The bubble of rising consumer expectations expanded rapidly during the past 10 years – until it burst.
Millions entered the middle class, brands grew in value, and the country prepared to host the 2014 FIFA World Cup and Summer Olympics of 2016. It seemed like Brazil, the world’s fifth-most populous country, was about to assume its rightful place as a global economic power.
Then world demand for commodities slackened and oil prices plunged, adding to the problems of Petrobras, the national oil company already facing judicial scrutiny for official misconduct. When the World Cup failed to live up to its promise as a showcase for the new Brazil, belief dimmed that the Olympics would succeed at this role.
And if all this weren’t enough to worry about, parts of the country faced serious water supply and other utility problems. In the 2014 national elections, Brazilians reelected the ruling party, but only by a slim margin, reflecting widespread dissatisfaction.
These developments produced a national hangover, and consumers spent money more cautiously. The impact is evident in the absence of Brazilian brands from the BrandZTM Top 100 Most Valuable Global Brands 2015, although Natura appears in the personal care sector rankings, and two Brazilian brands, Skol and Brahma, rank in the beer category.
Brazilian consumers had experienced hard times before, but they’d convinced themselves that this time progress would be inexorable. When it wasn’t, they didn’t stop shopping, but they shopped more rationally and resorted to well-tested coping strategies.
The implication for major brands is that customers may find “good enough” and cheaper options in certain categories. This openness to other less expensive options creates an opportunity for smaller brands.
If there’s good news for major brands it’s this: If consumers didn’t increase their spending, they didn’t move backwards either. They may
be more critical and more conscious of their purchasing, but consumers are not letting go of relationships they’ve developed with brands over the past 10 years, and people with more money and optimism are driving a premiumization trend in certain categories, such as personal care and food.
For millennials, lacking the experience of earlier economic cycles, dashed hopes may change attitudes permanently, making this generation much more realistic in
the future. Circumstances also affected media consumption. After the expense of World Cup advertising, more brands turned to social media for a better return on investment.
Creativity critical now to optimize media ROI
During this period of Brazil’s national disappointment and reassessment, it is difficult to predict brand development too far in the future. It is possible, however, to recommend the actions brands need to take to navigate through the downturn.
People will continue to shop despite the difficult national economy; purchasing will be rational, but at the same time, premiumization will continue in certain categories and for people more insulated by wealth from the economic travails.
The impact of the slowed economic growth will vary by category, but across categories, the challenge for brands is to avoid sinking into pessimism and producing a self-fulfilling prophecy.
Brands that don’t continue to invest during this difficult period will be in a weaker position when the economy turns – and it will turn. Instead, brands need to optimize their marketing investment, using social media, for example.
Brands also should avoid excessive price promotion. That practice potentially will damage the power of the brand. Creativity is crucial at this moment because there are opportunities to stand out without spending a lot of money, especially since some brand competitors will cut back.
Brands are not paying too much attention to the 2016 Summer Olympics yet. The Games are more focused on Rio de Janeiro, in contrast to the FIFA World Cup, which was viewed as more of a countrywide event. Optimism going into the Olympics has faded because of the difficult economy and because the World Cup didn’t produce the anticipated bounce.