Brazilian confectioners turn to exports amid economic downturn

By Vladimir Pekic

- Last updated on GMT

Brazilian companies try luck overseas as domestic economy slows
Brazilian companies try luck overseas as domestic economy slows

Related tags: Chocolate confectionery market, International trade, Brazil

Brazilian confectionery makers are turning their sights to increasingly attractive foreign markets, as the country’s economic growth has rapidly decelerated in recent years.

Brazil is experiencing the most serious economic downturn in more than two decades, with output projected to fall by 1% in 2015, warned the IMF in its latest regional outlook. This comes after the Brazilian GDP (at constant prices) failed to grow in 2014, with political instability and economic uncertainty shaking investor confidence in Latin America’s largest economy.

The Brazilian real also lost 37.05% of its value against the US dollar since September 2014. The US dollar traded for 3.07 Brazilian reals (BRL) on May 4, compared to just 2.24 BRL on September 1, 2014, making exports a much more attractive proposition for Brazil’s confectionery makers in 2015

Perfect timing

“With its distinguishing  ingredients and flavors, national companies from the chocolate confectionery sector are investing in novelties with the exclusive Brazilian touch in order to gain a presence in markets abroad and improve their businesses,”​ the Brazilian Association of Cocoa, Chocolate, Peanut, Candy and By-products’ Industries (ABICAB) told ConfectioneryNews.

Brazilian confectionery companies associated with the Sweet Brasil export promotion platform, developed jointly by ABICAB and the country’s National Export Promotion Agency (Apex-Brasil), are now investing to expand their share of the international market at a time of crisis in the domestic market.

The moment is perfect for Brazil to export, according to Greg Seminara, founder of US-based Export Solutions. Seminara, who recently took part in a seminar in São Paulo organized by Apex-Brasil, explained that Brazil has two major points in its favor: the favorable exchange rate and the upcoming Olympic Games. “Americans love this event and they adore the lifestyle of Brazilians. More importantly, they adore gastronomic diversity and they are open to it​,” he said in a recent statement for ABICAB’s press department.

“Brazil has tastes, smells, raw materials that are exclusive and differentiated. It is necessary to bring something new, something that captures our attention. There is a lot of room for that​,” he said, adding that Brazil’s confectionery industry can rely on around 1.4m Brazilians that legally live in the USA.

Nugali sets sights on exports

Oneexample of a company turning its sights to foreign markets is chocolate confectioner Nugali, from Pomerode municipality in the southern state of Santa Catarina state. The company recently invested around BRL1m ($324,220) in product development and equipment upgrades to better adapt to demand from foreign customers.

The expansion project, which we are initiating in 2015, includes a new production unit and its estimated value is BRL10m over the next six years​,” said Nugali president Ivan Blumenschein.

The company entered Brazil’s chocolate confectionery market just 11 years ago with the launch of its chocolate products containing 70% cocoa content, which was a novelty at the time. Today Nugali’s product portfolio numbers more than 50 products and it supplies more than 450 sale points across the country with a growth rate of 25% per year. The company produced 15 MT of chocolate per year in its first year but now manufactures more than 200 MT per year.

Nugali’s market differential is the company’s commitment to use traditional components in chocolate production, such as cocoa butter and natural vanilla, instead of substitute products. Furthermore, the chocolate confectionery marker also relies on natural items and flavors that are typically Brazilian, such as Brazil nuts, açaí berries and others, which provokes interest on the part of foreign consumers.

The company, which currently exports to UAE, Algeria and Japan, plans to begin exporting chocolate products to the US market very soon. Its most successful export products include Serra do Conduru 80% Cacau chocolate, Zero Açúcar 70% Cacau (diet) and chocolate products from the Cacau em Flor product line.

“As regards expectations for 2015, Nugali expects that exports will account for 5% of our annual revenue, but our objective is to increase this ratio to 30% in up to four years,”​ said Blumenschein.

Traditional chocolate exporter until 2013

Brazil produced 781,000 MT of chocolate products (including chocolate powder) in 2014, down 3.7% from the 811,000 MT manufactured a year earlier. Exports of chocolate confectionery products amounted to 29,000 MT in 2014, down 3.2% from 2013.

Although a net importer today, Brazil enjoyed an uninterrupted trade surplus in chocolate confectionery trade between 1999 and 2013. In 2013, imports totaling $139m finally overtook exports at $122m, causing a trade deficit in the chocolate confectionery market worth $17m, according to ABICAB data.

The Brazilian deficit in chocolate trade got worse in 2014 when it ballooned to $50m, based on exports worth $116m and imports worth $166m. Yet, despite this poor trade result, ABICAB expects that a wind of change blowing through Brazil’s economy will create new opportunities abroad for those confectionery industries ready to seize the moment.

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