Innovation Inspiration : Brazil - The Basics

24 Jun 2010|Added Value

In the last of our series on the BRIC markets, we take a look at some of the opportunities and challenges surrounding Brazil.

Brazil is the world’s 5th largest country both by geographical area and population, which will soon exceed 200 million inhabitants. It boasts the eighth-largest economy with a GDP of US$ 1.9 billion at the end of 2010 and a real GDP growth of 5.3%. The middle class represents roughly half of the population, which is young and growing rapidly.
Read More: Viewpoint – Brazil’s growing international presence
Read more: Emerging retail Markets Beyond China

With the prosperity of the Brazilian economy a new social class has emerged, dubbed by The Economist the “new lower middle class”. In 2003, 64 million people had an income less than half of the minimum wage; in 2005 this fell by around 7%, and in 2006 the average income rose by 7.2%. Welfare programs such as Bolsa Familia and increases in the minimum wage have also had an impact: a big portion of the population is now able to afford commodities like DVD players, TV sets or even a small car.
Read More: Getting it together at last
Read more: Brazil sees Middle Class emerging

Nestlé Brazil – acting local
So, where should major multinationals begin in Brazil? By thinking and acting local. Take the example of Nestlé: their food education program celebrated its 10th anniversary in Brazil in 2009. The core of the “Healthy Kids in Brazil” approach was to reach out to children and teenagers aged between 5-14 years old from lower-income families. It had an impact on 1.2 million children. The campaign has been driven by nearly 11,000 teachers in over 4,200 schools and social organizations in 61 Brazilian cities. Some 7.000 volunteers financially contributed to the initiative, and Nestlé doubled every R$1 donated. The company has also optimized its products by adjusting them to local customs and characteristics. “Anyone who tries to operate in Brazil with a single consumer profile is not going to run into many opportunities,” says Ivan Zurita, president of the company’s Brazilian division. Aligning nutrition with cultural values laid the corner stone for Nestlé’s success in Brazil.
Read More: Nestlé Nutrir in Brazil celebrates 10 years of food education
read more: In good taste – nestlé tweaks products for different parts of Brazil and Latin America, to boost sales.

Fashion is big in Brazil; and again, local is king. The local apparel market is the world’s fifth-largest at US$ 37.2 billion and 60% of it is currently controlled by domestic brands: 81% of consumers say they trust local brands, with only 11% agreeing that foreign brands are higher quality than local ones. Fashion is influenced by local celebrities, something European apparel retailer C&A has tried to capitalize on, running a successful campaign using Brazilian supermodels.
Read More: How half the world shops – Apparel in Brazil, China and India

What about the web? Brazil has some 72 million users with internet access and a year-on-year growth rate of 27%. What’s more, weight of usage – measured in terms of hours online/visitor –  is among the heaviest in the entire world. Added to this, IM usage in Latam countries is also among the highest in the world. Just as for fashion, Brazilians show a strong preference for local content: nine of the top 20 sites are Brazilian, and an additional five are Latin American or Portuguese. Social Networking is dominated by Google-owned Orkut, which has a reach of 79% compared to 3.4% and 1.4% for Myspace and Facebook respectively.
Read More: New Media Trend Watch

Orkut is now so deeply ingrained in Brazilian culture that it inspired a tongue-in-cheek song of betrayal and love lost called “I’m going to delete you from my Orkut” (“Vou te deletar do meu Orkut”), composed by an Orkut user.
Read More: Orkut, Friendster get second chance overseas

Positivo Informática – a local champion focusing on local needs
Go to high-end computer stores in Brazil and you’ll see the same models that you would anywhere in the world. But it’s a different story if you take a look around the stores where Brazil’s middle class goes shopping. Almost every third model sold is a local brand founded only 21 years ago: Positivo Informática, part of the Positivo Group with accrued revenues of US$ of 1.2 billion by 2009. Part of Positivo’s success has been creating products adapted to the local market, including a multifunctional media PC that combines computer and TV in one unit, dubbed a PCTV. Positivo aimed for a dual-purpose, low-cost machine that US-made models don’t offer.
Read more: In Brazil, PC buyers accentuate Positivo

Written by Jonathan Hall, CEO, Added Value France

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