International Research - Brazil

NEWS

Nestle to Invest $365 Million in Brazil in 2010
AmBev Fourth-Quarter Profit Grows 5.3% on Brazil Beer
Brasil Foods Sales Fall by 4 Per Cent in 2009

IMPORTS OF PACKAGING MACHINERY 

Brazil’s economy entered a mild recession with GDP contracting by 1.8% in the first quarter and 1.3% in the second quarter of 2009.  In response to external conditions, companies began to rapidly pull back on business investment as early as the second half of 2008 evinced by packaging machinery imports contracting by -1.57% on the year, after a growing by 73% in 2007.  Nevertheless, due to Brazil’s much improved financial system and robust domestic demand, Brazil’s economy led the recovery in the Latin American region.  Backed by strong capital inflows, the Brazilian Real has also strengthened 29% against the dollar in 2009, increasing sales prospects for US exporters.  Additionally, food consumption is expected to rise by 6% to $180 billion in 2010, as analysts predict GDP growth returning to 4-5% range as early as 2010, buoyed mostly by strong domestic demand.

TAX&TARIFF RATES

Duty rates below are applied on CIF. There is an Industrial Product Tax (IPI) (Federal sales tax) that ranges between 5 and 15 percent and a Merchandise Circulation Tax (ICMS – state sales tax) that is generally around 18 percent. There is also a 1 percent miscellaneous tax. In addition, there is a Social Security tax that varies by product but is approximately 10 percent. Contact the Trade Information Center at 1-800-USA-TRADE for full explanation of how taxes are applied.

FOOD & BEVERAGE ANALYSIS

• In the next five years, Business Monitor International expects total food consumption to grow by 86.7% in US dollar terms.
• There are around 45,000 food-processing companies, including major multinationals. The sector is, however, composed mostly of small and medium-sized companies.
• Nestlé is the clear leader in the Brazilian packaged-food industry with a market share of 7%, followed by Parmalat and Unilever. Small and medium-sized regional manufacturers also have a strong presence, benefiting from an intrinsic understanding of the local market and, often, cheaper prices. They account for around 24% of total packaged-food value sales.
• Industry confidence in the continued growth of domestic demand is reflected both in investments in production facilities, technologies and in a renewed focus on popular multinational brands.
• Coca-Cola announced it is to invest US$5.8bn in Brazil over the next five years. This is a 75% increase over the US$3.3bn invested between 2005 and 2009 and is driven by a desire to take advantage of steadily rising soft drink consumption, as well as the likely boost from the country hosting the 2014 FIFA World Cup and 2016 Olympics.
• Wal-Mart Brazil revealed that the firm will invest up to US$1.2bn in 2010 to open 110 stores. This would represent by far the biggest ever annual investment in the country and would be more than 40% more than the US$895mn invested during 2009.
• Brazil has the largest beer market in Latin America, dominated by Ambev, and is the world's largest exporter of coffee, soybean, poultry, beef, orange juice and sugar.
• Brazil is now the world's fifth largest consumer market for chocolates and the third-largest market for sweets.
• Coffee consumption is rising rapidly in line with increased interest in premium varieties and the opening of new American style coffee shops.

PHARMACEUTICAL INDUSTRY ANALYSIS

• Brazil has the 11th largest pharmaceutical market globally with annual sales topping US$17bn.
• Brazil launched a major 10-year biotechnology initiative in 2007 that provides incentives for private-sector R&D and production.
• There are some 550 pharmaceutical firms in Brazil. Of the top ten companies by sales in 2008, the first six are all foreign multinational drug makers. Sanofi-Aventis (US$1,229mn in sales) and Novartis (US$1,116mn) are clear leaders, followed by Roche (US$735mn), Pfizer (US$666mn) AstraZeneca (US$584mn) and Eli Lilly (US$545mn). Local firms Aché (US$456mn), EMS Sigma Pharma (US$445mn), Eurofarma (US$424mn) and Biosintética (US$382mn) fill the remaining spots. While this shows the strength of innovation for foreign drugmakers, the presence of five local firms highlights strong competition, as well as the growing use of generic drugs in Brazil. Other leading local producers include Aché/Biosintética, Medley and Libbs.
• From 2009-2014 BMI forecasts a CAGR of 11.63% for patented drug market in US dollar terms.
• The projected continuation of sales expansions is one of the key reasons that multinational research-based drugmakers continue to invest in Brazil despite generic competition having eroded some market potential since their inception in 2000.
• Industry association PróGenéricos has estimated that generics will account for 30% of the market by 2010. Investment reportedly totaled around US$400mn between 1999 and 2006, illustrating not only an expansion of capacity, but also the repositioning of product lines in favor of genuine generics.

SOURCE: Business Monitor International