Global Economy, Brazil Monetary Policy Impact Brands
Value growth or decline varies by sector
The promise of Brand Brazil met the reality of slower growth.
The overall brand value of the BrandZ™ Top 10 Brazilian brands declined 16 percent, more than other BRIC markets. Many brands lost value, but others improved substantially.
After years of economic expansion, GDP grew less than 1 percent last year, because of weakened commodity demand, especially from China, and pressure on exports, which resulted from economic stress in developed markets, particularly Europe.
In response, the government implemented policies to stabilize Brazil's economy, continue the rise of more people into the middle class, and reduce the society's income disparity between rich and poor.
The combination of external and internal forces—the global economic environment and the government's reaction—affected every sector of the Brazilian economy, helping some and hurting others.
Government policies to create jobs and stimulate spending drove sales in consumer categories, including food, beer, retail and shopping malls. The highest valued Brazilian brand, Skol beer, rose 39 percent in brand value, for example.
The same government policies, however, hurt the profits of Brazil's financial institutions and the state-controlled energy giant, Petrobras. Number two in the BrandZ ranking of the most valuable Brazilian brands, Petrobras declined 45 percent in brand value.
Burnishing Brand Brazil
Government programs also focused on preparing Brazil for two major upcoming sports events. The FIFA World Cup™ football competition takes place in Brazil next year, and Rio de Janeiro hosts the Summer Olympics in 2016.
Hosting these events requires substantial infrastructure development and improvement. This spending should stimulate the economy and produce jobs. The events also place Brazil before a global audience that will get a first-hand impression of Brand Brazil. The stakes are high.
Stadium construction and airport expansion are behind schedule. The challenge of providing transportation and communication infrastructure adequate to handle a surge in voice and data demand is of special concern. Failure would draw immediate media criticism.
Meanwhile, brands are planning their communications for these events. And the government is attempting to accelerate the transformation of the country's inadequate infrastructure, which lags Brazil's recent rapid economic improvement.
Some categories helped
Government initiatives that stabilized income and kept people employed left consumers with money to spend and helped buoy the brand value of many consumer brands.
The personal care brand Natura increased 12 percent in brand value following a decline last year. Among the first cosmetic brands to emphasize natural ingredients and environmental responsibility, the brand has become closely associated with Brazil. The brand markets throughout Latin America with over 1.4 million door-to-door direct sales people.
Signaling its global aspirations, Natura acquired a major stake in the Australian beauty retailer Emeis Holding, which operates over 60 stores in 11 countries under the name Aesop. The brand also is sold in department stores.
Brand value of the mid-market Brazilian discount department store chain Lojas Americanas increased 37 percent. The company opened 111 new stores in 2012, ending the year with a total of 729 locations. Like-for-like sales improved 8 percent.
The luxury end of the Brazilian market continued to thrive. Sao Paulo's newest luxury mall, JK Iguatemi, opened last year and includes global luxury brands such as Chanel and Gucci and flagship stores of Burberry and Prada.
The local beer brands enjoyed the greatest year-on-year increase in brand value across all categories. Along with Skol, these brands include Antarctica and Brahma, which rose 51 percent and 61 percent, respectively. Brand awareness benefited from the marketing effort of owner AB InBev, the world's largest beer brewer, which also promoted its Budweiser and Stella Artois brands in Brazil.
Other categories hurt
The policies that helped consumer products and retail hurt financial institutions. Banks struggled to maintain their profitability in a low interest environment engineered by the government to stimulate spending and control inflation, the historical threat to Brazil's economy.
Consequently, Bradesco, Itaú and Banco do Brasil each declined in market capitalization and brand value, although they remain fundamentally sound financial institutions. They focused on developing new customers among people rising into the middle class, what the Brazilian government designates as the C class.
The banks offered credit lines and microcredit. Bradesco, in particular, positioned itself as having ubiquitous presence, a promise it attempted to fulfill with conveniently located physical branches and a customer friendly website.
While appealing to the new middle class, Bradesco also cultivated prime customers with personal attention and specialized products and services. Itaú advanced similar initiatives and also focused a lot of attention on technology.
In another initiative to control inflation, the government moderated the price of gas sold at the pump by Petrobras, the government-controlled oil and gas company. Petrobras sacrificed profit by absorbing rising costs, importing oil to meet domestic demand, and keeping prices below the world market.
Petrobras reported its first quarterly loss in 13 years. Its stock recovered somewhat in March 2013, when the government allowed the company to raise diesel prices.
A more confident view of Brazil's economy appeared at around the same time, when a Brazilian private equity fund, in partnership with renowned investor Warren Buffett, purchased H.J. Heinz, the global food company, for $23 billion.
The key principal of the private equity fund, Jorge Paulo Lemann, is the Brazilian financier who developed the beer brewer AmBev and combined it with Interbrew of Belgium, forming the basis of what became AB InBev, the world's largest brewer, and owner of Brazil's leading beer brands.
In another corporate display of long-term confidence in Brazil, France's Groupe Casino took control over Groupo Pão de Açúcar, one of Brazil's most valuable brands and its largest retailer, with holdings in grocery and several hardline specialties. The transaction reduced the power of the founding Diniz family.
And Brazilians maintained their traditional optimism. Despite the challenging economy, they increased their positive feelings about both the country's financial situation and their own, according to The Futures Company Global Monitor survey.
Although Brazilians also have high regard for many local brands, few are known outside of Latin America. Exceptions include Havaianas, the maker of fashionable flip-flop sandals, and aircraft manufacturer Embraer. The mining brand Vale, Sadia, the food producer, are active globally, but known primarily within their industries.
More consumer brands aspire to become international. Along with Natura's move to expand internationally, the Brazilian cosmetic brand Boticário is developing sub-brands for new products to position itself for export.
In contrast, some global brands are attempting to become more Brazilian. Avon, for example, had used international celebrities to promote its image in Brazil. As the company works to strengthen its position in Brazil, it's changed its approach and uses Brazilian spokespeople instead.