Expanding middle class drives brand growth

Brazilians feel optimistic about the future relative to most of the world’s population.

Around 70 percent of Brazilians believe that the country’s financial situation is going “well” or “fairly well,” compared with a global average of 39 percent, according to the Global Monitor study of The Futures Company. Because the economy slowed last year, however, the positive attitude of most Brazilians is moderated by some doubt about both the country’s economy and their personal finances, The Futures Company found.

The underlying optimism is based on several factors that transformed the Brazilian economy and accelerated the growth of brands during the past decade including: consistent government focus on improving social and economic equality; a thriving economy, despite the current slowdown; increased availability of credit; and national cohesiveness and pride with growing excitement in anticipation of the 2016 Olympics and World Cup in 2014.

Perhaps indicative of the wide income disparity that has divided Brazilians in the past, the government organizes the population into hierarchical economic classes, A to D, wealthiest to poorest. As in many societies, the wealthiest individuals remain well off or even become wealthier. The distinction in Brazil, over the past decade, is the broadening of the middle class, or in Brazilian categories, the ascendency of people from D to C and from C to B.

Since 2003, roughly 40 million Brazilians—out of a population of 200 million—have entered the middle class. The C class now includes about half of Brazil’s population according to TGI. This demonstration of national conscience and self-sufficiency has burnished the nation’s self-image and unleashed spending that impacts brands across all categories, with credit widely available from credit cards, government programs and through employers.

Many Brazilian and multi-national brands had largely ignored or underserved much of the low-income population with poorer quality products provided in big economical and unattractive packaging. They now accord these consumers increased attention and respect.

Consumers adopt spending strategies

Over time, Brazilian consumers perfected strategies to bridge the gap between what they aspired to buy and what they could afford. In the past, low income consumers might pay one or two reais for a bottle of private label cola, for example. Today, they often spend a few more reais to buy Coke because it’s affordable, if more expensive.

But they may alternate their purchase of Coke with a private label, reserving Coke for special occasions and a weekend treat, while drinking private label on weekdays. Similarly, consumers increasingly mix brand and private label in the personal care category where many products offer both functional and emotional benefits. A female shopper might purchase a relatively low priced shampoo for general family use, but the Brazilian brand Natura for herself.

Natura, Brazil’s leading manufacturer and marketer of cosmetics, emphasizes natural and socially responsible products. It’s among the category leaders in the BrandZ™ ranking of personal care brands and earns a high score for Brand Contribution, which measures the portion of brand value attributable directly to the brand rather than to financial performance or other factors.

Spending touches most categories

Retail brands are organizing their businesses to serve the new middle class consumers. Grupo Pão de Açúcar, the nation’s largest retailer with a portfolio of 1,800 stores, operates three supermarket brands, each targeted to a particular demographic group. The international hypermarket brands, such as Carrefour and Walmart, are opening smaller stores closer to the economically transforming urban neighborhoods.

TAM, the largest airline of Brazil and Latin America, and the carrier GOL are among the travel brands benefitting as consumers spend their growing disposable income on travel. Leading bank brands, such as Bradesco and Itaú, are adding branches, especially in the favelas and other poorer neighborhoods.

Cielo and Redecard, brands that develop credit card networks and process payments, also are expanding to serve the rising middle class, as is Multiplus, which develops loyalty programs. Ownership of credit cards increased from 46 percent of C class individuals in 2005 to 53 percent in 2009, according to TGI. Store brand cards increased from 15 percent of the C population to 25 percent over the same period.

Brazilians like local brands

The positive way Brazilians feel about their country extends to Brazil’s brands, such as Natura or Havaianas, producer of the world’s most recognizable flipflop sandal. Even Petrobras, the national oil and gas giant and the nation’s most valuable brand, is held in high esteem.

In contrast to developed markets, where consumers regard oil companies with suspicion because of their size and environmental impact, Brazilians appreciate Petrobras for driving the economy and providing employment. The brand reinforces those attitudes with sponsorship of cultural, sporting and educational initiatives. Although the Petrobras brand value declined, it remains one of the world’s highest valued oil and gas companies, ranking 75 in the BrandZ™ Top 100.

Major global marketers, like Unilever, recognized growth potential in Brazil at least a decade ago and began enjoying the results in the past few years. P&G increased its investment during this period, becoming a major sponsor of popular TV programs and cross marketing its products under the corporate umbrella brand.

Some global brands, such as Nescafé, have been in Brazil so long that consumers think of them as Brazilian. The local beers Skol, Brahma and Antarctica enjoy tremendous popularity as Brazilian brands, although the global brewer AB-InBev owns them.

Learning to communicate

Many Brazilian brands are learning how to communicate with the same expertise exhibited by the multi-nationals. They’re experimenting with social media, for example, attempting to use it more for a relationship-building opportunity rather than another sales channel.

Mobile communication potentially offers a major brand marketing opportunity because Brazilians are so wired. According to some estimates, the number of cell phones in Brazil exceeds the size of the population. The brand marketing challenge, for now, is that only a small percentage of these devices are smart phones. But 65 percent of Brazilians use the Internet everyday, according to the TNS Digital Life Study, which also found that Brazilians build some of the most extensive social networks in the world, with an average Brazilian network consisting of 481 friends.

Fundamentals for brand building in Brazil

  1. Reach out digitally
    Brazilians are among the most wired people on the planet. This interconnectivity helps cross the social and economic divides, which are narrowing but sill exist.
  2. Be prepared for competition
    International brands entering or expanding in Brazil are likely to encounter both eager and welcoming consumers and increasingly tough local competitors.
  3. Recognize distinctive cultures
    Because Brazil is a geographically large and demographically diverse country, successful brands recognize that making an impact on consumers requires adapting to many local cultures.
  4. Be emotional
    Brazilians respond positively to brands that create an emotional bond. While rational reasons for purchasing products and services remain important to Brazilian consumers, they are especially loyal to brands that earn their affection.
  5. Help build Brazil
    Becoming a genuine and active participant in the effort to raise living standards and reduce inequities will ultimately benefit the brand.

    BrandZ Top 100 2012

    BrandZ Global 2012 Report Top 100 Report

    Top 100 Chart

    Methodology and valuation by Kantar Millward Brown

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