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Brazil: Kraft capitalises on chocolate and biscuit growth

By Jane Byrne , 03-May-2011
Last updated on 04-May-2011 at 12:01 GMT

Kraft Foods is leveraging the growing trend for chocolate and biscuits in developing markets with the opening of a new $80m production facility in Brazil.

The site constitutes the first part of a phased-in investment by Kraft of $200m in manufacturing expansion over the next 24 months in the Latin American country.

The Pernambuco facility is initially set to produce Bis and Lacta brand chocolates, said the US food group, with the production at the plant being ramped up in 2012 to include the manufacture of Club Social brand biscuits.

Kraft's Brazil team is also said to been working closely with its counterpart in India on formulations that are resistant to hot climates.

The Pernambuco plant is located in the North-Northeast of Brazil, which is said to be the “fastest growing” region in the Latin American powerhouse.

The 270,000-square-foot facility will employ 600 employees to start, adding 200 more when the new biscuit line opens in 2012, said Kraft. The food giant currently has 10,000 employees in Brazil.

"Brazil is one of 10 priority developing markets where we're making big bets," said Sanjay Khosla, who heads up the developing markets division of the US food group

Brazilian trends

Thanks in part to its acquisition of Cadbury, Kraft Foods' business in Brazil, which includes 35 brands, last year generated $1.9bn in sales, with its organic net revenue climbing 16 per cent.

Jonathan Thomas, principal market analyst at Leatherhead International, notest that prior to the Kraft deal, Cadbury had a strong presence in the Brazilian gum market via brands such as Trident and Dentyne, although far less so in chocolate, where Kraft’s Lacta brand is one of the market leaders.

He told this publication that chocolate consumption is highly seasonal in Brazil, with sales typically 40 per cent higher during the winter months.

"Brazilians are also very keen on Easter eggs, with annual sales of more than 100 million units. Consumption of chocolate tends to be slightly higher in the more southerly parts of the country," added Thomas.

And Francisco Redruello, senior food analyst at Euromonitor, notes that greater consumer purchasing power among lower-income groups in Brazil is favouring the purchase of chocolate over the traditional sugar confectionery products such as lollipops, standard mints and boiled sweets.

And he cites factors such as lower unemployment, a positive outlook for Brazilian GDP, higher levels of industry activity, increased consumer confidence and the elections in October 2010 as adding to the positive scenario for the domestic economy and indulgent food and drink categories.

First Callebaut factory

Pod-to-pallet chocolate maker, Barry Callebaut, opened its first chocolate factory in Brazil 12 months ago, with the company noting the predicted growth for consumption of chocolate products in Latin America.

At the facility's opening, Juergen Steinemann, Barry Callebaut CEO, said that Brazil “has returned much faster to its earlier growth dynamic than most other economies after the recent economic turmoil.”

“Against this background and based on growth forecasts for the Latin American chocolate market of more than three per cent in volume terms annually over the next three years, we see a tremendous market potential – not only in Brazil but in the entire region,” he added.

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