Challenges for 2018 – Brazil Market
Challenges for 2018
By Luciana Pellegrino
Executive Director for ABRE – Brazilian Packaging Association
We look at 2018 with positive expectations, computing strong indications of an effective, if gradual, recovery process of the Brazilian economy. We hope to enter the year recovering from the difficult days, growing at 2% per month. The gear needs to rotate. We are the fifth most populous country in the world, we are on the list of only six members of countries with more than 200 million inhabitants, and this is one of the reasons why our country is so attractive to external eyes, along with its vast geographical footprint and productive land, abundance of natural resources and biodiversity, among other attractions.
But at the same time, it is a country that presents many challenges, especially when it comes to political, regulatory or even infrastructure issues. The gear needs to rotate from these assumptions. In an unpredictable scenario, we have the opportunity to be highly flexible and creative. Adversity imposes a constant state of alertness and action, and in the packaging and consumer goods industry it has not been different.
Whether in stable markets or in more troubled markets, opportunities will not necessarily spring to our eyes. It is necessary to read between the lines, to look deeply at the consumer and the evolution of their behavior, to look at how other influences impact their choices, such as the digitization process, the quest for quality of life and, in particular, for healthy eating. The look at society is no longer binary, it now passes through innumerable variables, which need to be summed up and combined. More and more we depend on the whole, looking at each person as empowered by their own being. Yes, much more challenging and full of opportunities.
For 30 years we have experienced a real revolution in our industry. Throughout the process of stabilization of the Brazilian economy, the fall in inflation to a single digit, the opening of our market to imported goods, the increase in the economic power of Brazilian society, the rise of classes D and E, increased population access to international travel, through foreign television series or even communication platforms, demands have increased and the consumer goods market has expanded, seeking to meet ever more accurately the desires of society, making the level of consumer demand mature and sophisticated.
Examples that help to exemplify the qualification of the Brazilian consumer standard are the high added value market niches that even during these last two years of economic crisis have grown, such as coffees in capsules, artisanal beers, and sliced cheeses, to name a few. These products are presented in more sophisticated packages, with greater value added, with a high appeal of convenience, and have continued to gain market share. This is very positive news not only for the industry but for the country. Packaging confers a fairly accurate picture of a nation’s level of economic development and qualifies itself according to the empowerment of a society.
Another indicator of social and economic development is retail, and here in Brazil, we can also see this trajectory precisely. In the 1990s, when we experienced a high level of inflation, we had, in addition to small grocery stores, large hypermarkets, in close proximity to urban centers, offering mainly products characterized as cost-benefit, such as bulk, less value-added, and convenience, with one month being the largest supply objective. Because of the stability in inflation, the “purchase for the month” mindset lost its purpose for a large portion of the population, and neighborhood supermarkets appeared, for more ordinary purchases, products of greater convenience in their preparation, use, application and even in their transport.
The smaller supermarkets, with more precise and diversified deliveries to meet their target audience, demanded from the industry, allowed the delivery of more varied solutions, offering different alternatives for the consumption of the same product, with greater functionality and added value. It also brought challenges, with the stores being so close and accessible to people’s daily lives, they had to receive fresh products, such as fruits and vegetables in abundance, in their natural state as well as cut, portioned, and washed. Going further, mini-markets, specialized stores, e-commerce, and convenience stores were established, offering products for consumption on the go, and in relation to the economic climate, cash & carry format stores were created. The retail movement is continuous and reflects society’s growth.
E-commerce, a great worldwide trend that is becoming stronger every day in Brazil, demands on the one hand products of consumer goods that begin to have a very objective presentation when viewed from a computer screen, making clear the differentials of the product. On the other hand, it began to require greater intelligence in transport and distribution packaging, guaranteeing the efficiency of the logistics process, the maintenance of properties and presentation of the products, and the challenge of creating a bond by strengthening the experience and the relationship with the channel and with the brand. We are far from fully serving this channel, which opens up many possibilities still unexplored.
At the same time, niche stores were multiplied, with a greater assortment of products with a specific focus, opening the door to previously unexplored categories, such as stores focusing on natural, healthy and nutritional products. Comparing this category ten years ago and today, we saw products that were previously packed in very simple structures, with no opening and closing functionality, low-resolution prints and few options, and from the new motto of society in search of quality of life, has become a category of differentiation and added value, perceiving this character also in its increasingly functional packaging.
As we look at this scenario we can go beyond the packaging to understand the changes in the market and the opportunities that open up. If we pay attention to brands, we see a multitude of suppliers approaching the consumer, consolidating an important movement in our society: the growth and strengthening of new business initiatives through startups, regional and small companies, which, when looking specifically at this niche, found a great opportunity to bring new products to the consumer. These small companies often differentiate themselves by making the best use of products from a specific region of the country, exemplifying home-made appeal and differentiation by nutritional value and health.
Are we prepared to serve this army of small businesses? The challenge of niche markets, with low production volume – when compared to traditional markets – can no longer be ignored by our industry. Even though today, these small ones, despite their relevant role in our society, need to add value through packaging to introduce themselves to increasingly demanding consumers.
How can we offer packaging alternatives that meet these new dynamics? Our challenge migrates from looking at structures to systems. Yes, the systemic vision becomes increasingly relevant, both in its market outlook and in looking at ourselves, the links in the production chain.
The role of each link in this chain, from the manufacturer of machinery and equipment, suppliers of raw materials, supplies and accessories, design agencies and packaging manufacturers, is looking more and more at the whole, and all together for the business customers as well as their customers.
It is important that strategic intelligence on the key role of packaging in our society is in the domain of our own industry. Globally, society is beginning to be guided by the intelligence of information, the processing of data, and big-data. How will we internalize this process and gain a competitive advantage?
In a recent survey conducted by ABRE, called the Packaging Observatory, consumers showed latent needs that are not yet met by suppliers of food, beverages, and personal care products. It is a fact; people are not always being heard, so why should the chain not act in a more protagonist way and elucidate the solutions demanded, such as greater functionality in the packaging, especially the process of opening and closing, reading the labels, and portability?
The Packaging Observatory showed how people consciously interact with the packaging in their day to day, and how their presentation impacts both the choices and the experience of consumption and brand value construction. How can we go further?
The substantial growth of a society cannot be based on a single segment of consumption. It is necessary to look closely and analyze habits, access, and development in other categories of consumption other than food, where we find substantial examples of the growth and development of markets.
To mention a few, the sophistication of the market for dermo-cosmetics, beverages, alcoholic and non-alcoholic, the ongoing transformation of the domestic cleaning segment by changes in labor legislation, the segment of cosmetics for specific audiences such as children, the more careful look of the pharmaceutical industry and of personal care for older adults. The range and supply of products have grown over the decades, and packaging has diversified, even in highly traditional categories. Without entering into the particularity of the new packaging structures breaking paradigms of the categories, showing that the status quo of no market is perennial, all can suffer disruption.
Innovation in this sense has simplified the life of the consumer by the practicality in consumption, greater portability, ease of preparation, and from the point of view of the brand a differentiated positioning that stands out in the market, or that puts it in a differentiated occasion of consumption. Keeping a watchful eye on these needs allows brands to bring new proposals and gain space.
Each year, in a new edition of the ABRE Brazilian Packaging Award, we have a picture of what was presented that year, which technologies found their place and viability in the market, and which claims on products and packaging stood out as being the most relevant to consumers at that time.
Innovation can be a combination of new technologies available with a precise look at the dynamics of society, seeking to understand their needs not always exposed. 2018 will strengthen the need to approach new technologies that will add intelligence and efficiency to the production sectors. We are still taking baby steps into the inclusion of our industry in the fourth industrial revolution, as many countries in the world are, but increasingly we have to seek this approach with a focus on better process monitoring, speed of information and reaction, and search for flexibility and greater automation.
The market in 2018 tends to reheat and open new windows of opportunity for the different productive sectors. In addition to the traditional calendar full of festive and commemorative dates, it will be a world cup year and will also contain presidential elections in Brazil, events that accelerate our economy as they happen.
But where are we going? What are the next steps in this evolutionary process? While innovating while looking at society, innovation needs to be tied to a larger purpose. We can no longer look at each sector individually, but instead, must look across the board, for example, at how packaging can make our society more sustainable. How should packaging work as a tool to add efficiency to different supply chains?
The evolution of Brazilian society over the last decades has not only been in the economic sphere, it has also been in the cultural and social spheres, strengthening the awareness that we are part of a whole, of a larger ecosystem that needs to be taken care of.
This look came very incisively to the packaging industry and consumer goods. It is interesting to note that the packaging and the product are seen by the consumer in an inseparable way. The relationship the consumer has with the product is materialized through the packaging during its use. But at the moment the product is completely consumed, the packaging loses its intrinsic value and becomes a waste that needs to close its cycle through a process of revaluation and redemption of its raw materials. This demand has led our society to question the linear model of production, consumption, and disposal that we operate, to try to create a new circular model, where nothing is lost, everything is transformed.
It is a model that believes in the systemic efficiency by the greater and better use of natural resources, keeping them available for use for longer. From this point of view, we migrate from a society that has grown up in the last few years on disposable goods, and which now tries to reinvent itself by cultivating durable ones, where the biggest challenge ceases to be the product itself, but rather, the systems that support it.
The great challenge for 2018 is that by living in fluid times, we can no longer look forward only for the year, but need to see it as a bridge to the future. What will we do throughout the year to prepare for 2019, 2020, and so on? What will we do to maintain our relevance in society, and how can we play a leading role in helping to build a better future for all? The speed imposed by the new technology platforms requires each company to divide its efforts between maintaining its business and building its future.
We live in the digital and analog world and, more than ever, 2018 will be the year when we will have to start building the bridge between these two universes.