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Brazil Overview

Creative and disruptive innovations deliver relevance and drive growth

 

 

Valkiria Garre

CEO Kantar Insights

 

 

After two consecutive years in decline, Brazilian GDP grew 1 percent in 2017 and started to reflect signs of change in the Brazilian economy. This shift was driven by agribusinesses, which were largely responsible for this small signal of increasing growth.

 

Although this recovery is still rather slow, other figures show that Brazil is beginning to emerge from crisis, and that cautious planning is needed in the months ahead.

 

The accumulated inflation rate is now at its lowest level since 1998; and we have the lowest interest rate (Selic) since the beginning of the historical run in 1986. The unemployment rate is still very high, but it has decreased slightly, closing 2017 at 12.7 percent; the number of people unemployed fell by 5 percent, according to data from PNAD (Pesquisa Nacional de Amostras por Domicílio).

 

 

In the industry and the services sector, these small improvements are taking effect, although brands continue to face great challenges. Despite a long period of decline, we have seen segments that grow and brands that outperform their categories, indicating that there are ways, often disruptive and creative, to navigate this landscape in which traditional strategies do not bring clear signs of growth.

 

It is time to move; to seek creative and disruptive solutions, and to continue being a protagonist in the market, ready for when the economy takes off again.

 

The years of recession in Brazil in recent years have triggered, for better or worse, a change in the attitude of Brazilian consumers. Brazilians have always been seen as very creative, and great at juggling priorities as they adapt to new conditions. Conscious and rational consumption have become the watchwords and challenges for brands.

 

Consumers have become more cautious, as a result of their lack of control over their finances, high debts, financial default and the unpleasant coexistence of all this with high interest rates, especially on credit cards.

 

BrandZ continues to demonstrate that strong brands deliver more value to their shareholders, and are more likely to deliver positive returns, even when external conditions are challenging.

 

Big brands often, however, have more challenges in achieving differentiation, even when they seek to lead through innovation. In the case of banks and financial services providers, which are the fastest-growing category in terms of brand value, there is a huge challenge in building strong brands.

 

In recent years, newer brands in the financial market have seized the opportunity; they have made significant growth and are starting to be a threat to the market’s big, traditional brands. Starting from a small base, growth has been exponential for these challenger brands, based on customization that allows consumers to make their own choices. They can be treated as ‘one of a kind’, with specific needs and profiles. Brands like XP, Rico, Original, Órama and others have entered the market in the digital era, where there is no need to go to a bank to open an account, and everything can be done remotely via the internet, using attractive digital tools that give users strength and power.

 

Grocery stores is the other category that has found a way to innovate, meeting the need for more rational and daily purchases. All of the traditional brands have opened their own version of a mini, fast and practical format, close to your home or work: Extra Mini, Minuto Pão de Açucar, Carrefour Express, etc., delivering more relevance to consumers.  

 

At the other end of the retail spectrum, so-called ‘atacarejo’ (whole retail) formats have emerged, catering to consumers’ rationality, budgets and desire for conscious consumption with a place where families can come together for a collective experience. And there have been growing numbers of micro-entrepreneurs – people outside the formal labor market and seeking their livelihoods through small businesses – especially in food.

 

Innovation is not limited to large technology leaps based on high levels of investment. Innovations like the Internet of Things, nanotechnology, big data, epigenetics, or the use of robots that require a high level of investment, are still in the far future. Smaller-scale innovations, often with minimal investment, can deliver a qualitative leap in meeting the needs of consumers, delivering relevance, and bringing forth differentiation to brands.

 

Magazine Luiza is one such innovation success story. The brand is a home appliances and electronics retailer, and has been one of the pioneers in online sales. It has enjoyed a jump in sales through strategic partnerships that have helped it create more attractive sales channels: customers can buy online and pick up at flagship stores or at partner stores, even in areas where the brand is not present.

 

This marketplace strategy differs from pure e-commerce by aligning the digital channel with the structure of physical stores. It is a case of on-and-offline integration, where physical stores become digital centers and act as delivery channels.

 

 

Even in times of crisis, consumers are open to innovation at an affordable premium. Promotions are expected, especially in difficult times, but there’s a very thin line between what’s expected and the level of promotions that can damage a brand. As brands pursue growth, getting the right balance between promotions and brand building is a major challenge.

 

A historical series analysis by the Promo KantarWorldpanel study clearly shows that the levels of promotions carried out by different categories, especially the hygiene and cleaning segment, often end up being much larger than necessary. Brand strength ensures a premium inherent to high value-added brands. So, even under pressure to generate volume, strong brands can offer smaller discounts, which have a smaller impact on their revenue.

 

Don’t get too comfortable. Delve deeply into the needs of your consumers, and connect in a relevant and consistent way throughout the process: at the point of sale, through media and all communication.

 

Emphasize the benefits of your product, and ensure they are truly relevant and differentiated. Consumers are willing to pay a little more, but they need confidence that they will get a little more in return.