Brazil Retail Report Q4 2010

The Q410 BMI Brazil Retail report forecasts that the country's retail sales will grow from BRL1,258.88bn (US$685.47bn) in 2010 to BRL1,841.11bn (US$1,002.50bn) by 2014. Generally positive trends in underlying economic growth, an enormous and growing population and rising disposable income are key factors behind the forecast growth in Brazil's retail sales. Easier access to credit and the emergence of a wealthier middle class are also likely to help the value of the retail segment increase during the forecast period.

Brazil's nominal GDP is predicted to be US$1,837bn in 2010, with 2009's decline of 0.2% expected to turn into growth of 6.0% in 2010 as the economy recovers. Average annual GDP growth of 4.2% is predicted by BMI between 2010 and 2014.

With the population increasing from around 195mn in 2010 to an estimated 201mn by 2014, GDP per capita is forecast to rise by 45.9% by the end of the forecast period, reaching US$13,721. Our forecast for consumer spending per capita is for an increase from an expected US$5,952 in 2010 to US$8,894 by 2014.

The national monthly minimum wage rose by 26% in real terms between 2003 and 2006, and in 2010 the average annual salary is expected to be US$10,554. The lifestyles of middle and upper-income groups increasingly mirror those of their counterparts in developed countries and overall purchasing power has been increasing. However, income inequality is a major concern, with consumption patterns varying significantly according to salary. More than a third of the population lives on or below the poverty line and outside the main urban areas the proportion is closer to half.
In 2005, 67.8% of the Brazilian population was described by the UN as economically active, with 40.3% in the 20-44 age range, which is vital for retail sales. More than 84% of the population was classified by the UN as urban. By 2015, the urban population is forecast to have exceeded 88%, with 39.5% in the 20- 44 age band and 66.9% of the population expected to be economically active.
The non-grocery sector is outperforming the food sector as consumers increase their spending on household items and durable goods such as furniture, domestic appliances, cars and clothes. Easier access to credit is also proving to be good news for the retail sector. There were 118mn credit cards in Brazil in 2007, up from 44mn in 2003, according to Banco Central do Brasil (BCB).

Retail sub-sectors that are expected to show strong growth over the forecast period include food and drink, with sales predicted to rise from an expected US$191.24bn in 2010 to US$291.66bn by 2014, a rise of 52.5%. Over the counter (OTC) pharmaceutical sales are forecast by BMI to increase from an expected US$5.50bn in 2010 to US$8.12bn by 2014, up by 47.5%. Automotive sales are forecast to increase by 51.9% during the same period to reach US$100.23bn. The consumer electronics sector is predicted to grow by 41.2% between 2010 and 2014, from US$22.50bn to US$31.77bn.

Retail sales for our Latin American universe in 2010 are expected to reach US$1,166bn, based on varying national definitions. Total consumer spending for the region, based on BMI's macroeconomic database, is predicted to be US$2,590bn. Mexico and Brazil together are expected to account for an estimated 74.3% of regional retail sales in 2010; with the two countries plus Venezuela likely to account for 84.6% of all retail sales in the region by 2014. For Brazil, the predicted 2010 market share of 58.6% is expected to fall to 54.3% by 2014.