RESEARCH: Brazilian soft drink companies challenging multi-nationals
The hundreds of independent regional producers, known as ‘tubaineiros’, have increased their market share significantly in the last five years, particularly in the burgeoning packaged water and carbonates sectors, say leading beverage industry analysts, Canadean.
At the same time, market leader Coca-Cola has seen sales fall by over 10% and Pepsi-Cola has lost a quarter of volume, while major local producer Ambev has suffered badly from the price cutting techniques of the ‘tubaineiros’.
All categories, if not companies, have seen significant increases from the explosive growth of the sector over the last decade, which has raised per capita consumption of soft drinks from around 50 to nearly 120 litres, but the outstanding performers have been packaged water, which has risen almost 250%, carbonates, where sales have more than doubled and fruit powders, up by over 90%.
The packaged water market is served by literally thousands of producers, but with per capita consumption standing at a lowly 10 litres, Canadean believes there is considerable scope to increase sales. Leading Brazilian producer Edson Queiroz is one of the few companies to operate outside of its own region at present, but the multi-nationals are starting to take more interest and a number of forthcoming acquisitions are expected to lead to a degree of consolidation.
Brazil has the third largest carbonates market in the world and the sector accounts for nearly two thirds of soft drinks and over one quarter of all beverage sales. The smaller producers have increased their share at the expense of Coca-Cola and Pepsi-Cola in recent years, but in view of the market’s size and maturity, growth this year is unlikely to exceed last year’s 4%.
Although fruit powders’ has consistently grown faster in percentage terms than all soft drinks, and a further double-digit increase is predicted for this year, the main beneficiaries will continue to be Kraft General Foods and Unilever, who between them now control almost 90 per cent of the market.
Since the mid 1990s the role of returnable glass for soft drinks packaging in Brazil has diminished due to the availability of locally produced PET bottles, which now account for over 60 per cent of soft drinks fillings. Glass, however, remains the preferred option for sports and energy drinks. Indeed Gatorade only recovered market share after owner, Pepsi-Cola, reverted to the use of glass following an unsuccessful switch to PET.
Looking ahead, Canadean believes that the recent trend of expansion will continue with soft drinks consumption rising once again this year, pushing the sector’s share of commercial beverage sales to over 40 per cent.
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