Brazil's Northeast Goes From 'Land of Laziness' to Next China
Brazil's Northeast is an emerging market within an emerging market, a poverty-stricken but fast-growing region of 53 million people sometimes called the China of Brazil.
Known for Brazil's most dazzling beaches outside major cities such as Salvador and Fortaleza, the northeast's nine states are home to 30% of the nation's population but were long ignored. Now marketers are flocking to the latest region to benefit from Brazil's growing economic prosperity -- and carefully researching what they need to do differently, whether it's a floating Nestle supermarket boat or buying a local rival brand called Jesus.
Back in 1995, almost 70% of the inhabitants of the northeast, or nordeste, as the region is called in Portuguese, earned less than half of Brazil's minimum wage, or about $100 a month. In 2008, 49% of the region still made the minimum wage while half made more. By 2016 -- when Brazil hosts the Olympic Games, two years after playing host to the World Cup -- that number is forecast to fall to 28%, according to Brazil's Institute for Applied Economic Research.
Brazil's government has invested billions of dollars in new infrastructure as multinationals as diverse as Kraft Foods, ImBev, Novartis, Unilever and Fiat build plants there. But regional brands often have those global players beat in understanding consumers and distribution system that are very different from the rest of the country.
According to a Nielsen study of the northeast, families there are bigger, with more children, and the average age is younger; 43% of homes have four or five residents and 18% consist of more than six people. Door-to-door sales are extremely popular, and consumers are highly sensitive to low prices and promotional efforts. Neighborhood grocery stores are often more popular than big supermarkets, and capture 37% of sales. Consumers visit a grocery store 16 times a month, more than in any other part of Brazil.
"Regional brands have been especially successful because they seem to understand local consumers better," said Eduardo Ragasol, Nielsen's president for Brazil. "They have the right price, the right packaging and the best deals."
In Nielsen's study of the northeast market, regional brands accounted for almost 80% of total sales in 12 categories, including 87% of bottled water and 68% of coffee sales.
"Brazil used to see us as a region with no future -- the land of laziness," said Andre Torreta, founder of Sao Paulo consulting company Ponte Estrategica and a native of Salvador, the biggest city in the northeast. "Now we're the talk of the town, we became part of Brazil. But it's a region full of contrasts, and it takes a lot of work to get to know the local consumer."
So marketers are seeking a local edge. Nike launched the Nike Lanceiro sneaker in the blue and white colors of the flag of Pernambuco, with white midsoles splattered with beige to evoke the muddy marshes the state is known for. Primor margarine, owned by U.S. company Bunge, has become a best-selling brand with a saltier, firmer version that doesn't melt as easily in the region's searing heat. Nestle developed a cookie, sold only in the northeast, based on a popular local sweet-corn dish.
In the state of Maranhao, Coca-Cola's biggest competitor was Jesus, a local brand of guarana, a very sweet Brazilian soft drink made from an Amazon fruit. With no advertising at all, Jesus, created by a pharmacist by that name, was the No. 2 soft drink to Coke. Coca-Cola finally bought Guarana Jesus.
Danone is regionalizing both its products and marketing efforts in an effort to become the leading yogurt brand in the northeast.
"We launched a version of our most popular infant yogurt, Danoninho, with special vitamins lacked by children in the northeast," said Mariano Lozano, Danone's president in Brazil. "We have developed packaging that allowed us to lower prices to consumers. A significant part of our portfolio costs less than 70 cents. Our sales in the region have grown 139% in the past year, and our sales volume is up 150%."
For another brand, Danone introduced a 30-cent version of Corpus yogurt, supported by regional advertising.
Nestle is focusing on door-to-door sales in the northeast. Through a program called "Ate Voce" ("Reaching You"), micro-distributors started blanketing the region in 2009. Door-to-door salespeople sell cookies, dairy products, yogurt and desserts, organized in kits that vary by city and local consumer preferences. The vendors are trained to act as nutrition consultants, helping consumers understand healthful eating.
In a fascinating twist on the door-to-door sales concept, Nestle has a year-old floating supermarket that plies the Amazon River, bringing 300 different Nestle products to consumers who can't be reached easily by road. The floating supermarket, started in June 2010 to reach up to 1.5 million consumers in remote communities, moors at 27 riverside towns in northern Brazil, the region adjacent and in many ways similar to the northeast.
Nestle's boat sets off from Belem, the biggest city along the Amazon, and spends one day at each stop. Shoppers can check its schedule at nestleatevoce.com.br, or call a toll-free number or send a text for more information.
"Demand for our products has more than doubled in the north and northeast compared to other Brazilian regions," said Francisco Garcia, Nestle's marketing manager. "Local marketing efforts are also very important. Our agencies W/McCann, JWT and Publicis have local partnerships to develop local strategies."
Food marketers such as Nestle and Danone also benefit from the fact that many consumers in the northeast spend almost half their income on food.
Despite still-low incomes, marketers of expensive products such as cars are expecting consumers in the northeast to start catching up to more affluent regions. In Pernambuco, there is one car per 13.1 inhabitants in the state, compared to one car for every 5.12 people in Brazil as a whole. In Brazil's richest state, Sao Paulo, there is a car for every 2.43 inhabitants.
Fiat will open a $3 billion plant in Pernambuco next year, hoping to boost its car sales in the northeast even higher. Fiat already gets 18.3% of its Brazilian sales from the northeast, where its market share is almost 28%, well above its 22 .8% share of the whole Brazilian market.
"We sell more in the northeast than all the French, Japanese and Korean brands sell nationally," said Fiat's marketing director, Joao Ciacco, who is also president of the Association of Brazilian Advertisers. "Our marketing investment there has also grown more rapidly -- by 48% -- than our national investment."