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Brazil Retail Report Q1 2011
Business Monitor International, Dec 2010, Pages: 63
The Brazil Retail Report provides industry professionals and strategists, corporate analysts, retail associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Brazil's retail industry.
The Q111 BMI Brazil retail report forecasts that the country’s retail sales will grow from BRL1,390.02bn (US$756.88bn) in 2011 to BRL1,840.01bn (US$1,001.90bn) by 2014. Generally positive trends in underlying economic growth, an enormous and growing population and rising disposable income are key factors behind the forecast growth in Brazil’s retail sales. Easier access to credit and the emergence of a wealthier middle class are also likely to help the value of the retail segment increase during the forecast period.
Brazil’s nominal GDP is predicted to be US$2,130bn in 2011, with growth of 4.5% expected for the year. Average annual GDP growth of 4.4% is predicted by BMI between 2011 and 2014. With the population increasing from around 197mn in 2011 to an estimated 201mn by 2014, GDP per capita is forecast to rise by 36.4% between 2011 and 2014, reaching US$14,757.
The national monthly minimum wage rose by 26% in real terms between 2003 and 2006, and in 2011 the average annual salary is expected to be US$10,697. The lifestyles of middle and upper-income groups increasingly mirror those of their counterparts in developed countries and overall purchasing power has been increasing.
Although income equality is a major concern, with the poorest 20% of Brazilians (mainly in the north of the country) accounting for just 2% of all income, increases in the minimum wage and additional funding for welfare programmes mean incomes in the north have been growing at double the rate of those in the south, and the region offers very significant growth opportunities. In addition, Brazilian president-elect Dilma Rousseff is committed to continuing cash transfer programmes such as Bolsa Familia, which has considerably raised the spending power of Brazil’s low-income population.
In 2005, 67.8% of the Brazilian population was described by the UN as economically active, with 40.3% in the 20-44 age range, which is vital for retail sales. More than 84% of the population was classified by the UN as urban. By 2015, the urban population is forecast to have exceeded 88%, with 39.5% in the 20-44 age band and 66.9% of the population expected to be economically active.
The non-grocery sector is outperforming the food sector as consumers increase their spending on household items and durable goods such as furniture, domestic appliances, cars and clothes. Easier access to credit is also proving to be good news for the retail sector. There were 118mn credit cards in Brazil in 2007, up from 44mn in 2003, according to Banco Central do Brasil (BCB). retail sub-sectors that are expected to show strong growth over the forecast period include food and drink, with sales predicted to rise from an expected US$192.57bn in 2011 to US$288.38bn by 2014, a rise of 49.8%. Mass grocery retail (MGR) sales are forecast to rise from an expected US$63.65bn in 2011 to US$91.88bn. a rise of 44.3%. Supermarkets will continue to take the lion’s share of sales by value, but of increasing importance are the convenience, discount and hypermarket formats, which are all expected to register significantly more rapid growth over the forecast period.
Automotive sales are forecast to increase by 34.2% during the same period to reach US$100.23bn, with domestic demand stimulated by government intervention, tariff protection, tax concessions and preferential vehicle financing terms. The consumer electronics sector offers growth potential in key digital products groups such as computers (below 30% penetration), digital cameras (below 30% penetration) and LCD TV sets, and is predicted to grow by 28.7% between 2011 and 2014, from US$24.68bn to US$31.77bn.
BMI forecasts over-the-counter (OTC) pharmaceutical sales to increase from an expected US$5.06bn in 2011 to US$7.41bn by 2014, up 46.4%. retail sales for our Latin American universe in 2011 are expected to reach US$1,302bn, based on varying national definitions. Total consumer spending for the region, based on BMI’s macroeconomic database, is predicted to be US$2,891bn. Mexico, Brazil and Venezuela are expected to account for an estimated 83.1% of regional retail sales in 2011, with the three countries likely to comprise 85.3% of all retail sales in the region by 2014. For Brazil, the predicted 2011 market share of 57.5% is expected to fall to 54.3% by 2014.
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