Andréa Novais

Andréa Novais


The Brazil Business

Updated

Herbert Kajiura

The Diversity of Brazilian Consumers – From Illiteracy to Private Jets

Andréa Novais

Andréa Novais


The Brazil Business

Updated

Brazil has become a profitable market for all sorts of investments. The diversity of its socioeconomic profile generates opportunities for a wide range of business initiatives.

Background

It is common sense that Brazil is a country of astonishing inequality levels. Despite being ranked as the 8th economy in the world and its booming middle class, Brazil still struggles to find a balance for all the layers composing its society.

From a social-political perspective this is a very negative scenario, but if we look at it from the market point of view, Brazil can be very promising.

An ever more sophisticated upper class allied to a growing middle class, fueled by easy credit and by the consumption desire of those who have recently entered the market and acquired purchasing power has transformed Brazil into a place where many different type of businesses can succeed, especially if you are willing to offer more relaxed payment conditions.

Who is buying what?

Classes A and B are the ones behind the luxury market in Brazil. This portion of the Brazilian society is mostly concentrated in São Paulo (53% only in the capital) and their monthly income ranges from BRL 10.376,00 to BRL 16.000,00. Forty seven percent of them have a post-graduation degree and their mostly consumed items are:

  • Shoes
  • Clothing/apparel
  • Perfumery
  • Food
  • Jewelry
  • Automobiles
  • Hospitality
  • Alcoholic beverages
  • Cosmetics
  • Furniture

Class C – or the Brazilian middle-class -, currently corresponds to 51% of the population and has been the main target of retailers in Brazil. As this concept of middle-class is relatively new in a country that used to classify its inhabitants as merely poor or rich, it is hard to find a concrete definition to what exactly is the profile of a typical middle-class Brazilian family, but I guess it is possible to talk about constant change and desire to reach the top of the social pyramid.

To that extent, most middle-class families in Brazil are composed by parents with a lower educational level (mostly high school) that try to provide social inclusion to their children by sending them to college.

The federal government has created several initiatives to promote access to higher education and in my opinion this is the most effective way to promote social mobility. A proof of how it works is the 26 million Brazilians who were no longer considered poor in a period of time of five years.

This new middle-class have its expenses mostly concentrated in services. According to a research made by Data Popular institute, for every BRL 100,00 spent, BRL 65,20 are destined to services. Among them, the most popular are:

Of course there are expenses with products as well, but they are not what calls attention to this middle-class: historically speaking, poor people in Brazil would buy products while those on the top of the social pyramid would spend more money with services. To that extent we can talk about a hybrid class, which comes from a poor background, but now has got access to a certain social mobility.

On the base o the pyramid are classes D and E, that 10 years ago would not be taken into account by the market. This is where illiteracy is mostly concentrated in Brazil.

Nevertheless the considerable saturation of consumption observed in classes A and B and the continuing migration of members of classes D and E to class C has caught the attention of some clever entrepreneurs.

They were able to realize that easy credit allied to a strong desire to social change has led to a massive consumption. Differently from classes A and B, classes D and E present growth opportunities and they are not restricted to services, as goods also play an important role in the priority list of this portion of the Brazilian population.

They are the ones who still have not bought a laptop or a plasma TV. It is also important to have in mind that their own image is something they really take into account, differently from class C, that would rather spend money with education and other services.

The mostly desired items are:

  • Cars
  • Plasma TVs
  • Mobile devices
  • Computers

Also, most people in classes D and E still live in rented properties so buying a house is the primary answer a great majority of people give when asked about their plans for the future.

Is consumption the same throughout Brazil?

The answer is no. As in many other countries, Brazil presents drastic differences between the city and the countryside. But mostly, Brazil presents huge differences among its five geographical regions.

As previously mentioned, São Paulo city itself is responsible for 53% of the entire luxury market in Brazil and the rest of it is mostly concentrated in cities from the South/Southeast of Brazil, such as Rio de Janeiro and Porto Alegre.

The Northeast of Brazil concentrates 53% of the total poverty in the country, followed by the North and Central-West regions, also known for its poverty levels. In many cities of these regions it is possible to find communities with no access to electricity or basic services and many families living with a monthly income of BRL 465,00.

On the other hand, it is also possible to find mansions and upscale neighborhoods in cities like Recife and Salvador. The opposite works as well: it is possible to find very poor people living in São Paulo and Rio de Janeiro slums. As a matter of fact, sometimes the wealthiest people and the poorest ones are less than one kilometer away from each other, as it happens with Morumbi and its surrounding neighborhoods.

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