Mercado de Biscoitos Massas e Grãos

Mercado de Biscoitos Massas e Grãos

Cookies & Crackers Industry in Brazil

Brief description of the Cookies & Crackers Sector in Brazil

Cookies & Crackers are segmented into filled cookies, Crackers and Water and Salt, Wafers, Maria and Maisena, Dry Sweet, Butter Cookies, Salt, Donut and others. Brazil is the fourth largest cookies and crackers seller in the world with 1,732 thousand tonnes commercialized in 2015, according to ABIMAPI and Euromonitor. According to AC Nielsen data for 2015, the Southeast region was responsible for the higher sales volume of Brazil, around 44.0%, as the region has the highest per capital income of Brazil, the consumption of these products is influenced by acquisition power of the families. In 2015, the sector exported 39 thousand tonnes to more than 80 countries, with the concentration of 88.0% to the ten largest buyers.

Nowadays, the Brazilian per capita consumption is 6.0 kg per year, while countries such as Argentina and United Kingdom the consumption are more than 10 kg per year.

Cookies & Crackers Per Capita Consumption (2014*)
Country Per Capita Consumption (Kg/year)
Argentina 12.44
United Kingdom 10.02
Italy 7.37
United States 6.91
Brazil 6.05
Russia 5.75
France 5.56
Mexico 4.75
China 2.23
India 1.37
Source: ABIMAPI / Euromonitor
*Still haven‘t released 2015 data.

Until the beginning of the Real Plan (“Plano Real”), implemented in 1994, the sector was characterized as being predominantly by family businesses. The sector passed through a strong growth period, which led the large international brands to buy the smaller companies. In 2003, with the controllership of Adria passing to the Company, the Brazilian market leadership returned to a national Company. At the mentioned year, Nestlé passed to the second place and nowadays has a market share of 8.7%, followed by Marilan (8.2%), Mondelez (6.7%), Pepsico (6.5%) and Arcor (5.3%), while the Company is the market leader with a participation of 27.9%, according to AC Nielsen 2015 data. The rest of the market is fragmented among a wide number of Companies.

Recent Performance of the Cookies & Crackers Sector in Brazil

The population’s social ascension is encouraging the cookies & crackers consumption, including the ones with higher value added. The cookies & crackers of the healthy category are also showing an expressive growth rates, evidencing an opportunity to expand the production.

The table below presents the cookies & crackers competitors’ market share for Brazil, Northeast and Southeast region in the indicated periods, in terms of volume sold and retail value:

Cookies & Crackers Segment
Market Share in terms of volume sold
Brazil Northeast Southeast
M. Dias Branco 28.6% 60.7% 12.4%
Marilan 8.8% 4.9% 11.7%
Nestlé 7.9% 4.1% 9.8%
Pepsico 6.3% 2.4% 6.3%
Mondelez 5.8% 2.2% 7.8%
Bauducco 5.5% 2.2% 7.9%
Outros 37.1% 23.5% 44.1%
Source: AC Nielsen (2016)

 

Cookies & Crackers Segment
Market Share in terms of retail value
Brazil Northeast Southeast
M. Dias Branco 21.3% 53.1% 9.0%
Nestlé 10.1% 6.4% 11.4%
Mondelez 9.8% 5.4% 11.6%
Marilan 8.0% 5.2% 9.6%
Bauducco 7.4% 4.2% 9.4%
Piraque 6.8% 0.6% 12.9%
Outros 36.6% 25.1% 36.1%
Source: AC Nielsen (2015)

According to AC Nielsen data for the year 2016, the Southeast region is responsible for 45.5% of the cookies & crackers consumption in Brazil, the Northeast region for 30.6%, the South for 14.5%, the Midwest for 8.1% and the North for 1.2%.

Pasta Industry in Brazil

Brief description of the Pasta Sector in Brazil

The total volume of pasta sell in Brazil was in the range of 1million tonnes in 2016, according to the Brazilian Association of Biscuit Industries, Pasta and Industrialized Breads and Cakes – ABIMAPI, behind China (7.19 thousand tonnes), Indonesia (1.62 thousand tons), Italy (1.52 thousand tons), the United States (1.39 thousand tons) and Russia (1.15 thousand tons), according to the table below:

World Pasta Sale 2016 (thousand tons)
Countries 2014 2015 2016
World 63,808 63,971 64,030
1º China 7,356 7,297 7,191
2º Indonesia 1,563 1,591 1,621
3º Italy 1,501 1,513 1,528
4º USA 1,405 1,378 1,393
5º Russia 1,117 1,135 1,151
6º Brazil 1,025 1,025 1,024
7º Japan 942 949 952
8º Germany 714 718 721
9º France 558 559 564
10º South Korea 565 561 559
Source: ABIMAPI & Euromonitor

The productive process for pasta allows a pasta manufacturer to produce any type, requiring only small adaptations in the productive process and low investments. The industry’s flexibility in adapting the productive process requiring low investments, allows the producer to offer a large variety of pasta. Therefore, the pasta industry presents low barriers to entry in terms of product diversity.

Pasta is a low value added product and the freight has a significant relevance on its final price, justifying the implementation of regional production, consumption and distribution centers.

In relation to pasta consumption, Brazil is listed as the third largest pasta consumer in the world, behind only Italy and the United States. However, when comparing per capita consumption of the product, there is a clear disparity. The difference between per capita pasta consumption for an Italian and Brazilian arrives at 6.2 kg per habitant. According to ABIMAPI – Brazilian Association of Biscuit, Pasta, Industrialized Bread and Cake Industries, the factor which makes higher expansion of national consumption levels difficult is that the Brazilian people see pasta as a secondary and not a main dish. Additionally, rice is the greatest competitor of pasta as it is a lower priced carbohydrate.

Recent Performance of the Pasta Sector in Brazil

The economic opening process experienced by the country from the 1990s, introduced new challenges in the Brazilian consumer goods market and resulted in structural changes in the industry.
In the pasta sector, this process has taken on decisive forms in terms of market consolidation and driven companies to invest in technology, state-of-the-art equipment and training its professionals. The result of these investments is an industrial park which is among the most modern in the world and perfectly able to supply quality products.
In Brazil, dry pasta is almost totally produced from soft wheat and is segmented into: semolina pasta with egg, semolina pasta, general purpose pasta and home-made pasta. The name “pasta” is popularly used, also on packaging, as a synonym for “pasta”. There is also production of durum wheat pasta, using a raw material which is totally imported and represents 3.0% of the total volume sold.
Many companies in the sector have an integrated process with a wheat mil, and generally have an extensive portfolio with other products derived from wheat, such as flour, cake mixes, cookies and cakes, etc. Instant noodles are one of the products offered by companies, with the possibility of adapting flavors according to the target audience.
Dry pasta currently has the highest representativeness in the pasta sector. Considering data for 201, the sale of dry pasta was subdivided into: (i) 42.2% semolina without eggs; (ii) 33.2% semolina with eggs; (iii) 19.7% common; (iv) 3.0% durum wheat and (v) 1.9% homemade.
The Brazilian pasta market was quite dispersed until 1997, with the two main representatives in the sector, Adria Alimentos do Brasil (acquired by M Dias Branco in 2003) and Santista Alimentos, holding 6.8% and 6.7% respectively of consumption. This sector has become more consolidated following intensive merger and acquisition activity. More than half of the market is currently dominated by six companies in terms of volume sold: M. Dias Branco, Selmi, J. Macedo, Santa Amália, Vilma and Piraquê. The table below shows the market participation of competitors in the national pasta sector and northeast and southeast regions of the country for the period indicated:

Pasta Sector
Market share in terms of Volume sold
Brazil North Southeast
M. Dias Branco 28.8% 59.2% 17.1%
Selmi 11.3% 2.6% 13.8%
J. Macedo 9.6% 11.1% 12.8%
Santa Amália 7.6% 0.6% 16.2%
Vilma 5.5% 2.1% 9.1%
Piraquê 4.4% 0.3% 10.2%
Others 32.8% 24.1% 20.8%
Source: AC Nielsen (2016)

 

Pasta Sector
Market share in terms of Sales
Brazil North Southeast
M. Dias Branco 26.0% 58.9% 15.1%
Selmi 12.7% 3.7% 14.9%
J. Macedo 9.3% 11.9% 16.6%
Santa Amália 8.3% 0.7% 8.1%
Vilma 5.1% 2.4% 7.1%
Barilla 4.8% 0.5% 9.8%
Others 33.8% 21.9% 26.2%
Source: AC Nielsen (2016)

According to data from Nilsen and ABIMAPI, the types of pasta which experienced the highest growth between 2012 and 2016 are instant noodles and fresh pasta, with a growth of 27.6% and 40.3% respectively in sales value. Increased consumption and sales were the result of the practicality in preparing a meal, attracting children, young people and adults. Therefore, companies have increased investments in developing new ready-meal products, such as selling instant noodles with a sachet of sauce and pre-cooked lasagnas. Another determining factor for the expansion of new investments in producing instant noodles is profitability. According to ABIMAPI and AC Nilsen, in the retail trade, one kilo of common dry pasta cost an average of R$ 4.975in 2016 and instant approximately R$ 13.82 per kilo.

According to AC Nielsen data from 2016, the southeast region is responsible for the consumption of 43.6% of the pasta in the country, the northeast region for 29.8%, the south for 18.3%, center west for 7.1% and north for 1.3%.

Wheat and Wheat Milling Industry in Brazil

Brief Background of the Wheat and Wheat Milling Industry in Brazil

On November 22th, 1990, entered into force the Law 8,096 that revoked the Decree-Law 210. The Law 8,096 declaredfree, nationwide, commercialization and industrialization of wheat any source, releasing, as a consequence, the marketing and wheat industrialization in Brazil, without the economic agents are more attached to limits, quotas and governmentcontrols, including to import the grain. The sector passed through an intensive transformation as result of the sudden deregulation and opening to the international market, especially Argentina, where the production costs were below those found in Brazil and by consequence, produced wheat with more competitive prices than Brazil.

Recent Aspects of the Wheat Milling Industry in Brazil

The Government is currently adopting interventionist measures directed towards the sector, whether through Federal Government Loans (EGF), the Minimum Price Guarantee Policy (PGPM) and Production Distribution Award (PEP). In practice, the PEP is a subsidy in two fields. The producer, where he charges the difference between the minimum price and market price and at companies as a subsidy for transporting wheat from the producing region to the mill.

Despite having evolved considerably in recent years, the productivity of national wheat cultivation is still low in relation to the main world wheat producers. The disadvantages involve climatic conditions unfavorable to the winter crop in the majority of the national territory, associated to soil characteristics, and has influenced the quality of Brazilian wheat and/or production costs for the grain.

Despite the government efforts to guarantee the producer’s income, the suppliers, especially Argentina, are able to deliver the grain at lower costs if compared to the domestic wheat costs and/or with higher quality standards.

The table below presents Brazilian wheat consumption in the last 4 years:

Wheat Consumption in Brazil
Year Nacional Change Imported Variation Total Change
(In thousand tons – calendar year, except percentage)
2012/2013 4,380 -24.5% 7,357 0.3% 10,900 -2.7%
2013/2014 5,300 21.0% 7,066 -4.0% 11,400 4.6%
2014/2015 6,000 13.2% 5,374 -23.9% 10,700 -6.1%
2015/2016 5,540 -7.7% 6,745 25.5% 11,100 3.7%

Source: United States Department of Agriculture – USDA

The domestic production remains insufficient to attend the consumption. Thereby, Brazil is still highly dependent on imported wheat grain, mainly from Argentina. The import need imputes the mills a strong vulnerability regarding fluctuations in international commodity prices, which is influenced by external factors, including speculative movements. Nowadays, the imports reach half of the domestic consumption.

General Aspects of the Wheat Milling Industry Competition

According to the United States Department of Agriculture (USDA), world wheat production for the 2016/2017 harvest was estimated at 751.07million tonnes in March this year, a quantity 2.2% higher than the 735.25 million tonnes obtained in 2015/2016. The major wheat producers are the European Union, China, India, Russia and the United States, with the European Union and Russia being the largest exporters globally. Brazil is classified among the 5 largest importers in the world. In 2016 Argentina was responsible for supplying most of the demand for wheat imported by Brazilian mills.

The tables bellow shows the world largest producers, consumers and exporters of wheat, as well as the production and consumption of Brazil and Argentina:

World Largest Wheat Producers
Year European Union China India USA Russia World Production
(In thousand tons)
2012/13 133,949 121,023 94,882 61,298 37,720 658,600
2013/14 144,583 121,930 93,506 58,105 52,091 715,080
2014/15 156,912 126,208 95,850 55,147 59,080 727,978
2015/16 160,480 130,190 86,530 56,117 61,044 736,996

Source: United States Department of Agriculture – USDA

World Largest Wheat Consumers
Year European Union China India Russia USA World Consumption
(In thousand tons)
2012/13 119,250 125,000 83,824 33,550 37,768 679,015
2013/14 117,300 116,500 93,848 34,100 34,287 698,327
2014/15 124,677 116,500 93,130 35,500 31,554 704,908
2015/16 129,850 112,000 88,551 37,000 32,021 709,582

Source: United States Department of Agriculture – USDA

World Major Wheat Exporters
Year USA European Union Canada Russia Australia World Export
(Em Mil Toneladas)
2012/13 27,544 22,786 18,953 11,308 18,647 138,063
2013/14 32,011 32,032 22,268 18,609 18,615 165,870
2014/15 23,518 35,455 24,164 22,800 16,590 164,154
2015/16 21,094 34,686 22,134 25,543 16,124 172,854

Source: United States Department of Agriculture – USDA

According to data from the Brazilian Association of Wheat Industries (ABITRIGO), there were 196 wheat mills in operation in Brazil in 2016. A significant amount is concentrated in the south and southeast regions in the country (and, therefore, near to the main suppliers of the raw material). In 2016 it was Brazil‘s South that had the largest share of the milling market (42.2%), followed by the Southeast (24.5%) and the North and Northeast (30.1%). The center west is the region with the lowest participation at only 3.2%.

Perspectives for the Wheat Milling Industry

The National Supply Company (Conab) indicated that the planted area of wheat in the 2015/16 harvest presents a 11.2% increase in relation to the previous year, arriving at 2,448.8 thousand hectares, resulting in increased production of 7.3% in relation to the previous year. Production reached 5,534.9 thousand tonnes, against 5,971.1thousand tonnes registered the previous year. The prediction for planted area put forward in March 2017 for 2016/2017 has already shown to be lower than that presented last year, at 2,118.4 thousand hectares, with a predicted decrease of 21.5%% in production, estimated at 6,726.8 thousand tonnes.

Brazilian wheat faces competition from the subsidies awarded by the European Union, United States and Canada. In the absence of subsidies, Brazil would be competitive in this sector, as despite suffering from climatic aspects, which are less favorable than the climate in other countries, and higher prices with some of the raw materials, it has relatively cheap labor and can attain two annual harvests.

The wheat consumption in Brazil increased in the past years due to the population’s income growth and consequent increase in food demand.

The chart below presents the wheat consumption evolution in Brazil during the last decade:

* USDA March 2016 forecast for the 2016/2017 harvest
Source: United States Department of Agriculture – USDA

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