The Favela Consumer Profile
A considerable share of the Brazilian population live in slums; some stay there even though their income has increased. That is one of the reasons why companies are paying extra attention to consumers inside favelas.
Countries that have experienced fast urbanization processes usually show traces of economic inequality. If nations like India, Mexico and South Africa are analyzed, it is possible to see that rich and poor often live side by side.
It is no different in Brazil. There are many wealthy neighborhoods located next to favelas - term used to define the Brazilian shanty towns. Anyone that has visited Rio de Janeiro or São Paulo are probably aware of this.
Historically, the term favela itself is almost seen as something related to poverty; living conditions in such communities is often precarious either because of the lack of basic resources or due to high violence rates.
There are 11,7 million people living in favelas nowadays, more than 5% of the entire Brazilian population. Such an elevated amount of people has attracted the attention of some sectors, especially commerce and services.
According to data by the research institute Data Popular along with the entity Central Única das Favelas, the annual income of those living in favelas is BRL 63,8 billion, and many are far from the Brazilian poverty threshold: 47% of them have a LED, LCD or Plasma TV, and 28% have access to pay television.
Research conducted by Data Favela which addressed 63 communities in Brazil showed that the number of families with a monthly income of more than BRL 910 have doubled over the past ten years.
Brands Inside Favelas
The scenario in Brazilian favelas has been changing. Most of the problems are still there, but it is different from what was seen over the past decades. Companies from various areas have opened branches in favelas. Take Complexo da Maré, as an example: this area in Rio de Janeiro is home to 140.000 people and has more than 3.100 commercial facilities, including more than 600 bars or botecos, 300 beauty parlors, 130 grocery stores and 210 clothing stores.
Most of these businesses are owned by local entrepreneurs. Some offer special conditions to attract more customers, like travel agencies selling packages without credit assessment or paid through several installments. This might be a good strategy in an environment where 65% of the population do not have a credit card, and nearly 60% do not even have a bank account.
But there are also major Brazilian and global brands investing in this type of community. Some examples are:
- Casas Bahia, the largest Brazilian retailer of furniture and appliances, which had a gross income of BRL 18,8 billion in 2013
- Colchões Ortobom, the largest retailer of mattresses in Brazil and the 3rd largest franchising company in the country
- Magazine Luiza, another large Brazilian retailer of furniture and appliances, whose gross income was nearly BRL 9,7 billion in 2013
- Cacau Show, the 5th largest franchising company and the largest retailer of chocolates in Brazil
- Subway, the international fast-food brand that already has around 1.600 locations in Brazil
- Bob’s, one of the most famous fast-food brands in Brazil
Main Potential Markets
Since favelas originally erupted as poor areas that resulted from social and economic exclusion, they were not seen as a potential market. But as they grew and transformed into structured communities and as many locals started to be classified as part of the Brazilian middle class, they became economically interesting for businesses.
This is one of the reasons why companies tend to settle in larger favelas, where there is broader consumption potential, such as:
- Rocinha, located in Rio de Janeiro, is the largest in Brazil, which has 70.000 locals according to IBGE (and 165.000 according to community leaders)
- Complexo da Maré, also in Rio de Janeiro, which is a conglomerate of 16 communities
- Paraisópolis, in São Paulo, which has a population of 55.000 people according to IBGE (and nearly 100.000 according to community leaders), located next to a high end neighborhood
- Heliópolis, also in São Paulo, where nearly 93% of the locals have sewage treatment; the population is 41.000 people according to IBGE (and over 120.000 according to community leaders)