LatAm 2015: BRAZIL | THOUGHT LEADERSHIP
CHALLENGES FOR BRANDS IN THE BRAZILIAN MARKET
The BrandZTM ranking for the most valuable brands in Brazil consolidates Skol as a three-time winning brand. Consistent communication investment by Skol and relationship building aimed at the brand target’s interests, especially music (music festivals), are the basis for this success. The ranking also shows Ambev’s expertise in the proper management of its brand portfolio, positioning four brands among the ten most valuable in Brazil.
Even in challenging times, the brands in this segment can still grow in value, and Bradesco and Itau? are positioned as second and third respectively.
Petrobra?s is the brand most significantly affected by the economic crisis, mainly due to the lack of brand value. In 2015, it was the brand most impacted by political issues. In the past the most valuable brand in Brazil, it has lost 75% of its value, falling back 8 positions in the ranking for 2015. The political issues and allegations of corruption at the company have also significantly affected the economy of some Brazilian regions and cities that were closely linked to the oil exploration industry.
The slowdown and disruption or freezing of contracts in the construction area of major infrastructure projects have added to the current level of unemployment.
In a scenario of problems and challenges, a positive indicator stands out. Reaping the results of ‘Bolsa Familia’ — the federal program for income distribution — the HDI (human development index) rose one position, according to UNDP (United Nations Development Program). It ranks 79th in the world surpassing the average for Latin America and the Caribbean.
The government’s social programs (and specifically the ‘Bolsa Familia’), combined with easy access to credit and the economic stability, helped realize the dreams of many people, giving them access to aspirational items.
However, the 2015 global economic crisis coupled with the disruptive scenario of the local political arena has created quite a challenging environment for the economy and for brands. Affected by the crisis, people had their earlier dreams shattered. Credit has become more rare and more expensive, the level of debt is significant and
the population is under pressure to practice conscious consumption. This means buying only what is necessary, significantly changing purchasing patterns.
The trading-down process permeates behaviors in every social class: trading a trip to Disney for a Brazilian beach; instead of eating out in restaurants a shared lunch at family’s or friends’ home; young people crowding the streets drinking beer kept in coolers; cars replaced at longer intervals, often for less aspirational brands or used cars – there are many more such examples.
This prevailing attitude has also seen the informal economy grow, with the sale of homemade products and handmade items sold by street vendors.
CONCERNS FOR THE FUTURE
The major change in the economy a return to very high interest rates and inflation, which had been under control for almost two decades.
The economic instability requires government intervention in the exchange rate, significantly devaluing the Real (local currency). This devaluation positively meets the expectations of the export market, especially in agricultural and mineral raw commodities, making it more competitive. On the other hand, the devaluation creates challenges in
the investment field especially when it comes to expanding production capacity. Brazil still depends on importing technology and equipment developed abroad.
With the growth and stability of two decades slowing down, 2015 is a year of change. In this landscape, brands may need to dig deep in order to grow back.