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Brazil, Fragmentation in the Foodservice Sector

CONTENTS
1. Foodservice Sector
2. Foodservice Market Share
3. Hospitality Industry
KEY POINTS

With the end of the recession, Brazil’s GDP was expected to grow by 1.4% in 2018 and 2% in 2019. The Brazilian economy continues to grow at a modest pace. In 2018 the Brazilian food service industry registered a 5% increase compared to the previous year.

A Fragmented Foodservice Sector

Due to the high level of informality and fragmentation in the Brazilian food service sector, analysts frequently follow sales from the food processing industry to the food service channel to monitor the sector’s performance. 26% of overall sales were directed food service, which led to an estimated food service market size of R$428.5 billion (US$117 billion).

95% of foodservice outlets characterized as small-medium size, family-owned operations.

According to the Brazilian Food Processors’ Association, approximately 1.3 million foodservice outlets are distributed throughout the country, with over 95% of establishments characterized as small-medium size, family-owned operations. Large and multinational foodservice chains represent less than 5% of foodservice companies.

Online food delivery platforms continue to boost food delivery. According to the Bars and Restaurants Association (Abrasel), online food delivery amounted to R$11 billion (US$3 billion) in 2018. In Brazil, the most used App is iFood, which was launched in 2011, but now competes with high-stature competitors, Uber Eats, and Rappi. The “new-delivery system” is expected to rapidly increase sales of restaurants. This business model is growing fast at 20$ per year.

Brazil wine market

Market Share by Distribution Channel

In 2018, the HRI sector purchased R$172.6 billion (US$47.2 billion) in processed products and R$16.9 billion (US$4.6 billion) in perishable goods, totaling R$189.5 billion (US$51.8 billion) in domestic transactions. To reach such a fragmented clientele local food processors divide buyers into nine major groups: restaurants, bakeries, bars, fast-food chain restaurants, snack bars, institutional catering, hotels and motels, airline catering and others.

Foodservice market share by distribution channel (value):

1.Restaurants23%
2.Bakeries15%
3.Bars13%
4.Fast-Food chains12%
5.Snack bars11%
6.Institutional catering7%
7.Hotel and motels4%
8.Airline catering2%
9.Others13%
Source: Brazilian Food Processors Association (ABIA)

Foodservice market share by distribution channel (number of outlets):

1.Restaurants37%
2.Bakeries29%
3.Bars5%
4.Fast-Food chains4%
5.Snack bars3%
6.Institutional catering2%
7.Hotel and motels1%
8.Airline catering0.4%
9.Others19%
Source: Brazilian Food Processors Association (ABIA)

Although large processing companies have the necessary logistic structure to supply these small-medium size companies throughout Brazil, wholesalers seem to be the most viable option for many suppliers trying to reach the overwhelming majority of small and medium-sized food service operators. Within all eight segments there are opportunities to identify buyers willing to import directly; however, it is fair to say that restaurants, bars, and hotels/motels tend to purchase imported products solely through wholesalers and distributors.

Volume is the determining factor for a direct import operation. If the HRI buyer cannot be cost efficient to justify logistics and bureaucracy, wholesalers, distributors, and trading companies become important players. In Brazil, there are very few distributors of imported foods specialized in the HRI sector, the companies that provide such services are the ones that manage imports or processed products for large fast-food chains.

Brazil wine consumption by volume

Chain and Independent Hotels

The hospitality industry in Brazil is driven by travelers who are visiting the country on business purposes and have accounted for more than 70% of the hotel occupancies during 2017 and 2018. In typical locations of the country like Sao Paulo, Fortaleza, Brasilia, Recife, and Belo Horizonte the industry registered a high growth rate of RevPAR ranging from 13 – 16% during 2018.

The domestic and international brands and their chain hotels are almost equal in the total number of hotel properties they individually have in Brazil. The country also has a high number of individual hotels that are family owned and operated by themselves. The branded and their chain hotel market in Brazil is largely dominated by mid and upper mid-scale segment hotels in the country and they account for almost 65% of the total market share. Both the domestic brands and international brands are well covering this segment and most of the hotels are well strategically located in the important regions of the country.

Brazil wine consumption by value
Key Points
  • The Brazilian food service sector is informal and fragmented
  • 95% of establishments are small-medium size, family-owned operations
  • Brazilian consumers are becoming more engaged with environmental causes
  • The hospitality industry in Brazil is driven by travelers.
Brazil economics measures