Uncovering the new Brazilian middle class

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Introduction

The population in Brazil 20 year ago was inflicted by a chronic and spiking inflation that could reach more than 80% a month. This phenomenon on the other hand has taught Brazilians to manage their debt level. Inflation in Brazil is higher ( 6.13%, 2012 avg in Brazil )  when compared with the inflation of developed countries ( 0,93%, 2012 avg in Denmark),though inflation in Brazil is far from being  what it was back 20 years ago.

The Brazilian population has been lgone through a deep change social change over the last decade. Social policies have ballasted and helped to promote income expansion, which were responsible for creating more consumption and ultimately has brought higher credit access to the population.

Only  in Brazil, more than 12 million families (nearly 40 million people) have risen from the lowest rungs of the economic ladder, and are now able to consume what they once couldn’t’. Alongside the prosperity achieved by Brazilian people, the government had an essential role, using strong fiscal, monetary, economic and social policies.These last policies were very important to include more families into a new social stratification.

The forthcoming decade promises to be a decade of structural changes in the Brazilian pyramid, lined by all the inheritances led by the former Brazilian governments.


The New Brazilian Middle Class. A New way of dealing with Brazilian consumers.

Below you will see a chart showing how the classes are divided according to the income earned per household.

new brazilian middle class

 

The Brazilian middle class has expanded considerably. Nearly 40 million people shifted from classes D and E, to class C. According to FECOMERCIO, a Brazilian think tank focused on studies to the retail market, the Class C will be the driving force of the Brazilian Economy over the next years.

Projections for 2015 are a population above 200 million inhabitants and a total consumption of 2, 11 Trillion USD, what will represent 63% of Brazilian GDP.

700 biillion USD will be the total amount consumed by the new class C in Brazil. This is a relevant information since the consumption of one class will be more representative than the total consumed by classes A and B altogether.

family breakdown

Source: IBGE

With more people having their most basic needs satisfied and pursuing what once was not possible – that means higher added value goods and services– it is important for companies to be aware of this movement and start to prepare for the opportunities and challenges for this new door that is being opened in Brazil.

Where is the consumer market located in Brazil?

Brazil is a country of gigantic dimensions. Despite its huge dimension the consumer market in Brazil is predominantly located in the south/southeast of the country, in states such as Santa Catarina, Rio Grande do Sul, Paraná (South) and São Paulo, Rio de Janeiro and Minas Gerais (Southeast).

Nonetheless it has been widely reported that a large chunk of the “new” consumers are now becoming more representative in inner cities of the country. Below there is a figure of metropolitan cities of Brazil where consumption is growing the most.

BRAZILIAN CONSUMPTION TRENDS


 The Brazilian New Middle Class. Their Desires and Needs

As the income levels rise, aspirations and wishes walk alongside.

The industry of consumer and durable goods are just a few examples of sectors that have been highly benefited by these new consumers. Credit has been largely used in Brazil.It is possible to pay for a good in several monthly installments.

As it has become very easy to afford for a fly ticket, the new middle class has started flying more often. What is happening now is that instead of using buses more people are using airplanes, and also cruise ships (back then this could only be afforded by people with very high standards of living).

This fact has been oblidging airlines companies to not neglect this important mass of consumers and has broken many paradigms within the aviation sector.

In a simplified explanation, the airlines investing on new aircrafts. The airports infrastructure are a bottleneck in Brazil and needs investment as well. The whole chain is going ( or will go) through a transformation because there are more people consuming.

The new Brazilian middle class is becoming more evident, making companies adopt a proper strategy to attend this mass of ravenous consumers. Price played an important role as a decision making factor before but today the picture has changed and price is becoming one of the last items to be pondered  if consumers need or want something.


A mindset change?

As people get more sophisticated, higher quality standards are expected. The Increasing Internet inclusion and broadband expansion, has brought faster access to information and the possibility to buy many products or services online.

One interesting fact is the growth pace of the E-commerce in Brazil. The E-Commerce in Brazil grows at an impressive pace of roughly 30% per year and the segment has sustained this growth for the last 10 years according to E-bit, a Brazilian think-tank focused on  E-commerce statistics and research.


 Sectors in the Spotlight in Brazil for Danish Companies

The reason why you had a sociological approach in the beginning of this text was simply to outline some relevant facts that has happened lately in Brazil.

I believe it is important to have a good cultural and sociological understanding of a country, it’s cultural, consumer behavior and patterns – in this specific case Brazil- before knowing where or what are the opportunities laying in your industry.


Education

The New Brazilian middle class seeks the same possibilities for themselves and their kids as the most privileged classes in Brazil.  A boast in services aimed at education, such as private language schools, new online courses and a whole new field of opportunities exists within the educational sector.

Nearly three years ago, the former CEO of Google in Brazil Alexandre Hohagen was hired by a major educational group, Anhanguera. One of his missions as reported was to democratize the education using new platforms.

The opportunities are diverse here. Online Educational platforms, apps,etc are all possibilities within this field.


Tourism

Tourism in Brazil is another sector that grows at a ferocious pace. The competition is very high, and the amount of companies playing in the sector is enormous.

A recent study has shown that the tourism sector in Brazil moved roughly 25 Billion USD. The Brazilian tourism ministry claims that the sectors that presented the highest growth rates were respectively tourism agencies, tourism flight operators, airline transport companies and car rental.


Consumer Goods

Do you have a novelty to sell? The Brazilian consumers are keen on consuming novelties. Products such as premium beers and wines, electrical appliances, cosmetics among other products,surely represent a great opportunity for Danish companies willing to expand its market


Online Retail

The segment grows at the ferocious pace of roughly 30% per year. The competition is aggressive as well but there are several opportunities within online retail yet to be explored.

In 2010 two experienced Danish men started a new business called Oba Chegou in Brazil. Oba Chegou follows a very similar business model as “Just Eat” widely known in Denmark.


Healthcare

Daintel.com, a Danish Company, has recently arrived in Brazil signing its first contract with hospital Santa Paula. Daintel sells CIS (Critical Information System) for Intensive care Units and anesthesiology departments, and will surely increase its operation in the Brazilian market


Technology and Apps

As more people have internet acess, technology and applications capable of bringing smart solutions, is definitely a huge market to tap into the Brazilian market.


 

This is just a very small sample of where Danish companies can find opportunities in Brazil. Over time Denmark Brazil will be exploring more in depth each one of the sectors, bringing always relevant insights and knowledge to you about each sector.

Did I missed out on something? Please let me know.

I´m looking forward to hearing your feedback.

Mange Tak

 

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Carlos Monteiro is a Brazilian citizen, graduated in Business Administration by the Catholic University of São Paulo. He lives in Odense, Denmark with his Danish Wife, Cathrine, and their half Danish /Brazilian daughter Ines Marie. You are very welcome to be in contact him at any time.

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