Mercado de Biscoitos Massas e Grãos
Mercado de Biscoitos Massas e Grãos
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 1,366 thousand tonnes commercialized in 2018, according to ABIMAPI and Euromonitor. According to AC Nielsen data for 2018, the Southeast region was responsible for the higher sales volume of Brazil, around 45.3%, as the region has the highest per capital income of Brazil, the consumption of these products is influenced by acquisition power of the families.
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. Currently, Marilan is in second place with 8.2% share, Nestlé occupies the third place with a 6.9% share, and so successively with Bauducco (6.8%), Pepsico (5.4%) and Mondelez (4.9%), while M Dias Branco leads the market with 34.0%, according to AC Nielsen’s data for 2018. The remaining market is fragmented among a large 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 | 34.0% | 60.7% | 22.4% |
| Marilan | 8.2% | 5.0% | 10.8% |
| Nestlé | 6.9% | 2.9% | 9.2% |
| Bauducco | 6.8% | 3.1% | 9.4% |
| Pepsico | 5.4% | 1.6% | 6.6% |
| Mondelez | 4.9% | 1.7% | 6.6% |
| Bagley | 4.7% | 0.1% | 9.3% |
| Outros | 30.6% | 24.9% | 25.8% |
| Source: AC Nielsen (Retail + Cash & Carry:2018) | |||
| Cookies & Crackers Segment | |||
| Market Share in terms of retail value | |||
|---|---|---|---|
| Brazil | Northeast | Southeast | |
| M. Dias Branco | 30.1% | 55.1% | 22.5% |
| Nestlé | 8.7% | 4.6% | 10.3% |
| Bauducco | 8.7% | 5.4% | 10.6% |
| Mondelez | 8.4% | 4.3% | 10.0% |
| Marilan | 7.9% | 5.5% | 9.5% |
| Pepsico | 5.8% | 2.3% | 6.5% |
| Bagley | 4.8% | 0.2% | 8.4% |
| Outros | 25.6% | 22.6% | 22.2% |
| Source: AC Nielsen ( Retail + Cash & Carry:2018) |
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According to AC Nielsen data for the year 2018, the Southeast region is responsible for 45.3% of the cookies & crackers consumption in Brazil, the Northeast region for 33.8%, the South for 12.2%, the Midwest for 7.5% and the North for 1.1%.
Cookies and crackers consumption
The domestic market for cookies and crackers has presented a relatively flattish behavior. In 2018, a 0.8% retraction was recorded. Filled, dry/sweet and savory crackers were the segments with the highest drop, while donuts and cookies have shown advances.
The consumption of donuts grew 13.6% in volume in 2018. This growth have led the segment to gain two positions, becoming the 5th most relevant segment for the cookies and crackers market, beating Savory and Wafer types.
Maria/Maisena segment also delivered a positive performance, growing 0.8% in volume sold in the year. Of the five main segments, only Cookies and Maria/Maisena have increased the volume in the market of cookies and crackers as compared to the same period of 2017.
Brief description of the Pasta Sector in Brazil
The total volume of pasta sales in Brazil was around 0.8 million tons in 2018, according to the Brazilian Association of Crackers and Cookies, Pasta and Breads & Industrialized Cakes Association – ABIMAPI, being the 7th most globally.
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.
Recent Performance of the Pasta Sector in Brazil
The process of economic openness experienced by the country since 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 contours in terms of market consolidation and has driven companies to invest in technology, state-of-the-art equipment and training of their professionals. The result of these investments is production facilities among the most modern in the world and perfectly able to provide quality products.
Dried pasta in Brazil is produced almost entirely from soft wheat and is segmented into: semolina pasta with eggs, semolina pasta, regular pasta and homemade pasta. The name “noodles” is popularly used, including in packaging, as synonymous with “pasta”.
Many companies in the industry have an integrated process with wheat mill and overall have a broad portfolio with other products derived from wheat, such as flour, cake mix, crackers and cookies, ready-made cake, etc. Instant noodles are one of the products offered by companies, with the possibility of adapting flavors to the target market.
Until 1997, the Brazilian pasta market was very dispersed, with the two main representatives of the sector, Adria Alimentos do Brasil (acquired by M Dias Branco in 2003) and Santista Alimentos, respectively, holding 6.8% and 6.7%, respectively, of consumption. The concentration in the industry became more significant with the intensification of mergers and acquisitions. Currently, more than half the market, in terms of volume sold, is dominated by six companies: M. Dias Branco, J. Macedo, Selmi, Santa Amália, Vilma and Piraquê. The table below shows the market share of competitors in the domestic pasta industry and the Northeast and Southeast regions of the country for the period indicated:
| Pasta Sector Market share in terms of Volume sold |
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| Brazil | Northeast | Southeast | |
| M. Dias Branco | 36.0% | 63.5% | 28.2% |
| J. Macedo | 12.5% | 12.7% | 16.7% |
| Selmi | 8.6% | 1.3% | 10.4% |
| Santa Amália | 7.0% | 0.2% | 14.7% |
| Vilma | 4.9% | 2.8% | 8.4% |
| Tondo | 3.1% | 0.0% | 3.4% |
| Outros | 26.9% | 19.5% | 18.2% |
| Source: AC Nielsen (2018) | |||
| Pasta Sector Market share in terms of Sales |
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| Brazil | North | Southeast | |
| M. Dias Branco | 33.0% | 62.5% | 26.3% |
| J. Macedo | 11.5% | 13.1% | 14.6% |
| Selmi | 10.5% | 2.2% | 11.6% |
| Santa Amália | 8.4% | 0.3% | 16.6% |
| Vilma | 5.0% | 3.3% | 8.3% |
| Barilla | 4.6% | 0.6% | 6.6% |
| Outros | 27.0% | 18.0% | 16.0% |
| Source: AC Nielsen (2018) |
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According to AC Nielsen data for 2018, the Southeast region accounts for 46.5% of the pasta
volumes sold in the Country, the Northeast region accounts for 31.8%, South for 13.8%, MidWest for 6.3% and North for 1.7%.
Pasta Consumption
Unlike the retraction perceived in the previous year, 2018 was a period of recovery and growth for the category. For pasta, the growth was driven mainly by the most affordable segment: common pasta, with 5.2% growth and already representing 26% of all pasta consumption in Brazil. Except for semolina, with a decrease of -1.1% in volume, the other Pasta segments (+ 1.3%) and Instant Noodles (+ 3.9%) posted growth.
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 | Consumption | Change |
| (In thousand tons – calendar year, except percentage) | ||||||
| 2015/2016 | 5,540 | -7.67% | 6,745 | 25.51% | 11,100 | 3.74% |
| 2016/2017 | 6,730 | 21.48% | 7,349 | 8.95% | 12,200 | 9.91% |
| 2017/2018 | 4,264 | -36.64% | 7,021 | -4.46% | 12,000 | -1.64% |
| 2018/2019 | 5,428 | 27.30% | 7,500 | 6.82% | 12,100 | 0.83% |
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 USDA (United States Department of Agriculture), the global wheat production for the 2018/2019 harvest was forecasted in March of the current year at 733.0 million tons, 3.9% LOWER than the 763.1 million tons obtained in 2017/2018. As major wheat producers, we highlight China, the European Union, India, Russia and the United States, with the United States and Russia being the largest exporters in the world. Brazil is ranked among the 5 largest importers in the world, and in 2018 Argentina, based on data released by the Brazilian Wheat Industry Association – Abitrigo 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) | ||||||
| 2014/15 | 156,912 | 126,208 | 95,850 | 55,147 | 59,080 | 730,411 |
| 2015/16 | 160,480 | 130,190 | 86,530 | 56,117 | 61,044 | 738,417 |
| 2016/17 | 145,248 | 128,845 | 87,000 | 62,832 | 72,529 | 756,408 |
| 2017/18 | 151,254 | 134,334 | 98,510 | 47,380 | 84,992 | 763,069 |
Source: United States Department of Agriculture – USDA
| World Largest Wheat Consumers | ||||||
| Year | European Union | China | India | Russia | USA | World Consumption |
| (In thousand tons) | ||||||
| 2014/15 | 124,677 | 117,500 | 93,102 | 35,500 | 31,328 | 700,417 |
| 2015/16 | 129,850 | 117,500 | 88,551 | 37,000 | 31,944 | 713,675 |
| 2016/17 | 128,000 | 119,000 | 97,120 | 40,000 | 31,863 | 735,420 |
| 2017/18 | 130,400 | 121,000 | 95,834 | 43,000 | 29,364 | 742,316 |
Source: United States Department of Agriculture – USDA
| World Major Wheat Exporters | ||||||
| Year | USA | European Union | Canada | Russia | Ukraine | World Export |
| (Em Mil Toneladas) | ||||||
| 2014/15 | 23,523 | 35,455 | 24,170 | 22,800 | 11,269 | 164,229 |
| 2015/16 | 21,168 | 34,763 | 22,110 | 25,543 | 17,431 | 172,787 |
| 2016/17 | 28,602 | 27,426 | 20,157 | 27,809 | 18,107 | 183,346 |
| 2017/18 | 24,524 | 23,290 | 21,954 | 41,419 | 17,775 | 181,230 |
Source: United States Department of Agriculture – USDA
Perspectives for the Wheat Milling Industry
The National Supply Company (Companhia Nacional de Abastecimento – Conab) pointed out that the wheat planted area in 2017/2018 harvest was 6.6% higher compared to the previous year, reaching 2,042.4 thousand hectares, and the production was 27.3% higher compared to the previous year. Production reached 5,427.60 thousand tons, versus the 4,253.50 thousand tons recorded in the previous year. The forecast for planted area in 2019 is that of 5,631 thousand tons, 3.7% higher than the previous year.
Brazilian wheat is affected by subsidies granted by the European Union, the United States and Canada. In the absence of subsidies, Brazil would be competitive in this sector, because despite suffering from climatic aspects, which are less favorable than the climate of other countries, and more expensive prices for some inputs, it has relatively cheap labor force and can count with two annual crops.
The consumption of wheat in Brazil has grown in recent years due to the population’s income growth and consequent increase in food demand. The graph below shows the evolution of wheat consumption in Brazil during the last decade.
Wheat Market
The characteristics of this market have a direct influence in our results since wheat is the main raw material used in mills and in the manufacture of our products.
According to the – U.S. Department of Agriculture, 2018/19 harvest is estimated at a global production of 733.4 million metric tons (MMT), a 3.9% decrease versus the previous 2017/18 harvest. The total decrease of 29.6 MMT is mainly due to lower production in Russia and the European Union which suffered significant losses in the current harvest due to adverse weather conditions, falling 9% and 17.6%, respectively, in its production.
In the current wheat harvest, around 67% of global production is expected stem from four countries and the European Union.
With the decrease in global wheat production and the slight increase in global consumption, we will see, as a result, a decline in 4.2% in global inventories, from 280 million tons to 268 million tons.
The world’s final inventories are concentrated as follows: China accounts for 53.6%, the United States 9.9%, India 5.5%, the European Union 4.2% and Russia 2%.
Wheat production in Brazil is still low compared to the main world producers. According to CONAB (Companhia de Abastecimento Nacional) estimates, wheat production in Brazil for 2018/2019 will reach 5.4 MMT, representing a 26.5% increase in grain production versus the previous harvest. While 216 million hectares of wheat will be planted around the world, this figure in Brazil will amount to only 2 million, less than 1% of the global area. The quantity and quality of Brazilian wheat production are not enough to meet the market demand of wheat for milling. Due to this, the imported volume has remained high. According to the CONAB data, the expected industry milling for 2018/19 is 10.7 MMT, a consumption estimate similar to the previous year.
In the 2018/2019, Brazil was in the 3rd position in the world ranking of wheat importers, accounting for 4.3% of world imports.
The higher wheat volume consumed in Brazil is imported from three countries. In December/2018, the volume of this cereal imported from Argentina amounted to 81.9% of the total, while the United States accounted for 8.4% and Paraguay 9.6%. The main destinations for foreign wheat were the states of São Paulo (18.2%), Ceará (16.1%), Bahia (12.9%) and Pernambuco (9.6%).
According to USDA data, Argentina will deliver in the current harvest an estimated production of 19.5 million tons, with average yield of 3,250 kg per hectare.
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