2013-12-09 11:04:23 - Fast Market Research recommends "Brazil Food & Drink Report Q1 2014" from Business Monitor International, now available
We have revised down our 2013 real GDP growth forecast to 2.0%, from 2.6% previously, as economic activity data remains weak, interest rates are set to continue heading higher, and our Infrastructure team increasingly believes that numerous projects are unlikely to be completed in advance of the end of the government's PAC II growth acceleration programme and the FIFA World Cup in 2014.
Our core view for relatively weak private consumption remains in play. High household debt levels and weaker purchasing power (exaggerated by the recent collapse in the currency) is likely to constrain private consumption growth considerably over the coming quarters. With continued headwinds in the form of high inflation and interest rate hikes on the horizon, we believe that
Brazil's consumer sector will grow more slowly in 2013 than we previously expected. As such, we are revising down our forecast for real private consumption growth in 2013 to 1.4% y-o-y, from 1.8% y-o-y previously.
Full Report Details at
Food and retail consumption is likely to outperform among the country's private consumption items, and we project generally strong sales growth for the main companies in the sector. We also believe that a moderation in input prices (grains) could help margins for these companies to recover in the coming months.
Headline Industry Data (local currency)
* 2014 per capita food consumption = +6.7% y-o-y; forecast compound annual growth rate (CAGR) to 2017 = +8.0%.
* 2014 alcoholic drink sales = +8.9% y-o-y; forecast CAGR to 2017 = +3.9%.
* 2014 soft drink sales = +7.9% y-o-y; forecast CAGR to 2017= +2.3%.
* 2014 mass grocery retail sales = +6.9% y-o-y; forecast CAGR to 2017 = +7.7%.
Key Company Trends
Initial Estimates Confirm Subdued Corn View: We continue to expect a decrease in Brazilian corn production for the 2013/14 season beginning in February, as the area dedicated to corn is expected to fall due to lower average prices during the planting season, while yields are also expected to be lower. The first crop, which is planted in Q4 and is normally the smaller of the two crops, is expected to see a fairly sizable reduction in plantings as farmers choose soybeans due to higher profitability. Key areas such as Mato Grosso, Parana and Goias are expected to see particularly steep declines, which should help global corn prices find a base in Q413.
Coca-Cola FEMSA CEO Urges Heineken To Boost Margins: Carlos Salazar Lomelin, the CEO of Mexico-based bottling company Coca-Cola FEMSA, has urged Dutch brewer Heineken to improve margins in Brazil. Coca-Cola FEMSA, a joint venture between US-based beverage firm The Coca-Cola Company and Mexican producer and distributor of non-alcoholic beverages Fomento Economico Mexicano (FEMSA), has a 20% stake in Heineken. Coca-Cola FEMSA is engaged in expanding Heineken's distribution coverage globally.
No Comment From Carrefour On IPO Speculation: France-based food company Carrefour has not commented on speculation that it plans to launch an initial public offering (IPO) of its Brazilian operations, reports Just Food, citing Brazilian publication Valor Economico. According to the report, the company's board discussed a potential IPO for Brazil-based wholesale hypermarket Atacadao, a Carrefour subsidiary, at a recent meeting held in France. A Carrefour spokesperson would not verify or refute these claims.
Key Risks To Outlook
Downside Risks To Growth Forecast: Should inflation increasingly eat into consumers' purchasing power, weighing on private consumption growth, and should infrastructure projects remain hampered by delays, we could see real GDP growth underperform our 2.0% forecast this year.
Upside Risks To Interest Rate Forecast: Should consumer price inflation persist above the upper limit of the central bank's 4.5% += 2.0% tolerance band in the coming months, and inflation expectations continue to head higher, we could see more aggressive monetary tightening than we currently expect in the next few months. Such a scenario would likely bring the Selic rate to 9.50% or 10.0% by year-end, exceeding our end-2013 forecast of 9.25%
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