Retailers report sluggish sales as suppliers inquire about price increases of up to 7%
02/18/2025
Consumer spending showed signs of instability at the start of 2025, a stark contrast to the steady growth seen in the same period last year. Weekly monitoring by NielsenIQ (NIQ), obtained by Valor, indicates that February began with a slowdown in purchasing activity compared to January, shifting from strong sales volumes to a deceleration relative to 2024.
This trend did not occur a year ago when sales expanded week by week between January and February 2024.
From early January to February 9, sales volumes increased by 4.8% compared to the same period in 2024, based on NIQ’s weekly data analyzed by Valor Data. As of February 2, the cumulative growth was 5.2%. However, this increase was largely driven by the traditionally strong start of January, which tends to push the overall average higher.
Typically, the first week of the year sees a surge in sales due to consumers restocking household essentials after the holiday season. However, in 2025, sales momentum declined rapidly week by week compared to 2024, with volumes dropping for the first time between January 27 and February 2, registering a growth rate of just 2.3%.
The data is unaffected by the timing of Carnival in 2024, which took place after February 10 last year. NIQ noted that holiday-driven sales only began influencing the retail sector after February 5, according to last year’s report.
NIQ provides this data weekly to its clients, serving as a benchmark for companies to compare their performance with the broader market. Large retail groups primarily use the reports to track demand trends.
Sluggish demand
The consumption slowdown coincides with another wave of price increases from manufacturers to retailers, adding inflationary pressure on food and beverages that could further impact demand.
A large supermarket chain and a leading cash-and-carry wholesaler reported on February 14 that suppliers of essential grocery items are inquiring about price adjustments ranging from 5% to 7%. Items that had not previously been targeted for price hikes, such as eggs and potatoes, are now on the list.
“The dollar remains high despite recent declines, agribusinesses are prioritizing exports, and fulfilling 100% of purchase orders has become more difficult due to increased export volumes—these factors are all driving up prices,” said the CEO of one of these retail chains. “We are already selling eggs at over R$1 each. A year ago, a carton of ten eggs cost R$10; today, it’s R$15, and further price hikes are expected,” he added.
A separate report obtained by Valor from Scanntech Brasil, a data and research firm, noted that the average price level in January was the second highest in the past 13 months.
“January’s price levels were surpassed only by December 2024, when seasonal factors naturally drive prices higher,” the company said in its report.
Regional disparities
NIQ’s data indicates that Brazil’s Northeast region and Greater São Paulo (including the capital) are experiencing the weakest sales growth in 2025, lagging behind the national average in both supermarkets and cash-and-carry wholesalers.
These areas represent significant consumer markets, accounting for 22% of the country’s population in 2024, according to the Institute for Applied Economic Research (IPEA). Their sales performance has gained attention in recent weeks amid projections of economic deceleration and a sharp drop in President Lula’s approval rating, according to a recent Datafolha survey.
In the Northeast—a key region in Mr. Lula’s 2022 election victory—sales at hypermarkets declined by 3% in value terms (without adjusting for inflation) as of February 2, marking the worst regional performance. Volume data for this segment was not disclosed.
In large supermarkets (1,000 to 2,500 square meters), revenues in the Northeast grew by 5%, the smallest increase among all regions despite the uptick. Meanwhile, cash-and-carry sales in the region rose 12%, slightly below the national average of 13%.
Rising food prices, alongside structural economic challenges, have been cited by research firms as key factors in Mr. Lula’s record-high disapproval ratings.
Nationwide, small supermarkets have felt the slowdown the most since early January, while cash-and-carry stores have shown greater resilience.
Small supermarkets, often run by local entrepreneurs and family businesses, started the year with a 21% increase in sales compared to the same period in 2024. However, by early February, growth had slowed to just 1.4%.
Sales volatility
Valor found that the Brazilian Supermarket Association (ABRAS), the country’s largest food retail organization, has preliminary data for the week of February 3–9. The figures show a 2.8% increase in sales volume compared to 2024, following the decline posted in the previous week. According to the association, this reinforces the perception of an unstable consumption pattern in early 2025.
This data should be viewed in context: the comparison period—February 5–11, 2024—overlapped with Carnival, when sales surged 13.5%.
“We need to wait a few more weeks to assess the consistency of these peaks and valleys in consumption at the start of the year,” said João Galassi, president of ABRAS, when asked about February’s sales figures.
Mr. Galassi noted that while the recent interest rate hikes affect the broader market, they have a more pronounced impact on electronics, which rely on consumer credit. If demand for durable goods declines, more disposable income could become available for food and beverage purchases.
Despite waiting for more data, ABRAS announced at the end of January that it expects supermarket sales to grow by 2.7% in 2025—lower than the 3.7% increase in 2024. If this forecast holds, 2025 will mark the weakest sales performance for the sector since 2018 when sales rose just 2%. These figures are adjusted for inflation and reflect changes in sales volume.
This projection aligns with broader retail forecasts for 2025, which anticipate growth of 1.7% to 2% on average, compared to a 4.7% increase in volume in 2024.
Economic uncertainty
Eduardo Terra, managing partner at BTR Consultoria and a board member at several retail chains, noted that 2024 was a strong year for the sector, but companies remain cautious in their 2025 budgets. According to the Brazilian Institute of Geography and Statistics (IBGE), the retail sector grew by 4.7% in volume last year, the highest since 2012, but investment plans remain conservative.
“Since the Selic rate hike in 2021, companies have focused on improving productivity, renegotiating debt, and cutting costs. These priorities remain crucial, especially with interest rates rising again, particularly for more indebted retail chains,” Mr. Terra said.
A report sent to clients on Monday (17) by BTG Pactual’s analysis team highlighted that with weaker sales expected in 2025 compared to 2024, retailers will prioritize protecting profit margins rather than pursuing aggressive growth. Strategies to optimize working capital could lead to improved financial returns.
This cautious approach has been widespread in retail since 2021 when the COVID-19 crisis, rising inflation, and subsequent monetary tightening pushed companies to focus on margin preservation rather than sales expansion.
*By Adriana Mattos — São Paulo
Source: Valor International