MARKET ACCESS SECRETARIAT Global Analysis Report Foodservice Trends In Brazil April 2014 EXECUTIVE SUMMARY1 In 2012, the consumer foodservice market continued its upward trajectory in Brazil. One reason for this continued rise is the opening of new fast food chain outlets and new international chains, such as Quizino’s and Carl’s Jr, entering the Brazilian market. Another reason is price increase due to a higher level of inflation experienced throughout the year. The above factors have stimulated the market growth of the Brazilian foodservice industry allowing it to reach a world ranking of fourth with value sales of US$146 billion in 2012 (Euromonitor International, 2013). Independent operators have a strong foothold on the foodservice industry in Brazil and made up 93% of overall sales in 2012. Chain operators have shown steady sales growth over the last 5 years, having increased their overall sales percentage from 5% in 2008 to 7.1% in 2012. This trend looks to continue over the forecasted period with chain operators gaining over 9.5% of overall foodservice sales by 2017. Many of the top 10 players in the Brazilian foodservice industry are also familiar and significant global competitors. The fact that their combined market share was less than 5% indicates a varied number of choices for the consumer. Factors such as varied ethnicity, a growing middle-class, a cultural preference to engage in frequent “dining experiences”, make Brazil, and most specifically São Paulo, a strategically attractive opportunity for suppliers to the country’s foodservice providers. The 2014 FIFA World Cup being hosted in São Paulo and Rio de Janeiro, and the 2016 Summer Olympic Games happening in Rio de Janerio will see a large influx of international tourists to these regions thus having a major effect on the Brazilian foodservice industry in the near future. 1. Information in the executive summary sourced from Euromonitor International, 2013. CONTENTS Executive Summary ........................1 Sector Overview ..............................2 Subsectors ......................................4 Locations .........................................5 Top Companies ...............................7 Influencing Factors ..........................7 Opportunities ...................................8 Conclusion .......................................8 Resources .......................................9 SECTOR OVERVIEW Ranked fourth largest in the world, Brazil’s foodservice sector was valued at US$146 billion in 2012. Between 2008 and 2012, the Brazilian foodservice market saw a compound annual growth rate (CAGR) of 10.9% and is expected to continue to expand with a CAGR of 10.6% through 2017, achieving total sales of US$228 billion. Foodservice subsectors consist of cafés/bars, full-service restaurants, fast food, self-service cafeterias, street stalls/kiosks and 100% home delivery/takeaway. Cafés/bars and full-service restaurants are the dominate subsectors making up 70% of the market, followed by fast food. Fast food showed the highest CAGR of 15% over the 2008-2012 period. Over the forecasted period of 2013 to 2017, street stalls/kiosks will show the highest CAGR at 14.1%, thus dropping fast food into second spot with a forecasted CAGR of 12.6%. Market Value and Growth of Brazil Foodservice by Subsector, Historic, Current Prices, Fixed 2012 Exchange Rates Categories Total Consumer Foodservice Cafés/Bars Full-Service Restaurants Fast Food Self-Service Cafeterias Street Stalls/Kiosks 100% Home Delivery/Takeaway Pizza Consumer Foodservice** 2008 96,490.7 46,764.8 24,406.2 16,077.3 4,496.4 4,265.1 480.9 3,312.7 Market Value (US$ millions) 2009 2010 2011 105,106.7 115,505.9 128,671.2 49,808.2 53,510.2 58,112.1 27,145.4 30,283.8 33,882.3 17,685.0 19,856.1 23,100.1 5,119.6 5,748.8 6,532.7 4,817.4 5,493.3 6,362.3 531.1 613.7 681.8 3,726.8 4,229.8 4,704.3 2012 146,164.4 61,795.6 40,450.5 28,117.5 7,809.3 7,181.1 810.4 5,567.6 CAGR* % 2008-12 10.9 7.2 13.5 15.0 14.8 13.9 13.9 13.9 Source: Euromonitor, 2013. *CAGR: compound annual growth rate. **Pizza consumer foodservice data is compiled from three different subsectors (fast food, full-service restaurants, and 100% home delivery/takeaway) for the purposes of comparison, but remains reflected within the figures for these subsectors, and thus the consumer foodservice total. As such, pizza consumer foodservice is not counted as its own sector within the consumer foodservice total. Market Value and Growth of Brazil Foodservice by Subsector, Forecast, Current Prices, Fixed 2012 Exchange Rates Categories Total Consumer Foodservice Cafés/Bars Full-Service Restaurants Fast Food Self-Service Cafeterias Street Stalls/Kiosks 100% Home Delivery/Takeaway Pizza Consumer Foodservice** 2013 152,761.3 58,825.3 44,527.4 31,772.6 8,674.1 8,080.0 882.1 6,068.5 Market Value (US$ millions) 2014 2015 2016 170,111.2 187,855.9 208,178.0 64,258.5 69,901.3 76,091.0 49,524.1 54,461.4 60,161.6 35,987.6 40,771.7 45,911.4 9,936.2 10,937.5 12,357.0 9,437.7 10,731.4 12,507.9 966.9 1,052.6 1,149.1 6,724.0 7,295.7 7,988.9 2017 228,227.6 82,015.8 66,411.7 51,162.9 13,721.5 13,673.4 1,242.3 8,652.5 CAGR* % 2013-17 10.6 8.7 10.5 12.6 12.1 14.1 8.9 9.3 Source: Euromonitor, 2013. *CAGR: compound annual growth rate. **Pizza consumer foodservice data is compiled from three different subsectors (fast food, full-service restaurants, and 100% home delivery/takeaway) for the purposes of comparison, but remains reflected within the figures for these subsectors, and thus the consumer foodservice total. As such, pizza consumer foodservice is not counted as its own sector within the consumer foodservice total. Page | 2 Independent operators provide the majority of foodservice in Brazil, accounting for US$135.8 billion or 93% of the total foodservice market in 2012. However, chained operators achieved the most dynamic performance of the year with sales showing a 30% increase, compared to their independent counterparts which only showed a 12.5% increase over 2011. Chained operators will continue to see a very healthy CAGR of 16.1% from 2013 to 2017, while independent operators will only see a 10% CAGR over the same period. Market Value and Growth of Brazil Foodservice by Type, Historic, Current Prices, Fixed 2012 Exchange Rates Subsector Market Value (US$ millions) 2009 2010 2011 105,106.7 115,505.9 128,671.2 99,604.2 108,901.6 120,707.0 5,502.4 6,604.2 7,964.2 2008 96,490.7 91,632.8 4,857.9 Total Consumer Foodservice Independent Consumer Foodservice Chained Consumer Foodservice Source: Euromonitor International, 2013. 2012 146,164.4 135,819.4 10,345.1 CAGR* % 2008-12 10.9 10.3 20.8 *CAGR: compound annual growth rate. Market Value and Growth of Brazil Foodservice by Type, Forecast, Current Prices, Fixed 2012 Exchange Rates Subsector Total Consumer Foodservice Independent Consumer Foodservice Chained Consumer Foodservice 2013 152,761.3 140,764.4 11,996.9 Source: Euromonitor International, 2013. Market Value (US$ millions) 2014 2015 2016 170,111.2 187,855.9 208,178.0 155,908.5 171,356.0 189,079.2 14,202.7 16,499.9 19,098.8 2017 228,227.6 206,399.5 21,828.2 CAGR* % 2013-17 10.6 10.0 16.1 *CAGR: compound annual growth rate. The Brazilian foodservice sector had just under 1 million outlets that recorded close to 24 billion transactions in 2012, with an average transaction cost of $6.11. The cafés/bars subsector had the most outlets with over 400,000 and also showed the most transactions at 12.5 billion. Full-service restaurants had the highest average sales per outlet and highest average sales per transaction with US$622,890 and US$24.59, respectively. In 2012, 100% home delivery/takeaway was the lowest performing subsector in terms of outlets and transactions. Outlets and Transactions of Brazil Foodservice by Subsector, 2012 Subsector Total Consumer Foodservice Cafés/Bars Street Stalls/Kiosks Fast Food Full-Service Restaurants Self-Service Cafeterias Pizza Consumer Foodservice** 100% Home Delivery/Takeaway Outlets 995,853 409,696 334,710 156,787 64,940 21,671 15,445 8,049 Transactions (Thousands) 23,919,602.5 12,467,540.5 2,940,980.2 5,907,232.0 1,644,971.5 868,002.4 253,936.2 90,876.0 Average Sales Average Sales per Outlet per Transaction ($US) ($US) $146,773 $6.11 $150,833 $4.96 $21,455 $2.44 $179,336 $4.76 $622,890 $24.59 $360,357 $9.00 $360,479 $21.93 $10,068 $0.89 Source: Euromonitor International, 2013. **Pizza consumer foodservice data is compiled from three different subsectors (fast food, full-service restaurants, and 100% home delivery/takeaway) for the purposes of comparison, but remains reflected within the figures for these subsectors, and thus the consumer foodservice total. As such, pizza consumer foodservice is not counted as its own sector within the consumer foodservice total. Page | 3 Of the total foodservice outlets in Brazil, independent operators accounted for 98.3% or 979,000 outlets and had close to 24 billion transactions in 2012. Although chain operators only accounted for 1.7% of total outlets and 5.2% of total transactions, on a per-outlet basis, they have shown higher sales and a higher average transaction value then their independent counterparts. Outlets and Transactions of Brazil Foodservice by Type, 2012 Subsector Total consumer foodservice Independent consumer foodservice Chained consumer foodservice Outlets 995,853 978,959 16,894 Average Sales Average Sales per Outlet per Transaction ($US) ($US) 23,919,602.5 $146,773 $6.11 22,726,811.1 $138,739 $5.98 1,192,791.3 $612,353 $8.67 Transactions (Thousands) Source: Euromonitor International, 2013. SUBSECTORS The following subsector analysis is based on information from Euromonitor International, November 2013. See resource section for complete listing of resources. Cafés/Bars Cafés/bars is the largest subsector within the Brazilian foodservice industry and made up 42.3% or US$61.8 billion of the total values sales in 2012. Most cafés/bars in Brazil offer drinks and snacks throughout the day, with coffee being served in the mornings and alcoholic beverages from lunchtime on. Within cafés/bars there is the subsector of coffee shops, which is highly competitive, particularly in São Paulo and Rio de Janeiro where the majority of coffee shops are located. This competitive landscape has encouraged coffee chain operators to look at a store-within-a-store concept, such as joining with a bookstore or business establishments. Although cafés/bars had the highest number of outlets with 410,000 and the most transactions with 12.5 billion in 2012, they are forecasted to experience the lowest CAGR with only 8.7% from 2013 to 2017 mostly due to the hardening Dry Law relating to alcoholic drinks potentially resulting in a decline in beverage sales. Street Stalls/Kiosks The most popular street stalls/kiosks with consumers is the ice cream kiosks. The top two companies which account for 75% of the market share within the chained street stall/kiosk subsector, are McDonald’s Corp and Brazil Fast Food Corp, with their brands of McDonald’s and Bob’s . The independent street stall/kiosk operators still make up the majority of the subsector and account for 99% of the total outlets or 332,000. In the past, regulations restricted food stalls to essentially hotdogs, but a new law in São Paulo will now formally licence the operation of food trucks and this segment is expected to greatly increase in the coming months. Street stalls/kiosks saw value sales of US$7.2 billion in 2012 and a CAGR of 13.9% from 2008 to 2012. The CAGR for the forecasted period of 2013 to 2017 is expected to be 14.1% while sales are predicted to reach US$13.7 billion. Page | 4 Fast Food The fast food subcategory had total value sales of US$28.1 billion in 2012 and raised the number of outlets to 157,000 with 5.9 billion transactions in 2012. Of all the fast food restaurants in Brazil, the top 5 companies are McDonald’s Corp, Al Saraiva (Habib’s), Doctor’s Association Inc. (Subway), Brazil Fast Food Corp (Bob’s), and Burger King Holdings Inc., which hold 66% of the overall market share. The fast food subcategory saw an increase in chained bakery products due to new international chains, such as Quiznos, joining the market. Another factor helping to increase the rise in the fast food subcategory is the upsurge of new shopping centers being opened in Brazil which are providing good retailing space and a steady flow of consumers. Full-Service Restaurants Second in total value sales with US$40.5 billion are Brazil’s full-service restaurants. Between 2008 and 2012 full-service restaurants saw a CAGR of 13.2%, but are expected to experience a slight decline in CAGR (10.5%) during the forecasted period of 2013 to 2018. Within the full-service restaurant subcategory there are a number of different types of restaurant styles, such as Asian, European, Latin American, Middle Eastern, North American and pizza. The chained Latin American style restaurants showed the most growth with 43%, and saw the second highest number of outlets open, with 18 in 2012. Chained Asian full-service restaurants opened the most outlets within 36 in 2012 and showed a 39% growth in sales. Self-Service Cafeterias The most popular style of self-serve cafeterias in Brazil is the kilo restaurant, which serves food by weight. Chained kilo restaurants directly compete with full-service and fast food restaurants when it comes to price and product offering. Although chained kilo restaurants experience high rental charges due to being located in shopping malls, this cost is balanced out by only having minimal infrastructure costs, such as tables and chairs. The leading operators of chained self-serve cafeteria are Divino Fogão and Viena Express and account for 91% of the market share in Brazil. Self-service cafeterias are one of the smallest within the foodservice subsector in terms of outlets and transactions with 21,671 and 868 million, respectively. However, they are second when it comes to average sales per outlet and average sales per transaction with US$360,000 and US$9.00, respectively. In 2012, self-service cafeterias registered value sales of US$7.8 billion and boasted a 14.8% CAGR from 2008 to 2012. Value sales are projected to reach US$13.7 billion by 2017. 100% Home Delivery/Takeaway The top three brands in the 100% home delivery/takeaway subcategory are China in Box, Lig-Lig and Domino’s Pizza. These three brands make up 75% of the market share. Although pizza is the main delivery food, Brazilian consumers favour Chinese food for 100% home delivery/takeaway which explains why China in Box and Lig-Lig are two of the top three brands. 100% home delivery/takeaway saw value sales of US$810 million in 2012 and a CAGR of 13.9% from 2008 to 2012 and is expected to reach values sales of US$1.2 billion by 2017. During the forecasted period of 2013 to 2017, the 2014 FIFA World Cup and the 2016 Olympic Games will take place in Brazil; these two events should help increase sales within the category due to a projected increase in the delivery of pizza, Chinese and Japanese foods. Page | 5 LOCATIONS The majority of Brazil’s 995,860 foodservice outlets are standalone, which account for 83% or 842,986 and saw value sales of US$109.5 billion in 2012. However, standalone foodservice was one of the lowest performers in regards to average sales growth rate and outlets numbers from 2008 to 2012. Due to the increase in new shopping centres being developed in Brazil, the top performer over the period of 2008 to 2012 was retail which averaged a sales growth rate of 15.8% and an average outlet growth rate of 3.9% (Euromonitor International, November 2013). Market Value and Growth of Brazil Foodservice by Location, Historic, Current Prices, Fixed 2012 Exchange Rates Location 2008 96,490.7 73,436.2 9,885.8 6,559.4 5,084.8 1,524.5 Total Consumer Foodservice Standalone Travel Retail Lodging Leisure Market Value (US$ millions) 2009 2010 2011 105,106.7 115,505.9 128,671.2 79,785.1 87,411.5 96,890.3 10,790.6 11,893.5 13,481.0 7,370.0 8,374.5 9,698.3 5,469.4 5,904.0 6,558.2 1,691.6 1,922.4 2,043.5 Source: Euromonitor international, 2013. 2012 146,164.4 109,491.1 15,298.0 11,803.6 7,090.3 2,481.4 CAGR* % 2008-12 10.9 10.5 11.5 15.8 8.7 13.0 *CAGR: compound annual growth rate. Market Value and Growth of Brazil Foodservice by Location, Forecast, Current Prices, Fixed 2012 Exchange Rates Location Total Consumer Foodservice Standalone Travel Retail Lodging Leisure 2013 152,761.3 113,793.1 15,721.6 13,262.6 7,196.6 2,787.5 Market Value (US$ millions) 2014 2015 2016 170,111.2 187,854.3 208,177.1 126,624.1 139,578.1 154,256.8 17,434.3 19,302.7 21,609.0 14,943.6 16,690.5 18,683.9 7,976.0 8,774.1 9,674.5 3,133.1 3,508.9 3,952.9 Source: Euromonitor International, 2013. 2017 226,985.3 167,475.6 23,715.5 20,797.3 10,597.5 4,399.3 CAGR* % 2013-17 10.4 10.1 10.8 11.9 10.2 12.1 *CAGR: compound annual growth rate. Outlet Numbers and Growth of Brazil Foodservice by Location, Historic and Forecast Outlets Location Total Consumer Foodservice Standalone Travel Retail Lodging Leisure CAGR* % 2008 2012 2017F 916,622.0 761,797.5 78,290.2 33,159.3 30,074.1 13,300.9 995,859.7 824,985.6 89,545.4 38,637.8 28,555.5 14,135.5 1,132,827.0 935,767.9 105,178.7 44,694.6 30,308.7 16,877.1 Source: Euromonitor International, 2013. 2008-12 *CAGR: compound annual growth rate. 2.1 2.0 3.4 3.9 -1.3 1.5 2013-17F 2.7 2.6 3.5 2.8 2.1 4.2 F: Forecasted Page | 6 A typical retail outlet earned US$305,494 in 2012, which is over double what foodservice locations in general earned at US$146,772. Retail foodservice experienced the highest outlet CAGR at 3.9% from 2008 to 2012. Over the forecasted period of 2013 to 2017, leisure foodservice is expected to show the highest CAGR in values sales and outlets with 12.1% and 4.2%, respectively, due to a projected expansion of entertainment services in Brazil. TOP COMPANIES McDonald’s Corp. is ranked first in Brazilian foodservice with the most outlets (1,540), and brought in US$3.0 billion in sales in 2012. Of note, British Petroleum Co., with their fast food convenience stores brand ampm, has the second most outlets in Brazil with 1,377, but only holds 0.1% market share and is ranked 11th amongst foodservice companies is Brazil. Top 10 Companies in Brazil Consumer Foodservice Company McDonald's Corp Al Saraiva Empreendimentos Imobiliários e Participações Ltda Brazil Fast Food Corp Doctor's Associates Inc Burger King Worldwide Inc Restpar Alimentos Ltda Grupo Úmbria Yum! Brands Inc OSI Restaurant Partners Inc CPQ Brasil S/A Other Source: Euromonitor International, 2013. Foodservice Value Sales (US$ millions) CAGR* (%) Market 2008 2012 2008-12 Share (%) 1,659.6 3,060.1 16.5 2.1 Total Outlets 2012 1540 466.4 1,010.1 21.3 0.7 407 380.2 109.9 76.1 179.8 140.7 89.1 57.4 117.8 93,044.6 705.6 602.2 491.5 372.3 248.3 191.8 184.1 141.6 138,857.4 16.7 53.0 59.4 20.0 15.3 21.1 33.8 4.7 10.5 0.5 0.4 0.3 0.3 0.2 0.1 0.1 0.1 95 864 1041 203 388 310 41 95 356 987,096 *CAGR: compound annual growth rate. INFLUENCING FACTORS Geographic Inside Brazil’s lucrative foodservice market, São Paulo has emerged as the key location for strategic entry. For reasons such as its large size, diverse culture, and high incomes in combination with a thriving nightlife and dining scene, São Paulo is an ideal entry point for new brands, and for existing players looking to increase their presence. Cultural São Paulo is an ethnically diverse population, a true melting pot of inhabitants from Italian, African, Portuguese, Jewish and Muslim descent, and in particular, is home to the largest population of Japanese people outside of Japan. Culturally, there is a pronounced worldliness among local consumers when it comes to cuisine, as a result of their exposure to a variety of culinary traditions. This unique cultural blend has also fostered an appreciation for restaurant dining, making it one of the most popular leisure activities. On average, Brazilian consumers’ expenditure on food and beverages was Page | 7 twice that spent by other global counterparts, suggesting the population places a very high priority on their eating experiences. Industry In general, foodservice operators were looking for improved ways to compete and differentiate their brand in 2013. Euromonitor learned these players would be focusing on providing a better dining experience through improved food quality and ambiance. Operators are incorporating localized menu choices to cater to consumers while still maintaining their global reputation. The highest profile foodservice operator, McDonalds introduced new items for breakfast and healthy sandwiches in 2012. The strength of Brazil Fast Food Corp., comes from a multi-brand strategy and acquisition activity, and Drs. Associate group attributed its success to outlet expansion, marketing campaigns and affordable prices. Chained consumer foodservice providers are expected to carry out a continuous cycle of acquisitions in the coming years. Economy The growth of the economy over the past decade has led to an increase in the middle class that has more disposable income and can now afford to eat out. World Bank stated that Brazil’s middle class grew 40% over the past decade (World Bank, November 2013). OPPORTUNITIES Latin America has a vast and growing middle class, which value the eating out experience, and looks forward to engaging in this past time with great enthusiasm. The large share of sales bars/pubs contribute to obtain in Brazil’s foodservice market is a reflection of how important social occasions are, and the strength of the existing eating and drinking culture. Furthermore, Brazilians place less of a need for fast paced and takeaway consumption. Self-service cafeterias are a large foodservice industry in Brazil and make it the largest market for this type of foodservice in the country, thus indicating it is a category that should not be overlooked. As disposable incomes grow, so too will these foodservice trends, presenting great opportunity. Even in low-growth high-income regions, foodservice players could adapt and take advantage of an increasingly fluid and competitive environment. Demand for good food in an affordable, informal, social environment is growing, as consumers place format secondary. Overall, these trends translate into real opportunity for those who can forge a distinct identity, through their food, sourcing, or design. With new international players entering the market, the opening of new shopping centres and global events such as the 2014 FIFA World Cup and 2016 Summer Olympic Games expected to favour consumer foodservice sales and the fact that Brazil is one of the fastest-growing countries within Latin America these factors will provide foodservice operators the ability for continued expansion into this market over the forecasted period of 2013 to 2018 (Euromonitor International, November 2013). CONCLUSION Several factors will influence and support the performance of the consumer foodservice market over the 2013-2017 forecast period. Strong macroeconomic trends and investments from both domestic and international operators in concert with new resources from alliances, and acquisitions or mergers will sustain future development. Furthermore, large operators are likely to expand within the Brazilian consumer foodservice market through multi-brands, a trend already seen in recent years, including groups, such as McDonalds Corp., Al Saraiva Empreendimentos, and Brazil Fast Food. Page | 8 RESOURCES Euromonitor International, 2013 Euromonitor International (November 2013) “Consumer Foodservice in Brazil.” Passport. “Consumer Foodservice by Location in Brazil.” Passport. “Cafes/Bars in Brazil” Passport . p. 4 “Fast Food in Brazil” Passport . p. 4 “Full-Service Restaurants in Brazil” Passport . p. 4 “Self-Service Cafeterias in Brazil” Passport . p. 5 “Street Stalls/Kiosks in Brazil” Passport . p. 5 “100% Home Delivery/Takeaway in Brazil” Passport . p. 5 Euromonitor International (August 2013) “Mapping the New World: Global Consumer Foodservice in 2013 and Beyond.” Passport. “Consumer Foodservice 2013: New Insights and System Refresher” Passport. World Bank, November 2013 http://www.worldbank.org/en/news/press-release/2012/11/13/ new-world-bank-report-finds-fifty-percent-increase-middle-class-latin-america-over-last-decade Page | 9 Foodservice Trends in Brazil © Her Majesty the Queen in Right of Canada, represented by the Minister of Agriculture and Agri-Food (2014). Photo Credits All photographs reproduced in this publication are used by permission of the rights holders. All images, unless otherwise noted, are copyright Her Majesty the Queen in Right of Canada. For additional copies, to request an alternate format, and for all other inquiries regarding this publication, please contact: Agriculture and Agri-Food Canada, Global Analysis Division 1341 Baseline Road, Tower 5, 4th floor Ottawa, ON Canada K1A 0C5 E-mail: infoservice@agr.gc.ca The Government of Canada has prepared this report based on primary and secondary sources of information. Although every effort has been made to ensure that the information is accurate, Agriculture and Agri-Food Canada (AAFC) assumes no liability for any actions taken based on the information contained herein. Reproduction or redistribution of this document, in whole or in part, must include acknowledgement of Agriculture and Agri-Food Canada as the owner of the copyright in the document, through a reference citing AAFC, the title of the document and the year. Where the reproduction or redistribution includes data from this document, it must also include an acknowledgement of the specific data source(s), as noted in this document. Agriculture and Agri-Food Canada provides this document and other report services to agriculture and food industry clients free of charge. Page | 10