Rivals Have Eyes on Brasil Kirin

Brasil Kirin, the Japanese beer maker in Brazil, has been the target of other large international brewers including Heineken, Ambev, and Carlsberg.

Five years after buying Schincariol, Japanese group Kirin, has seen its shares in Brazil become the target of international brewers. Since taking over the company for more than R$6 billion, Kirin has seen its position weaken amidst a crumbling economy and changing consumer behaviors. The company's capacity is significantly larger than its sales. Among the company's options include the total sale of shares or a large portion of them, according to sources.

According to the newspaper Estado de S. Paulo, Dutch brewer, Heineken would be interested in buying all of the company's shares. Negotiations have not yet been formalized. One source, however, has confirmed that representatives of Heineken have held a meeting with Kirin in Japan at the end of June to try to define the bases for formal negotiations.

Heineken's appetite is large as the company has seen its global position weakened after the fusion of AB InBev and SAB Miller, which today own approximately 30% of the global market of beers.

Within Kirin's global portfolio of beverages, Heineken's main interest is in Brazil. The Dutch company, which entered the country via the purchase of Femsa has been able to grow and solidify its brand as premium and has been able to beat out Kirin with 9.4% sales of the sector.

Among the other competitors, Carlsberg, would use Kirin to establish some type of relevance in the country. For Ambev, the purchase would represent a low cost acquisition of Kirin's factories. The purchase would also help protect the company's two-thirds dominance of the sector.

Kirin has publicly denied all speculation about its strategic position.

Read more at Supermercado Moderno (in Portuguese) Rivals Looks to Buy Kirin

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Possible Trade Challenge from Brazil Against Canada

According to Reuters, Brazil is mulling over a possible World Trade Organization challenge against Canada for state funding of its airplane manufacturer, Bombardier. Brazil, which is suffering from a devastating economic crisis, is looking to protect the overseas competiveness of its airplane manufacturer, Embraer.

Canada is funding the airplane maker, which has been struggling.

The announcement of the possible challenge came from Foreign Minister, Jose Serra, of Brazil's interim presidency. Current Brazilian president, Dilma Rousseff, is suspended and awaiting her impeachment trial.

More specifically, Serra, a presidential candidate in 2002, said that a $1 billion investment in the struggling airplane manufacturer by the province of Quebec was a "subsidy" and was unfairly advantageous over Embraer.

Bombardier and Embraer are among the world's largest airplane manufacturers. Both are fighting for market share as the industry struggles with slow growth.

Read more at Business Standard Brazil Considers WTO Challenge

Coca-Cola to Make Acquisitions in Latin America

Constantly releasing new products and making new acquisitions will be the focus of Coca-Cola states Xiemar Zarazua who will leave his post as leader of Coca-Cola in Brazil in October after right years at the helm. "We prepare for difficult moments," said Zarazua.

Despite leaving his post, Zarazua will not be leaving the company. In fact, he will take the role of vice president of strategic endeavors for the company in Latin America. The Mexican will be replaced by Brazilian, Henrique Braun, who worked for the company in China and South Korea.

"In Latin America there are enormous opportunities. We have already seen consolidation in the areas in which we are in and we need to enter those areas that we are not in. We have an appetite for all categories. We release new products or we buy," said Zarazua regarding Brazil and neighboring countries.

Under Xiemar's time, one of the longest presidents at Coca-Cola Brazil, the company bought at the end of 2015 Laticinio Verde Campos from Lavras, Minas Gerais. In June, the company bought Ades in Latin America from Unilever. The acquisition was done in partnership with the Mexican soft drink bottler, Femsa.

When Xiemar arrived in Brazil Coca-Cola had just purchased Leao Junior, a tea brand. A year before the company had acquired juice company, Del Valle, which led the leader to restructure the company's portfolio of products.

At the same time, the company reduced the number of franchised bottlers from 16 to 10 with joint ventures and acquisitions among bottlers.

These consolidation moves, according to Xiemar, brought the company scale-ability and reduced costs helping to the company to better position itself to face downturns in the company similar to the one Brazil is currently facing.

"We prepare for difficult moments and we did well. At the time we made changes, we didn't used to have this belief system, but the results have made us stronger. We are suffering for sure, like everyone, but we were prepared. I doubt any company in Brazil is not worried," stated Xiemar.

According to the System Control of Drink Production (Sicobe) of the country's Internal Revenue Service, overall soft drink production in the country fell 8.2% in June to 956.3 million liters, compared to the same month in 2015. In comparison with May, there was a drop of 16%.

Read more at Supermercado Moderno (in Portuguese) Coca-Cola Predicts Acquisitions in Latin America

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Dip Frangos Cuts Production By 12.5%

Dip Frangos, subsidiary of Diplomata Group, a chicken factory from the southern state of Parana, has announced a cut of 12.5% of production.

Production cuts are a result of higher prices of corn as well as lower demand for the white meat. According to executive-director, Othmar Rempel, the company will lower its number of chickens from 120,000 chickens to 105,000 chickens. The reductions are to take place within the next 45 days.

The cut of production will also result in the loss of approximately 100 jobs at the Capanema, Parana plant. However, Rempel claims their will not be any job losses. He states that the company will simply not rehire any new workers over the next 45 days. According to him, the company has high turnover with approximately 8% of workers leaving every month. Today, Dip employees 953 workers at the plant.

In 2016, Dip is expected to have revenues of R$225 million in chicken.


Read more at Supermercado Moderno (in Portuguese) Dip Frangos Cuts Production

Sales of 100% Grape Juice Slowdown

Sales of 100% grape juice grew just 0.41% in the first five months of 2016. While consumer habits have changed during the country's economic crisis, Brazilians are not necessarily removing grape juice from their shopping carts.

After a 2015 in which the product saw an increase of 29.8% in volume, the sales of 100% grape juice grew just 0.41% between January and May of this year compared to the same time period the year before. The main reasons for lower sales is higher unemployment and lower income among Brazilian consumers. Estimations are that sales will be much lower than 2015 considering the country's economic struggles.

Dirceu Scotta, president of the Brazilian Institute of Wine (Ibravin) also blames an increase in the cost of production given the drop in this year's grape harvest and an increase in the IPI and ICMS taxes. These factors mean a higher price that consumers see in the supermarkets.

Even so, Scotta doesn't believe consumers will stop buying the juice. Brazilians continue to purchase healthy products, though, the frequency and quantity of these purchases have fallen.

Supermarkets will have to pay close attention to those factors that determine a consumer's purchasing decisions at the time of purchasing. According to the manufacturer, Famiglia Zanlorenzi, social classes A and B choose the based on the type of packaging. Then, they make their decisions based on brands, effectiveness, price and label information. Social classes C and also are concerned by the packaging type, but only after evaluating the price.

Making consumers aware of the products health benefits can also help increase sales. It's important that the consumer knows about the absence of preservatives and sugar as well as the fact that the product doesn't raise glucose levels. They also need to know that it is 100% natural fruit juice.

According to specialists, the drink helps protect the body from toxins and free radicals. It is also reduces the formation of fat in the blood, which helps reduce the levels of bad (LDL) cholesterol and raise the level of good (HDL) cholesterol.

Read more at Supermercado Moderno (in Portuguese) Grape Juice Sales Down

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Beer and Soft Drink Production Falls in June

National Wines and Sparkling Wines See Lower Sales

The sale of nationally produced wines and sparkling wines dropped 6.3% over the first five months of 2016 in Brazil. Ibravin, the Brazilian Institute of Wine, reported the sales numbers, which are a comparison of the same time period in 2015.

The main culprit in the drop in sales is the fall in the grape harvest in the Southern region of the country. Compared to last year, the harvest fell 57%. Additionally, the rise in taxes on the products resulted in lower sales.

"With the increase in the IPI and ICMS taxes in a lot of states, taxes now account for 56% to 77% of the product's final price," said president of Ibravin, Dirceu Scotta.

Before federal tax accounted for just R$0.73 per bottle, but now represents 10% of the value of the unit.

Up to 2015, the market fought back the country's economic crisis and sales rose 1.68% in comparison to 2014.

"The strong dollar had a positive impact at first, but with the high tax rate we lost the competitive advantage we had obtained."

Harvesting at the Salton Vineyard in Rio Grande do Sul fell from 15 million kg to 6 million kg this year stated the executive-director, Luciana Salton. "Before the stocks that were problematic ended up being our salvation."

Salton is expected to limit its product line of wines and sparkling wines due to the lack of natural resources. One solution is to launch products using Malbec grapes from Argentina. "Our first importation will be 40,000 boxes."

Despite the problems in the sector, sales for the company in the first half of the year were stable. According to Salton, in 2015, the company had revenues of R$338 million.

Read more at Supermercado Moderno (in Portuguese) Wine Sales Fall

Sales of Appliances Fall 16.5% in Brazil

The sale of appliances have dropped 16.5% in South American's largest economy. In particular, the fall in sales comes mostly from the "brown" line appliances, such as televisions and audio equipment.

Reasons for the drop in sales include the difficulty of consumers getting credit and low consumer confidence leading consumers not to want to take on debt.  The fall in appliance sales has led to numerous store closings of major appliance brands like Ponto Frio.

According to results released by the Brazilian Institute of Geography and Statistics (IBGE) on Tuesday, retail sales in volume have dropped for 14 consecutive months in Brazil. Overall, the decrease has totaled -7.3%. Appliances have fallen for 16 consecutive months.

The brown line of appliances tend to be more expensive and sales often depend more on financing for consumers, something which is rare today in Brazil.

Via Varejo, owners of Casas Bahia and Ponto Frio, closed 21 stores in the first trimester of 2016 due to low sales of appliances. In 2015, the company had closed 39 stores.

According to the association of manufacturers, Eletros, sales of brown line appliances have fallen 40% in 2016. The country produced 2.5 million televisions through April, a drop of 29.72% compared to the same time the year before and a decrease of 58% compared to 2014.

Lourival Kicula, president of Eletros, the devices have high penetration in the market. In times of crisis, there is little motivation to upgrade.

Right now, the expectation is that sales and production numbers could get worse in the second half of the year.

For more go to Supermercado Moderno (in Portuguese) Appliance Sales, Production Down