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Food Processing Ingredients in Brazil

02 January 2011

USDA Foreign Agricultural Service

The Brazilian food processing industry was valued at US$ 173 billion in 2009. Analysts expect that the market will increase 4.0 to 4.5 percent in the next five years, according to the USDA Foreign Agricultural Service. This increase is driven by key market indicators such as higher income levels, single-living trends, health and wellness concerns.

Market Overview

The food processing industry is the second largest sector among manufacturing industries in Brazil. According to the Ministry of Labor and Employment (MTE), the industry employs 1.4 million people in 38,486 establishments. In 2009, approximately 15,000 jobs were created in the sector. The Brazilian Food Processors’ Association (ABIA) reported that in the same year net revenue totaled approximately 173 billion dollars, an 8 percent increase compared to the previous year. Food and beverage industries made up 85 percent and 15 percent, respectively, of this total.

Regarding distribution channels, the domestic market represented 77 percent of total net revenue in 2009, totaling 132.6 billion dollars, which includes US$ 3.7 billion of imports. Retail and food service sectors accounted for 71 percent and 29 percent, respectively, of total sales in the domestic market. The biggest food service buyers are restaurants and bakeries.

INDUSTRY SALES BY DISTRIBUTION CHANNELS

The meat and by-products sector was the most lucrative processing industry in 2009, churning out to US$ 34.4 billion in sales. Coffee, tea and cereals ranked second accounting for US$ 19.5 billion. The sugar industry ranked third, with a significant increase compared to 2008. In 2009, sugar sales increased 90 percent due to higher exports value. Compared to 2008, the number of food items in the food industry remained unchanged in 2009.

Industry analysts estimate that in 2010, the food processing industry will increase 5 percent in volume. In the next five years, growth estimates are of 4-4.5 percent per year, which is above the 3.3 percent average for the past ten years. In addition, analysts estimate that the growth value will range from 5.5 to 6 percent per year in the next five years. These estimates will favor ingredients imports since Brazilian industries will search for new solutions, such as new technologies for ingredients, in order to meet higher demand.

Domestic Companies

According to Exame Magazine1, of the top 10 leading companies in the food processing industry, 6 are multinational: Ambev, Bunge, Cargill, Unilever, Nestlé and ADM. The other four are Brazilian companies (Sadia, Brasil Foods, Copersucar and JBS). Sales by multinational totaled approximately US$45 billion while sales by Brazilian companies totaled US$ 20 billion.

Key Market Drivers

The key market drivers for the food processing industry in Brazil include:

  • Higher income levels: In the last five years, Brazil has been going through a period of stability and prosperity. This prosperous moment has advantaged a large number of Brazilian consumers, who were able to elevate then from D class (incomes up to US$ 630 per month) to C class (incomes ranging from US$ 631 to US$ 2,723 per month). According to industry analysts, the C class category represents more than 50 percent of food consumption. Higher income levels increased the consumption of dairy products, cookies, snacks and toast bread. These products have larger value added than rice, beans and other products which are consumed by individuals with lower levels of income. As a result of total value added growth, profitability increased TO the food processing industry. Brazil’s growth potential for food consumption is much larger when considering that Brazil faces the demographic bonus, which will represent the highest level of Economically Active Population (EAP) by 2030. This level represents the largest number of individuals in the workforce.
  • Singles trend: The number of people living alone in metropolitan areas in Brazil has been growing in the last few years. In the city of Sao Paulo – the largest metropolitan area in Brazil – singles accounted for 12 percent of all households. This group of people looks for wellness and convenience in food consumption. A recent study done by the Federation of Industries in the State of Sao Paulo (FIESP) shows that with the increase in the number of singles, the average time to prepare a meal has changed from two hours to fifteen minutes. This decrease in time is a result of a large number of individuals in the workforce. This new consumer looks for pre-prepared food in small quantities. As a result the pre-prepared food sector was the largest growth area in 2009, especially tomato sauce, which had a sales increase of 10 percent.
  • Health and wellness: Brazilian consumers are more concerned with health and wellness. This trend is reflected in food consumption habits. The FIESP study reported that 23 percent of people interviewed attempt to include healthy food in their diet. According to industry sources, the functional foods market increases 25 percent per year. Healthy and functional foods markets have a high added value, which also increases profitability in the food processing industry.

Further Reading

- You can view the full report by clicking here.

January 2011

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