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GLOBAL 2016: Resilient Brazilians face reality with self-reliance and resolve

Brands help consumers navigate challenging times

Brazilian consumers faced reality, and it was ugly - a perfect storm of economic crisis, political corruption and epidemic disease.

Only a few years ago, demand for oil and other commodities drove a booming economy, the middle class was expanding exponentially, purchasing power was rising and Brazil was looking forward to assuming its rightful place on the world stage during the FIFA World Cup in 2014 and the Summer Olympics a year later.
That was then. Today, slower global economic expansion, particularly reduced demand for commodities, impedes Brazil’s economic growth. Plunging oil prices and scandal damaged Petrobras, Brazil’s state-owned and formerly well-respected oil and gas brand. Corruption charges tainted World Cup preparations, and the prospect of the Olympics no longer generates excitement, except perhaps in Rio de Janeiro, the host city. And as if these problems were not challenging enough, the Zika virus added a tragic public health crisis.
Brazilians have in the past endured many cycles of inflation and deflation, economic boom and bust, and government turnover with a determined optimism that things will get better, somehow, because they always have. This crisis is different. Better off, with more to lose, and more informed and connected to the rest of the world, Brazilians have lost patience and trust in the system.
They still believe that their lives will improve, but an experience-hardened realism has replaced their vague acceptance that somehow things will work out. Brazilians do not expect progress to resume until the political problems are resolved, which now includes the impeachment of Brazil’s president. They find some hope next door in Argentina, where the national mood improved following an election and change in leadership.
Brazilians are convinced that for real change to happen, they can no longer depend on luck, or even government, but only on themselves. Disenchanted with their political leaders, consumers are more likely to turn to the private sector for support, potentially opening an opportunity for brands to play an increasingly important role in helping individual consumers live better lives.
The consumer mood
Brazilians attempted to remain optimistic through the last election, hoping that political change would solve their problems. Prior to the election in the fall of 2014, 75 percent of Brazilians reported feeling optimistic, according to TNS research, but only a year after the election, the portion of the population feeling optimistic plummeted to only 25 percent.
It was as if much of the nation reached a therapeutic moment at the same time and discovered the same insight. With a sense of crisis fatigue, Brazilians, particularly members of the middle class, concluded that self-reliance supported by private initiative was the only way to protect and improve their living standard.
Older Brazilians, who had endured earlier periods of high inflation and economic volatility, had hoped that enduring stability had finally been achieved. Having tasted the good life, they are reluctant to give it up. Young people, having experienced only the good life, now worry about being able to afford it - to someday purchase a car or a house. High unemployment has forced them to be more entrepreneurial.
Meanwhile, members of Brazil’s wealthy elite, known for their consumption of luxury, have not stopped purchasing. But rather than spend their money during overseas trips, they are buying merchandise in Brazil, where luxury has become less expensive.

Coping strategies
Middle-class consumers are developing coping strategies to protect what they have and, to the extent possible, still enjoy life. Shopping baskets are becoming more complex as consumers trade down on some items to save money for selected premium items. E-commerce is growing rapidly, not only because it is convenient, but also because it facilitates price comparisons.
Because of recently imposed higher tax rates for imported alcohol, consumers are shifting to local brands and increasingly favoring craft and imported premium beers. Even in these troubled times, consumers want to experiment, and also devote some spending to affordable treats, including ice cream and coffee. Consumers also are buying premium yogurts.
People are eating out less and preparing more meals at home. And when eating out, people are visiting fast food restaurants. Some of the fast food brands are experiencing strong sales and adding more premium items to their menus to appeal to consumers trading down from fine or casual dining. Food trucks are a new phenomenon. McDonald’s launched a gourmet burger truck in São Paulo.
Although some brands have reflexively resorted to price promotions, others have commanded premium pricing because even while feeling economic duress, middle-class consumers are not willing to surrender all their gains. The drug store channel has done a good job of adding value, for example, because consumer are not simply shopping for products but also relying on advice.
Some local brands prospered because of prior experience adapting to Brazil’s economic cycles. Foreign exchange rates impacted local brands less than the multinationals. Generally, brands have attempted to make their offerings more affordable and to develop initiatives to help consumers navigate through challenging times.
Brands advance social initiatives
Many brands have responded to Brazil’s crisis with initiatives that help people and strengthen consumer relationships with the brand. Unilever is offering free webinars to help women compete in the workforce. Avon has programs to empower women. Brands are also connecting with consumers through a shared sense of purpose. The natural cosmetics brand Boticario, for example, promotes diversity and political dialogue.
Coca-Cola went back to the future and lowered prices by marketing beverages in recyclable glass bottles that save production costs. It also partnered with Subway to provide training programs. The telecom provider Telefónica, along with several financial services brands, including Itaú and Porto Seguro, created programs to incubate start-ups and encourage innovation, particularly among young people. Positive messaging from the educational brand Anhanguera envisions a better future through learning.
Two major sporting events, the World Cup and the Olympics, were expected to elevate Brazil onto the world stage, but because the World Cup disappointed and preparations became embroiled in corruption charges, fewer brands are investing in the Olympics, except for official sponsors, such as Coca-Cola, McDonald’s and the bank brand Bradesco.
Brands are trying to meet consumers where they are, to offer whatever sliver of the good life or indulgence is possible. As consumers work to rebuild prosperity, brands have an opportunity to help them.

Brand Building Action Points

1. Sound hopeful.
Sound neither too optimistic, because it is not believable, nor too pessimistic, because it is not helpful. Be realistic and straightforward. Make it clear that the brand is committed to helping consumers, both to rebalance their lives during this difficult period and to prosper again when economic growth resumes.
2. Empower people.
Consumers have become more self-reliant. But they need help to navigate through the current crisis and be better prepared for the future. Having become skeptical that government can fix their problems, consumers are more receptive to private enterprise, which opens a role for brands to engage with consumers in ways that are brand relevant and socially constructive.
3. Provide solutions.
Brazilian consumers want to sustain the life they have come to enjoy. They don’t have the same purchasing power, but Brazilian’s feel more in control of their lives. Help them make choices and feel good about the choices they make. Give them opportunities to enjoy small indulgences.

4. Tailor messages.
In these economically stressful times, Brazilians want to buy more with less. They accomplish that goal with sophisticated shopping and social media use, and are most receptive to thoughtful brand messages that show real understanding of their individual needs.

5. Partner with retailers.
Manufacturers and retailers are increasingly collaborating in Brazil to better understand consumer behavior, and to discover the products and messages that will draw consumers into stores and turn them into paying customers.
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