pork processor in the U.S. market. Combined, Pilgrim’s Pride and JBS’s U.S. unit would have posted about $20 billion in revenue last year. Furthermore, if the deal is completed, Pilgrim’s Pride’s banks and bond holders will likely be paid in full and there will also likely be money for the company’s shareholders, a rarity in bankruptcy court.

The deal illustrates how large companies like JBS can use the economic downturn to improve their global position by buying up weaker rivals at cheap prices. Opponents of industry consolidation, however, fear that the meat giants will have the leverage to raise prices. Be that as it may, industry experts say the deal is unlikely to face any serious antitrust scrutiny.

MEGA BRANDS VS MICRO BRANDS AT HOME
While BRF can build a platform to reach super scale for pumping out the processed meat, I think this will open up the field for micro-brands to emerge.  What we are witnessing is a similar landscape that was found in the US over the past 20 to 50 years, where food companies merged, merged and merged till they were super giants.  

And while they built massive revenue streams, plumped up the average American and generated solid financial returns, they totally missed the boat on the evolution of a growing audience focused on higher quality, organics, naturals and premium niche brands. 

I think that we will witness a steady emergence of micro food brands focused on quality ingredients, local sourcing, sustainable farming and smaller scale farming techniques.  These players will have to compete on taste and back story of sustainability.

Here at Letters From Brazil, we will treasure hunt for the emerging players and follow their stories.  Many of these will produce solid product ranges, yet suffer from insufficient scale or management talent and result in groups like BRF buying them out.  

BRF is already advocating the benefits of the merger and reaching on channels like twitter.  Their corporate site is parked and being readied for action.

The marketing effort is on:

http://twitter.com/brasilfoods
http://www.brf.com.br/

 
FIFA UPS THE NUMBER OF HOST CITIES
FIFA made a decision to up the number of host cities for the Brazil World Cup 2014 from 10 cities to 12. The FIFA officials completed an inspection of 17 candidates in January and February. They will be making their annoucement of the final list at the end of May. FIFA official posting:http://www.fifa.com/worldcup/brazil2014/news/newsid=1037180.html

Aside from São Paulo and Rio de Janeiro, which are likely to be the opening and closing cities, there will be a host of regional cities.  And in every case, once the annoucements are made, it will put each of these cities on track for a serious upsurge in development.

PARTNERSHIPS
Each city will likely seek a mix of domestic and international partnerships to implement infrastructure developments required to meet the 2014 in-bound visitors.  

Letters From Brazil will follow the host cities as they prepare for partnerships and developments.

According to the Association of the Industry of Personal Hygiene, Fragrances, and Cosmetics (Abihpec) the Brazilian market acheived exports of $650 million dollars compared to $450 million of imports, creating a surplus of $200 million, putting Brazil on world map as the second largest beauty market, officially surpassing Japan.  Brand Channel, an Interbrand website, features an article on one of the nation´s leading players in this field, Natura  http://www.brandchannel.com/features_profile.asp?pr_id=429

Natura  is a giant with its roots in a group of founders driven by incorporating environmental sustainability, carbon neutral production and socially responsible managment.  http://natura.infoinvest.com.br/static/enu/perfil_organizacao.asp?language=enu

Natura is a major player and is a lead indicator about consumer spending in this niche. Last years figures roared in at 26% over last year with 844.7m $R in sales.  Bloomberg reports on the markets warm reception of this data in the face of an overall call for contraction in the country´s growth due to global financial market conditions. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aqoLiiS9YwNo

WIDE MARKET, EMERGENCE OF MANY PLAYERS
While Natura is a giant player, there are a crop of young upstarts emerging domestically.  We think Brazil`s beauty market is one to continue to watch at all segments from the chic upscale stores of the high street to the bottom of the pyramid direct sales channels, Brazil is fertile ground for a steady upward trend in beauty innovation, design and consumption.

FRONTIER MIND
The Frontier Mind is flexible, adaptive and resourceful.  Equally, fuelling the the Frontier Mind is a culture of innovation, collaboration and spirit of exploration.  This is distinct to the past mindset that developers had with Brazil in mind, which was pure extraction. Brazil became destination numero uno for cheap commodities. 

And while Brazil remains the world´s biggest farm, largest natural reserve and one of the largest democracies, it is beginning to blossom as a source of design, innovation and leadership.   

This crossover from being a commodities market place into a design led society is a major sea change.  Letters from Brazil is here to help tell that story.