Nutrition Market in Brazil: Growth Against the Odds
Published in eyeforpharma June 2017 by Marc Yates
Until the recession of 2014, Brazil saw a sustained period of strong growth in the functional foods and nutritional supplements market, albeit from a low base. The wealth gap was closing and a burgeoning, better-educated middle class with a rising disposable income was increasingly interested in nutrition products, both as lifestyle accessory and aid to healthier, longer lives.
While growth was tempered by the deep recession that hit the country two years ago – and restrictive government regulations remained an ongoing challenge – the recession is now (slowly) easing and optimism about the Brazilian market is far from exhausted. According to a recent Mintel report, the nutrition and wellness trend has built enough momentum to ride out this challenging climate.
The Brazilian market for ‘healthy eating food’- encompassing health foods and nutritional supplements – grew from BRL 118 million (US$37 million) to BRL 700 million (US$ 220 million) between 2011 and 2016, accounting for more than 0.5% of total food industry revenues, stated Mintel.
A government campaign to raise awareness of healthy eating and physical activity in the face of an escalating obesity crisis has also helped drive this rapid expansion.
Positioned for growth
Consequently, Brazil is well positioned for a nutrition market boom. On the positive side, it has the largest population country and economy in the LatAm region (although the economic slump has shifted investment towards markets such as Mexico and Argentina). It can also draw on considerable agricultural resources and biodiversity, with opportunities to incorporate natural local ingredients such as guaraná or yerba mate into functional nutrition products.
With the expansion of the middle class comes improved awareness of links between nutrition and health, as well as increased exposure to global trends and products. Plus, the traditional Brazilian interest in looking good has further piqued interest in healthy living and niche areas such as weight management.
Other trends feeding into the bullish outlook include:
- Growing concerns about unhealthy diet and sedentary lifestyles – as much as 50% of the Brazilian population are classed as overweight and about 15% as obese.
- A rapidly ageing population – average life expectancy rose from 54 years in 1960 to 75 years in 2015
- Increasing urbanization – more hectic lifestyles and greater reliance on convenience foods
- A growing female workforce who are less inclined to cook for their own or others’ families
- A shrinking birth rate – smaller families with more disposable income to spend on neonatal and pediatric nutrition (albeit at a lower overall volume across the population).
However, the recession might give pause to investors, with one report showing the middle or C class shrank by 3.7 million in 2015, from 56.6% to 54.6% of the total population. While this may not be enough to bring the nutrition market to its knees, it should discourage complacency. Budget-conscious consumers are unlikely to regard nutrition products as essential, particularly where price differentials are marked. This has important implications for optimal pricing and portfolio positioning
Cracking down on processed foods
Another important consideration is the Brazilian government’s skeptical, if not adversarial, attitude to the highly processed foods that are a staple of the functional food market.
New dietary guidelines issued by government in early 2015 to address rising obesity rates, chronic diseases and other dietary and health problems called for a ‘back to basics’ approach centered on minimally processed, home-cooked foods with natural ingredients as part of a balanced diet. The guidelines recommended limiting use of processed foods, avoiding ultra-processed foods and treating food advertising and marketing with caution.
The guidelines were especially blunt about the health claims of manufactured foods. “People often think that it costs a lot to eat healthily and that natural or minimally processed foods are much more expensive than ultra-processed products,” the guidelines state. “Such an impression is reinforced by ‘premium’ high prices of various ultra-processed products ‘fortified’ with vitamins and other nutrients or marketed as good for weight loss or which indicate other health claims. However, these products are not healthy.”
This does, nonetheless, present opportunities for nutrition companies to tap into the growing appetite for natural, organic and ‘free from’ foods and ingredients. Natural ingredients could serve as a platform for scientifically validated health claims, clearly differentiated from those associated with processed ‘fortified’ foods.
Pinning down the actual size of Brazil’s nutrition market is complicated by ambiguities and constraints in national food legislation, which does not place functional foods in a discrete category for regulatory purposes. Unlike vitamin and mineral supplements. or foods for weight control, any novel food or nutrition product with health/functional claims are subject to pre-market registration by ANVISA, Brazil's national health surveillance agency.
Herbal products are treated as phytomedicines and have to be registered, which can be lengthy and onerous. A scientific dossier with evidence of health benefits, safety and quality is required for evaluation by a special technical committee at ANVISA. The time and expense involved mean that functional foods are often launched as ordinary food products without health claims, or bearing only generic healthy-living messages.
Health claims may only be made in line with the agency’s positive list of standardized functional claims for food ingredients, with no deviation in wording or claims. Advertising and marketing of claims must not stray from food labels.
Careful targeting and messaging
These conditions, and the dampening effect of recession, suggest that the main nutrition players in Brazil – whether multinationals such as Nestle, Abbott or Danone, or local competitors like Indústria de Alimentos Bomgosto or M Dias Branco SA Indústria e Comércio de Alimentos – have much work to do.
With consumers spending more selectively, manufacturers will need to choose their audience carefully. Based on our experience, more receptive population segments may include the health-conscious elderly, sports and beauty enthusiasts, high-income urban women, busy working parents, young to middle-aged adults of both sexes with busy lifestyles, and those elements of the middle or upper class relatively untouched by the economic slowdown.
At the same time, messaging must be calibrated to a prohibitive regulatory framework, and to official dietary policies notable for their hostility towards processed foods making health claims. Securing endorsements from trusted advisers such as nutritionists, dieticians, physicians and pharmacists could help. As in other markets, reimbursement from payers concerned about escalating drug costs may be available if companies can convincingly argue for disease prevention, treatment or risk-reduction benefits for nutrition products.
Manufacturers should also be mindful of the broad cultural and income diversity in Brazil, although this may support creative segmentation and willingness to try new products. If the odds are now less stacked in favour of growth in the nutrition market than a few years ago, that is not to deny the substantial progress already made. Nor should manufacturers shirk the chance to engage thoughtfully with policymakers, health advocates and consumers in the interests of a balanced and informed environment for health foods.
If Brazil really is climbing out of recession into a more proactive, preventive stance on diet, health and chronic disease, then the nutrition industry needs to make sure it is part of that solution.