Fast Food Industry In Brazil

TRENDS

• Fast food restaurants continued to experience growth over the review period as a result of higher disposable income amongst low-income socioeconomic strata, and as a result of an increasing number of women entering the workforce, reducing the time available for cooking. The desire for speed and convenience spurred sales of burgers, convenience stores, ice cream and other fast food, largely represented by lanchonetes – particularly pratos feitos (specials) – along with sandwiches, snacks and beverages. With rising rates of obesity, especially within the middle-income segment, a growing number of fast food outlets such as McDonald’s, Bob’s and Pizza Hut have been investing in offering healthier options, such as wraps, salads and grilled meats.

• In order to attract lower-income consumers, players are promoting some items in the menu with very low prices. McDonald’s, for instance, has launched campaigns titled “Small Prices”, where six regular menu items are offered at reduced prices, and “Flavour of the Moment”, a series of seasonal sandwiches available for three months and priced at R$4.00. Al Saraiva has been offering for several years now its meat esfiha for R$0.49 (vs normal price of R$0.79) during some months of the year.

• Although fast casual dining similar to what is in the United States is not available in Brazil, some new chains are emerging that offer healthier food at fast food speed and prices still lower than full-service restaurants. Two good examples are Salad Creations, which entered the Brazilian market in 2007 offering a wide selection of salads and wraps with an appealing décor, as well as Go Fresh, a new venture by the same company that presents full-service restaurant wraps. Go Fresh offers a menu developed by a chef and a “salad man” to help consumers make the best combination for their meals amongst salads, grilled meats and bread.

• Fast food grew 10% in constant value terms in 2009. Expansion of chained fast food establishments into the northeast and central regions of the country underpinned growth in value sales and outlets of chained fast food, with the latter rising by almost 8% in 2009. Giraffa’s and Bob’s – both in chained burger fast food – reported outstanding performances in these areas.

• Chained bakery products fast food showed the highest growth, around 37% in current value terms in 2009. Mainly Subway, but also Uno & Due and Casa do Pão de Queijo were responsible for the growth – together they opened around 150 outlets in 2009.

• Despite the strong growth of Subway, sandwich specialists still accounted for less than 5% of bakery products fast food outlets in 2009. This is due to the importance of padarias or traditional bakeries in Brazil, which offer meals to consumers at lunchtime (like the kilo restaurant format), pizzas and Brazilian pastries such as coxinhas, empadas and croquetes or pratos feitos (specials).

• Although chicken is perceived as a healthy food, chicken fast food has a small presence in Brazil since there are a wide number of fast food restaurants that include chicken on their menus. Giraffa’s offers meals with chicken breast, which account for almost 14% of the brand’s overall revenues. BFFC is paying special attention to KFC’s menu – in addition to the traditional chicken buckets and sandwiches, the company is also offering chicken meals tailored to the Brazilian taste, with sides of rice, beans and Brazilian farofa.

• Although ice cream fast food accounted for less than 1% of fast food revenues in 2009, over the review period several new frozen yoghurt outlets such as Canadian Yogen Früz and locals Yogoberry, Yoguland, Yoggi and Yogurberry opened, especially in the city of São Paulo. Even though numbers are still small, it demonstrates a growing trend of offering healthier dessert options such as frozen yoghurt, which can have half the calories of regular ice cream.

• Independent fast food accounted for 76% value share and 95% share of outlets in 2009, due to the wide presence of bakeries and lanchonetes. These outlet types offer quick meals at affordable prices and are usually in residential areas and/or high pedestrian traffic locations where business offices predominate.

• In Brazil it is inherent in the culture to eat in establishments rather than taking food away. The percentage of people eating food on the premises was more than 80% in 2009. Expenditure on beverages in fast food establishments is relatively high, with a 33% value share, as it is very common for consumers to drink beer with snacks during happy hour in lanchonetes, and even bakeries. This trend has attracted the attention of some chained fast food players, such as Montana Grill Express, which also includes special menu offerings during happy hour (16:00hrs to 20:00hrs).

• After revision of 2008 data, it was verified that in Brazil there are no restaurants that fit Euromonitor’s definition of fast casual dining. When Brazilian consumers look for a place with fast service and good ambiance to eat, during weekday lunchtime they will likely go to FSR that offer fixed price menus or kilo buffets.

COMPETITIVE LANDSCAPE

• McDonald’s remained the leading brand in chained fast food, holding a value share of more than 40% in 2009. However, it lost share over the review period as there were few investments in outlet expansion. After the license agreement with Arcos Dourados in Latin America in 2007, McDonald’s invested in increasing same-outlet sales by introducing new menu offerings, especially healthier alternatives such as chicken wraps, as well as new salads and desserts such as sundaes with banana topping. The company also has been investing in lower-priced menu items to attract lower-income consumers with the campaigns “Small Prices” and “Flavour of the Moment”.

• Al Saraiva Empreendimentos Imobiliários e Participações Ltda is the second leading company based on the success of chained Middle Eastern fast food brand Habib’s amongst middle-income consumers. Although the number of stores did not increase from 2008, the company kept investing in low-priced menu items in order to attract the emerging C socioeconomic group to its stores.

• Brazil Fast Food Corp has initiated the expansion of KFC stores and also has inaugurated the first three Doggis stores in Brazil, in partnership with Chilean company GED, owner of the Doggis brand. The company is also investing in the expansion of Bob’s with franchised stores and kiosks all over the country.

• Restpar Alimentos Ltda, which entered the market through sales of burgers, experienced growth based on sales of pratos feitos – a combination of rice, beans, salad and meat. According to the company, pratos feitos accounts for 65% of overall revenue, with chicken the most popular meat. In January 2009, the company released Giracone, a type of wrap, to compete with McDonald’s, which had also launched chicken wraps. Restpar Alimentos continues to invest in the expanding the number of Giraffa’s outlets in the northeast and central regions due to the limited presence of chained fast food establishments in these areas.

• Subway has been expanding rapidly through franchises across the country. The company reached over 350 outlets in 2009.

• In order to increase sales per outlet, a growing number of fast food restaurants have invested in sales at non-traditional times of day, such as breakfast and after lunch. McDonald’s introduced new menu offerings for breakfast through McCafé. Spoleto, in chained Italian fast food, introduced in some outlets a space where coffee and snacks are served. Montana Grill Express invested in new menu items to attract consumers for happy hour (usually between 18:00hrs and 20:00hrs), which include beer and appetizers.

• Private equity fund Pátria sold its stake in Casa do Pão de Queijo to a holding company that includes the original owners of the brand as well as South African Standard Bank Private Equity. The transaction was completed at the end of 2009 and the plans for the chain were yet to be announced at the time of writing.

PROSPECTS

• Fast food is expected to keep growing over the forecast period, as a result of players’ investment in expansion of outlets into other areas, as well as the increasing purchasing power of the lower socioeconomic class population, which brings new consumers into the category. Fast food is estimated to see a CAGR of 6% in constant value terms over the forecast period.

• Although there are only two players in chained fish fast food, both are investing in expanding the number of outlets through franchising and the expected CAGR for the 2009-2014 forecast period is 14% in constant value terms.

• The forecast for chicken fast food was revised due to the announced expansion of KFC in Brazil. BFFC is looking for franchise candidates to open new KFC outlets in 2010 and beyond.

• Yum! Brands has announced its intention to bring Taco Bell to Brazil over the years 2010-2012. Due to its strong partnership with BFFC with Pizza Hut and KFC, it is likely that Yum! Brands’ new venture will happen together with BFFC.

• New product developments such as the promotional “Flavour of the Moment” low-price sandwich offerings by McDonald’s are expected to keep performing well as they are a lower-cost option, especially to consumers who are, for the first time, able to eat at fast food places. For 2010, several players are expected to launch low-price menu offerings to attract new consumers to the segment.

Source:   Euromonitor International