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After Ten Boom Years, Brazil’s Consumers Cut Back on Buying

According to BCG Research, Four Key Trends Are Changing Buying Habits in Brazil. To Win, Companies Must Rethink How They Approach the Market.

Concerns about the future are causing Brazilians to reduce their spending in many product categories, in sharp contrast to the buying spree of the last decade, according to new research by The Boston Consulting Group (BCG). Companies that sell to the Brazilian market must adjust their strategies accordingly.

For ten years, Brazil enjoyed a period of economic stability that fueled investment growth, strong business activity, high employment, greater use of credit, and more consumer purchasing power. Taken together, these factors led to a strong consumer market, especially for the automotive, computer, and personal-care industries. But economic growth is slowing. Brazil's GDP grew just 0.17 percent in the first quarter of 2014 (compared with 0.6 percent in the same period in 2013), and the forecast for the year is only 1.0 percent. Although the country’s weakening economy hasn’t affected employment rates or salaries to date, it is driving fundamental changes in consumer buying patterns. To gain greater insight into these changes, BCG surveyed 2,000 people whose gender, age, and income broadly reflect the country's population and census data.

Four Trends to Watch

According to BCG research, Brazilians were more anxious about the future in 2014 than they've been in the last five years. This anxiety is fueling four key consumer trends:

- Reduced Spending. Of the consumers we surveyed, 72 percent planned to decrease their spending on discretionary items, compared with 66 percent in 2013. Reasons given included a desire to save more and an expectation that their salaries would decrease.

- Growing Aversion to Debt. Indebtedness has plunged, as consumers try to save more to avoid paying interest and as a precaution against a weakening economy, among other reasons. Except for debt on cars, all borrowing decreased in 2014 relative to 2013. Consumers are using less credit to buy clothes and shoes (down 10 percent as a category this year), as well as home appliances. Since 2012, in fact, consumer behavior reflects the belief that only cars justify taking on debt.

- Trading Down—and Up. Brazil's consumers are spending far less in most product categories and are looking for products that improve health or have greater quality. As in previous years, Brazil's consumers spent less on dining out and unhealthy foods such as canned and frozen goods and sweets in 2014. Also as in the past, they spent more on healthy, fresh, natural, and locally grown foods. As for nonfood items, consumers spent less on luxury goods and accessories and more on baby care, children's clothing, home goods, and travel and vacations.

- Fragmentation by Location and Market. Location and household income affect purchasing patterns for food and nonfood items alike. For instance, urban and high-income consumers are more likely to dine out and to trade up for chocolate, beer, and premium products than are consumers living outside of cities and earning less per household. When combined with growth trends over the next decade, these differences may lead to varying market opportunities. For instance, as consumer spending grows in Brazil's more rural areas, different store formats may become essential.

Implications for Companies

Clearly, companies that sell to Brazilian consumers must rethink their strategies and tactics in light of these changing purchase patterns. “Given the slowdown in spending, companies must be prepared for more intense competition,” notes Olavo Cunha, a partner in BCG's São Paulo office and leader of the research team. “They'll have to adjust their cost structures, improve their innovation capabilities, rethink the value they deliver, and focus on the product categories with the greatest growth potential.” Forward-looking companies will also revisit their pricing and credit programs, shift to lower-cost digital channels where possible, and deepen their understanding of shifts based on location. Where are consumers moving, and where are salaries growing? Some of today’s biggest opportunities are in the country’s interior regions.

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About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 81 offices in 45 countries.

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Jeudi 18 Décembre 2014