Pet food draws R$2.5bn in investments

Mars, PremierPet, Petz, Nestlé and BRF expanded operations recently

09/01/2022

Mars had already injected R$165 million to build the Ponta Grossa facility — Foto: Divulgação

Mars had already injected R$165 million to build the Ponta Grossa facility — Foto: Divulgação

Mars, owner of the brands Pedigree, Whiskas and Cesar, has joined the recent wave of investments in the pet food market, which totaled R$2.5 billion since last year. The U.S.-based manufacturer will invest R$200 million in a new plant focused on the production of wet food for dogs and cats in Ponta Grossa, Paraná.

The company had already injected R$165 million to build the facility. The plant, the company’s fourth focused on pets, is expected to be finished in the first quarter of 2024.

In June 2022, PremierPet, owner of the Golden and Premier brands, started operating its fourth plant, in principle for dry food, after injecting R$1.1 billion in the facility. In the same month, Petz’s Zee.Dog launched a natural food brand with a capital expenditure of R$10 million. A year earlier, Nestlé announced the construction of its second Purina factory in Brazil and injected R$1 billion to expand production of wet food as of 2023. Last year, BRF, which already owned Balance, acquired Rio Grande do Sul-based Hercosul, which makes the Biofresh brand, for an undisclosed value.

Although it has the potential to sell 8.3 million tonnes, given the size of the population of dogs and cats in the country, sales are currently around 3.7 million, according to the association of pet products industry Abinpet. This difference shows the potential for growth, the association’s head José Edson Galvão de França said.

The volume of pet food sold is expected to grow by 6.6% in 2022, faster than the Brazilian economy. Last year, the food segment alone accounted for 78% of the revenue of the pet industry, whose turnover totaled R$35.8 billion.

“This growth requires investment, there is no idle capacity in the industry. Today we are the second-largest manufacturer of pet food, second only to the United States,” said Mr. França, noting that sales could be higher, but home feeding is still common in the country.

This scenario, however, has been changing, according to data from consultancy Kantar. Before the pandemic, industrialized dog food had a 35.8% slice of the market, and in the 12 months through March they accounted for 43.8%. Home-cooked pet food represents 11% now, down from 15.9%. Kantar also said that the number of households with pets fell by almost 3% this year compared to 2021. “The economic crisis may explain this,” the consulting firm said.

With more than 14,500 square meters built – and forecast to reach 25,000 square meters in six years – the Ponta Grossa plant will expand the company’s production capacity. The company currently has facilities in Recife (Pernambuco), Mogi Mirim (São Paulo) and Descalvado (São Paulo). In addition, it has an industrial plant for snacks and chocolates, such as Twix and M&M’s, in Guararema (São Paulo).

Ponta Grossa was chosen for its proximity to suppliers of raw materials and the main distribution routes. The facility will employ 150 people at the beginning of the operation and 300 in five years. Initially, the unit will supply the domestic market, especially the South region, which accounts for 20% of the Brazilian market. But it will also export to South American countries. In 2021, exports grew 33%, to $412.5 million, and pet food accounted for 95% of sales.

Mars has two strong brands, according to Euromonitor: Pedigree, with 11.5% of the market, and Whiskas, with 5.4%. Besides these two, the new plant will produce wet food for the brands Cesar, Sheba, Optimum and Kiteekat.

“Mars sees the sachet category as large and important enough for us to launch a new plant focused exclusively on it,” said João Konstantinidis, chief manufacturing officer at Mars Petcare. The privately-held company does not disclose its revenues in Brazil, nor the share of wet food in sales.

In total sales, wet food is still small in volume in the dog category, which accounts for 85% of total sales. Dry food accounts for 98.7% of volume. But while dry food sold 0.4% less at the end of the 12 months through March, sachets grew 0.1%, Kantar said.

*By Raquel Brandão — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Unemployment at lowest level since 2015, at 9.1% in July

In the quarter through July, Brazil had 9.9 million unemployed, a contraction of 12.9% compared to previous one

09/01/2022

The unemployment rate fell to 9.1% in the quarter through July, down from 10.5% in the quarter through April and 13.7% in the same period last year, the Continuous National Household Sample Survey (Pnad) released on Wednesday by the Brazilian statistics agency IBGE shows.

In the quarter through June, the rate was 9.3%. It is the lowest unemployment rate for a moving quarter through July since 2015 (8.7%) and the lowest for any three-month period since the fourth quarter of that year (9.1%).

The result was above the median expectations of 27 consultancies and financial firms consulted by Valor, which pointed to a rate of 9% in the quarter ending in July. The projections ranged from 8.8% to 9.2%.

In the quarter to July, the country had 9.9 million unemployed — people aged 14 or more who looked for a job but could not find one. The number shows a contraction of 12.9% compared with the previous quarter (1.5 million people less) and a drop of 31.4% compared with the same period in 2021 (4.5 million people less). The level of unemployed people is the lowest since the quarter ending in January 2016.

The figures include both formal workers — that is, with a contract — and informal workers, that is, without an employment relationship, such as app drivers and day laborers. These also grew. The number was 39.294 million people employed in the informal labor market, the highest since the series began in 2015.

Adriana Beringuy — Foto: Divulgação

Adriana Beringuy — Foto: Divulgação

Adriana Beringuy, the coordinator of IBGE’s Household Sample Surveys, pointed out that the reduction in unemployment is spread across the 10 economic activities monitored by the institute. Even so, more than 60% of the new jobs created by the labor market in the quarter ending in July, compared to the previous quarter, came from only two sectors (commerce and the public sector).

“This process of reducing unemployment is widespread among activities. Even the group of information technology services, which has been always growing, continues to expand. Some services showed recovery towards the end of 2021, including face-to-face services. And in the past few quarters we had a very vigorous growth in commerce and the public sector, as an effect of the post-pandemic,” she said.

Between May and July, the employed population (employees, employers, public servants) was 98.7 million people. This represents an increase of 2.2% compared to the previous moving quarter, which ended in April (2.2 million more people employed). Compared to the same quarter in 2021, it rose 8.8% (eight million more people).

All the 10 economic activities reported an expansion of job positions in the quarter through July 2022, compared with the previous quarter, but only two of them were classified by IBGE as growth: commerce and the public sector. The other eight variations were considered stable by the institute, for not having significant variations and because they were within the survey’s margin of error.

Of these 2.2 million more people employed in the quarter, 1.34 million (62.2%) got a job in the sectors of commerce, automotive and motorcycle repair and public administration, defense, social security, education, human health, and social services.

In commerce, there were 692,000 more people in the labor market, 3.7% more than in the previous quarter. The public sector, meanwhile, employed 648,000 more people, an increase of 3.9% compared with the previous quarter.

The labor force — that is, people aged 14 and older who are employed or looking for a job — was 64.7 million in the quarter to July 2022, statistically stable compared with the previous quarter and 2.8% lower than the same period last year (1.9 million fewer people).

The average income of workers fell 2.9% in the quarter through July 2022, compared to the same period in 2021, to R$ 2,693, according to the survey — R$80 less. The average real usual income of workers considers the sum of all jobs. Compared to the quarter ending in April, there was an increase of 2.9% (R$75 more).

The real income mass usually received by occupied people (in all jobs) was R$260.6 billion in the quarter from May to July 2022. The figure shows an increase of 5.3% compared with the previous quarter (ending in April), or R$13.1 billion more. Compared to the same period in 2021, there is an increase of 6.1% (R$14.9 billion more).

*By Lucianne Carneiro — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
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Analysis: GDP shows strength boosted by reopening, government steroids

Reopening – after the end of social distancing measures put in place to fight Covid-19 – boosted activity

09/01/2022

GDP climbed 1.2% compared with the first quarter, seasonally adjusted — Foto: Dado Galdieri/Bloomberg

GDP climbed 1.2% compared with the first quarter, seasonally adjusted — Foto: Dado Galdieri/Bloomberg

The Brazilian economy grew strongly in the second quarter, with a substantial increase in household consumption and investment, on the demand side, and in services and industry, on the supply side. GDP climbed 1.2% compared with the first quarter, seasonally adjusted, slightly above the expansion of 1.1% seen in the first three months of the year.

The effect of the reopening of the economy, after the end of social distancing measures put in place to fight the effects of Covid-19, boosted the activity, as well as government measures, such as the authorization to withdraw money from Workers’ Severance Fund (FGTS) accounts and the early payment of the 13th salary, a mandatory year-end bonus, for retirees and pensioners.

The labor market has also shown more strength than projected. The consensus of analysts heard by Valor for the April-June period was a GDP expansion of 0.9%.

After the strong first half, the economy is expected to lose steam in the second half of the year and especially next year. In the second half of the year, however, the package of vote-getting stimuli put in place in an attempt to burnish President Jair Bolsonaro’s image will still boost the economy, especially the increase in cash transfers through the social program Auxílio Brasil to R$600 from R$400.

The picture for activity seems to be more complicated in 2023. The impact of the cycle of high interest rates, which took Brazil’s key interest rate Selic to 14% a year from 2%, should slow down the economy. The scenario includes indebted consumers, stimulus measures losing effect, and more expensive credit. Besides this, the uncertainty about public accounts is likely to take its toll.

In the second quarter, household consumption advanced 2.6% compared with the previous quarter, while investment rose 4.8%. Together, they account for almost 80% of the GDP on the demand side. Government consumption, on the other hand, fell 0.9%.

According to economist Alberto Ramos, head of Latin America economic research at Goldman Sachs, the so-called domestic final demand grew 2.5%. The indicator combines household consumption, government consumption and investment, excluding changes in inventories.

The external sector, on the other hand, weighed on the GDP in the second quarter, because imports grew 7.6%, while exports fell 2.5%. Foreign purchases advanced in a period marked by a strong increase in consumption and investment. Mr. Ramos reckons that the external sector “took away” 1.34 percentage points from the GDP expansion from April to June. The domestic final demand contributed positively with 2.6 percentage points.

On the supply side, the main highlight of the second quarter was industry, with a broad-based increase of 2.2% in relation to the first quarter. Construction rose 2.7%, the extractive industry grew 2.2%, and the manufacturing industry climbed 1.7%. The power, water, gas, and sewage sectors rose 3.1%.

The services segment, which accounts for 70% of the GDP on the supply side, grew 1.3%, with a strong performance in transportation and storage and other service activities, up 3% and 3.3%, respectively. The latter includes in-person services battered by the pandemic, such as restaurants and hotels, said Rebeca Palis, the coordinator of IBGE’s national accounts. Commerce also did well, up 1.7%, while the information and communication segment grew 2.9%.

Agriculture, on the other hand, saw a slightly more modest growth of 0.5% compared with the first quarter.

After the good GDP figures, economists revising growth projections for the year. Mr. Ramos, with Goldman Sachs, raised his estimate to 2.9% from 2.2%. In 2023, he expects nearly 1% growth. Mr. Ramos wrote that the second quarter left a carryover effect of 2.6% for the year. This means that if the GDP does not grow at all from the level seen in the April-June period, the economy will expand by 2.6% in 2022. Capital Economics increased its forecast for this year to 2.5% from 2% and projects 0.8% growth next year.

After the strong result in the first half of the year, activity tends to be weaker in the second half. The labor market, however, has performed well, with lower unemployment thanks to a substantial job generation, although the figures for the July quarter have indicated a slowdown.

Furthermore, the government’s measures to boost Mr. Bolsonaro’s popularity should have an effect on activity. The package includes higher cash handouts through Auxílio Brasil, vouchers for truck and taxi drivers, and an increase in the cooking gas voucher, totaling R$41.5 billion. Inflation is falling, but this movement is concentrated on fuels and electric energy. Food and service prices are still rising considerably.

A strongest economic slowdown is likely to come in 2023, as substantial interest rate hikes put in place by the Central Bank will hit activity harder. Besides this, fiscal uncertainties could hold back investment.

In 2022, however, GDP so far shows more strength than was expected at the turn of the year. The reopening of the economy had a significant impact on the services sector, and the arsenal of government measures to stimulate activity had a clear effect.

*By Sergio Lamucci — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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