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Brazil’s supremacy in sugar is growing

The country may account for more than half of exports in the 2022/23 global season

10/17/2022

Sugar production in Europe; Brazil is expected to export 30 million tonnes of the product in 2022/23 season — Foto: Dario Pignatelli/Bloomberg

Sugar production in Europe; Brazil is expected to export 30 million tonnes of the product in 2022/23 season — Foto: Dario Pignatelli/Bloomberg

Brazil is expected to continue to dominate the sugar market in this global season 2022/23, which tends to be marked by a small surplus in production. The latest rains in the Center-South of the country contribute to this scenario, which have helped in the development of crops for the next local season.

Brazilian mills may export 30 million tonnes of sugar in the 2022/23 local season, estimates Plinio Nastari, president of Datagro, a consultancy firm specialized in agriculture. If confirmed, this volume would be more than half of the sugar to be traded in the current international cycle — the consultant foresees global shipments of 57 million tonnes.

With this, the distance between the shipment volumes of Brazil and India, the second-largest exporter of the commodity, is likely to grow. The authorities in New Delhi indicated that they should issue export licenses for 8 million tonnes in this cycle, below the 11 million of last year’s season.

India will probably produce 36 million tonnes of sugar this harvest, already considering 4.5 million tonnes converted to produce ethanol, according to Datagro. India’s biofuel program has limited the country’s ability to compete with Brazil in the sugar market. Since 2017, the production of ethanol has seized 15 million tonnes of sugar, the consultancy says.

In Brazil alone, the Center-South may produce 36 million tonnes in the next local crop (2023/24), and there are still the volumes of North and Northeast regions. The increase of the Brazilian relevance in the global market raises the impact of climate and fuel prices in the country on global prices.

The difference between global supply and demand in 2022/23 is expected to be narrow, 1.87 million tonnes, Datagro predicts. The calculation, presented last week at a dinner with executives of mills that Citi Brazil promoted in Ribeirão Preto, in the countryside of São Paulo state, is similar to others in the market, such as that of Itaú BBA, which recently forecast a surplus of 2.1 million tonnes.

But this slight slack can be dilated. Mr. Nastari doesn’t rule out that production in South-Central Brazil is 2 million tonnes higher than the initial forecast, which would increase the surplus to 3.8 million tonnes.

Some mills already signal a scenario of robust supply in the next harvest. Mill Coruripe, for example, believes that the rains are favoring its crops so much that there may be more cane than it can crush in a normal cycle.

“If the rains continue, there will be 1 million tonnes more than capacity,” says CEO Mario Lorencatto. Today, Coruripe can grind up to 15.2 million tonnes per harvest in its five plants in the states of Minas Gerais and Alagoas. The company is already expanding its capacity in Limeira do Oeste, in Minas Gerais, by 1 million tonnes, and will add a sugar plant to this distillery.

Investments like that, however, are the exception in the sector. “The companies are reluctant [to invest in capacity] because of the increase in interest rates,” says André Cury, in charge of the Commercial Bank of Citi Brazil. According to him, even with the good prices last year, the mills opted to generate cash and reduce leverage, which is currently close to 1.15 times.

In São Paulo, the productive picture is also favorable. Usina Santa Isabel, which has two units in the state, expects, with the crushing of this season and the next, to recover a good part of the losses with the 30% decrease it had in the last cycle, says chief financial officer Fabio Montecchio. In the current cycle, crushing may reach 5.6 million tonnes.

Despite the ample supply, the international trade scenario continues to favor price increases, believes Mr. Nastari. The prices continue 30% above the level of two years ago, near 17.8 cents a pound, and the consultant sees room to reach 19.50 cents a pound until March.

In part, price maintenance is in global demand. Datagro estimates that consumption will increase by 2.5%, above the average of the last decade, which was 1% per year.

*By Camila Souza Ramos — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Telecom spending to grow 10% this year, to R$175bn

Experts agree with IPC Maps data that show post-pandemic habits

09/27/2022

Sales of cell phones and accessories are expected to grow at double-digit levels this year — Foto: Brenno Carvalho/Agência O Globo

Sales of cell phones and accessories are expected to grow at double-digit levels this year — Foto: Brenno Carvalho/Agência O Globo

The consumer market is expected to spend R$175 billion this year on telephone services, packages (TV, Internet, and phone), and the purchase of cell phones and accessories. This represents a potential growth of 10.1% compared to 2021 and 32.53% compared to 2019. The growth is based on current prices and may have a margin of error of 5%.

This is what IPC Maps, a study prepared by IPC Marketing Editora, shows. Experts consider that the data is coherent with the country’s reality.

Marcos Ferrari, CEO of Conexis, which represents the big telcos, said that “the pandemic has changed society’s consumption basket and connectivity has become vital.” Mr. Ferrari, a former secretary of economic affairs during the Rousseff administration, added that “people’s lives, companies, businesses have acquired a new form with the importance of connection.” He recalled that the National Household Sample Survey (Pnad) showed that 98% of people access the Internet via cell phone.

The growth of services is “booming” and will continue, said Vivien Suruagy, head of the federation of telecommunications and information technology network infrastructure (Feninfra). These companies expect to spend nearly R$20 billion this year on infrastructure services for operators, small providers, and suppliers, up 10% to 20% over 2021, according to Ms. Suruagy’s informal analysis.

“I think this growth is totally reasonable,” said Luca Belli, coordinator and professor of the Center for Technology and Society at the think tank Fundação Getulio Vargas (FGV). Mr. Belli recalled that the Pnad, from the Brazilian Institute of Geography and Statistics (IBGE), showed in the last few weeks the increase of connected people and of the use of cell phones and connected TV.

“However, you have to be more critical to understand these statistics,” Mr. Belli said. Not all Brazilians are connected, he added, citing that the lower-income population does not have a connection and is unable to surf the internet. In addition, a good part of Brazilians with access to this type of technology “have very limited bandwidth. There is a digital divide.”

Marcos Pazzini, a partner at IPC Marketing in charge of IPC Maps, said that the main telecom consumption categories were analyzed: landline phone, which has been losing importance for users for years; cell phones, the main device in people’s daily lives; the entertainment-work duo; and chargers, which have gained importance, especially after manufacturers decided to sell them apart from new cutting-edge 5G smartphones – both iPhones and brands that run on Android.

IPC found that telecoms account for 3.3% of household expenses after analyzing water, electricity, telephone, and Internet bills, among others.

The advance in telecom spending is stronger than the expectations for overall household consumption in 2022 in the wider IPC survey, which analyzed 22 sectors. General consumption is expected to draw R$5.6 trillion this year in Brazil, up only 0.92% from 2021.

“Brazil is always among the top countries in terms of consumption, whether of telecommunications services or mobile devices, accessories, and appliances,” said Matheus Rodrigues, a Deloitte partner in Brazil and a specialist in the technology, media, and telecom industry.

The growth in consumption of telecommunications products and services in Brazil had already been noted by Deloitte. The executive cited a recent study held by the company showing that Brazil leads five of six pillars in the industry when compared to the United States, United Kingdom, Germany, and Japan. Brazil is a leader in music streaming, games, social media, Internet navigation, media, videos, shows, and movies. The country is only behind in the segments of live concert streaming and movies at home.

According to IPC Maps data, the growth in telecoms spending this year ranges between 9.51% and 10.6%, depending on the category, compared to last year. Landlines are expected to see the smallest growth (9.51%).

The loss of importance of the landline phone becomes more evident when analyzing the potential spending when looking at the bills in reais in 2022 compared to 2019. Spending on this service dropped on average 80%, to R$10.15 billion, while cell phones are expected to grow 35%, to R$58.4 billion. Telephone, TV, and Internet packages are expected to rise 167% to R$58.4 billion, while cell phones and accessories are expected to increase 229.3% to R$47.9 billion.

“Few people depend on landlines and many who still have them at home do so for convenience because if you cancel the landline in the package, the price goes up,” said Mr. Pazzini. In fact, the sharp decline compared to 2019 follows industry trends, but the growth forecast for 2022 seems illogical. The executive explains that it is a nominal variation and the same is true for cell phones and accessories. “It does not mean that it grew by more than 200% in real terms. Inflation from 2019 to 2022 is expected to reach around 70%,” he said.

The industry’s revenues have been falling in real terms since 2015 due to structural issues. Even with an inflation of 5% to 6% per year, there is positive growth in telecoms, said Fernando Moulin, a professor at Insper and ESPM, and a partner at the consultancy Sponsorb. Mr. Molin, who has already worked for telecom companies, said that the growth indicated in the survey is justified by the change in people’s habits, and the tendency is for this to continue. “Digital transformation points to the North, with cultural, economic, and social changes,” he said.

Mr. Molin agrees that the macroeconomic scenario for 2023 is indeed challenging. But microeconomic conditions do not change, and one of them is habit; people want to be connected.

Cell phones, on the other hand, grew the most because people who used them eventually were forced to buy better devices to work at home and make video calls during the pandemic, Mr. Pazzini said.

Sales of cell phones and accessories are expected to grow at double-digit levels this year, said Reinaldo Sakis, research and consulting manager for consumer devices at IDC Brasil. He linked the increase to the change in the mix of products, higher prices, and higher costs caused by manufacturing problems in Asia passed on to products and components. IDC estimates a 5% drop in units sold in 2022, despite the new 5G technology, because retailers are “well stocked.”

In 2021, IDC saw a 6.1% drop in sales in units compared with 2020. In the second quarter of 2022, there was a 3.1% increase, with the sale of 11.3 million handsets. In revenue, from May to June, cell phone sales grew 14.1% year-over-year, to R$17 billion. In the first half, revenues reached R$36.7 billion, up 16.8% from the first six months of 2021.

“5G growth is exceptional, up over triple digits in units,” said Mr. Sakis. But he added that since this advance occurs over a still small base of 5G smartphones, it will not make a difference this year.

In addition, 1,261 new companies were founded in the telecoms sector since 2021, up 2.2% year-over-year. Now they add up to 57,805, the study found.

Spending rose despite higher unemployment because money flows increased as well, Mr. Pazzini said. The population sought income alternatives, and new delivery and transportation applications emerged, for instance. Ride-hailing drivers and motorcycle couriers depend on the Internet. The reliance on connections has created demand in the industry.

Mr. Pazzini says the upward trend will continue into 2023. “But it won’t last,” warned Mr. Belli, with FGV.

*By Ivone Santana — São Paulo

https://valorinternational.globo.com/
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M & A deals increased 26% in first half

Internet and information technology companies accounted for more than half of deals

09/05/2022

Mergers and acquisitions in Brazil increased 26.1% in the first half of this year, to 1,104 deals, compared to the first six months of 2021. Internet and information technology companies totaled 590 deals, research by KMPG shows.

The long-time consolidation drive in the technology market remains in place. Totvs announced on Thursday the acquisition of a 60% stake in Feedz, which develops human resources management software, for R$66 million. It is the seventh acquisition in the year and Totvs invested, in total, R$233.1 million this year. The recent agreement includes a clause for the purchase of the remaining 40% stake by 2025.

Semantix, a Brazilian technology company traded on Nasdaq in New York, also announced an acquisition on Thursday, when it bought the startup Zetta Health Analytics. The value of the deal was not revealed. The company offers data consulting services for the healthcare industry and complements the big data platform that Semantix offers its clients.

According to the company, Zetta has processed more than R$42.1 billion in claims and cross-referenced data from 764 databases, and now has 640 clients. Semantix says the acquisition strengthens its big data portfolio, adding services to serve the pharmaceutical industry, insurers, hospitals and other companies in the sector.

According to the KPMG survey, during the first three months of the year, 553 mergers and acquisitions took place, up 47.4% year-over-year. In the second quarter, KPMG found that 461 deals happened, up 7.45%.

Between the first and second quarter, there was a 16.6% drop. “Despite the good perspective for this year, if this deceleration trend [in the third quarter] is maintained, we will be a little further away from surpassing the figure seen in 2021,” said Luís Motta, a partner at KPMG and head of the survey. Last year, there were 1,963 M&A deals, surpassing the previous record in 2019.

Despite the favorable exchange rate for foreign companies, about two-thirds of the 646 deals took place between Brazilian companies in the first half of the year. Foreign capital, either on the buying or selling end, accounted for 36% of the mergers and acquisitions in the first half.

The internet and information technology sectors had the most mergers and acquisitions during the first half of this year, with 410 and 180 deals, respectively. Mr. Motta said that these companies remain active in the market even in situations of macroeconomic uncertainty since attracting investments is part of their growth cycle.

He recalled that the internet and technology industry experienced robust growth in the pandemic, increasing the number of companies in the market.

Technology companies end up being especially affected by rising interest rates as a result of their business models. The many investments to gain scale and expand businesses make them leveraged companies with revenues allocated to the future, which reduces cash flow and makes acquisition by larger groups an alternative.

*By Felipe Laurence — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Imports of solar equipment doubled in first half, study shows

Survey shows imports may enable capital expenditure of R$35bn in projects

08/25/2022

Industry foresees a “race for the sun” this year, as consumers are expected to join now to use the grid free of charge by 2045 — Foto: Pixabay

Industry foresees a “race for the sun” this year, as consumers are expected to join now to use the grid free of charge by 2045 — Foto: Pixabay

Imports of solar equipment to supply the markets of distributed generation (own generation) and centralized generation (large-scale farms) have risen 100% year-over-year in the first half of 2022, a survey with 1,600 companies linked to the sector found.

This can enable capital expenditure of R$35 billion in the entire project cycle and represents an installed capacity of nearly 10 gigawatts-peak. The data was released by Greener, a consulting company specializing in studies about the solar power market, during the event Intersolar South America.

“We had a strong acceleration in volumes in the first half of the year, with more than 100% growth in equipment arriving in Brazil, especially photovoltaic modules, which indicates an investment of more than R$35 billion. Distributed generation is the main driver of this growth,” Marcio Takata, a director at Greener, told Valor.

The study also found a slight decrease in prices. The previous survey pointed to an 8% increase in solar panel prices due to freight costs, commodity prices and exchange rates.

Now the prices of photovoltaic systems have cooled by 4.3% for the final consumer due to cheaper freight costs, the stronger real, growing competition in the domestic market and the larger number of equipment distribution companies as a result of the sector’s growth.

“Unlike three years ago, Brazil is now among the main markets. This brings competition in manufacturing and distribution. Today, there are more than 200 distribution companies in Brazil. Not so long ago, there were at most 20 companies,” he said.

The return on investment has also dropped to four years. An average residential system in Brazil costs R$19,500 for 4 kWp, compared with R$20,600 a year ago. The reduction in the discounts for distributed generation installations as of 2023 should change this situation, since the industry foresees a “race for the sun” this year, as consumers are expected to join now to use the grid free of charge by 2045.

The change in the rules for solar generation associated with the increasing interest of power consumers in reducing costs has driven growth. “This shows that distributed generation is a competitive solution for consumers, even though electricity bills [in general] have dropped due to the reduction of the state tax [ICMS],” the executive said.

On the other hand, the high interest rates held financing back. About 54% of sales were financed, compared with 57% in the previous survey. Mr. Takata bets that despite pressured production chains, the solar power industry should maintain strong growth in the coming years.

*By Robson Rodrigues — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Brazilian imports of fertilizers grew by 14.7% in 2022

The main exporter was Russia, accounting for 24% of the total

08/16/2022

Fertilizer handling at Paranagua port — Foto: Divulgação

Fertilizer handling at Paranagua port — Foto: Divulgação

Brazilian fertilizer imports grew 14.7% in the first seven months of the year and reached 21.8 million tonnes, a report by the consultancy Agro, of bank Itaú BBA, highlighted on Monday. Despite the war in Eastern Europe, Russia was the main source of purchases, with a 24% share in the total volume.

The product from Russia continues to arrive in the country “normally,” and in July alone the country sent 828,000 tonnes to Brazil, 10% more than in the same month in 2021. The purchases originated in Belarus, an important global exporter of potash, totaled 26,000 tonnes last month, 90% less than a year earlier (306,000 tonnes).

“As industries have been accelerating fertilizer imports since the beginning of the Russia-Ukraine war, fertilizers have been arriving in Brazil in volume even above 2021, which mitigates concerns about product availability,” the bank’s analysts say.

With the recent drop in fertilizer prices, they note, Brazilian farmers may have postponed the purchases of the input, contributing to the increase in the volume stored in ports. Agro informed that there are reports of high stocks, which may concentrate the delivery period and reduce the monthly import volume until the end of the year.

Earlier this month, Anda, an industry association, said that fertilizer deliveries between January and May increased only 1.7% compared to the first five months of 2021, to 14.6 million tonnes. In May, 3.2 million tonnes were delivered, a decrease of almost 5% compared to the same month last year.

*By Erica Polo — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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States’ investment increased threefold in first half

Expansion was driven by fiscal situation favored by extraordinary factors

08/10/2022

State governments have increased nearly threefold investments in the first half of this year, in real terms, driven by this year’s elections and a fiscal situation favored by extraordinary factors. The 26 states and the Federal District jointly invested R$31.4 billion between January and June 2022. In the same months last year, they injected R$11.8 billion. In 2018, also an election year, they invested R$13.48 billion, according to figures adjusted by inflation. Current revenues, which include collections and transfers from the federal government, rose 7.3% year-over-year, in real terms, in the first half of the year, and 21.7% compared with 2018.

Representatives of states and experts in public accounts say the situation of revenues is still influenced by cyclical and non-recurring factors. The picture is likely to begin to change in the second half.

Changes on how states calculate sales tax ICMS levied on fuels, electricity, and telecommunications are expected to at least slow down the increase in the collection of the main state tax. Besides this, expenditure pressures, such as salary adjustments granted during the first months of the year, are seen as weighing more heavily in the second half. Even so, in general, specialists say the result of 2022 is expected to be positive given the good performance of the first half and previous periods. As for the fiscal situation in 2023, they still see many uncertainties.

A set of cyclical factors, which included extra transfers from the federal government due to the pandemic and higher revenue driven by the recovery of the economy, inflation, and high commodity prices, played a role, said Ursula Dias Peres, a professor of public policy at the University of São Paulo (USP) and a researcher for the Solidary Research Network. These factors provided the states with more funds in 2022 than at the end of the previous terms in 2018, when the Brazilian economy was coming out of a recession.

“There are two distinct periods,” she said. Part of what caused the most recent increase in revenues helped the states in the first half of 2022 and, for this reason, despite recent measures to reduce ICMS rates in key sectors, states may end the year with a better relative collection than in 2018 or 2021.

Besides revenues, what helps explain such an increase in investments this year was the space opened by the restrictions on salary adjustments for public servants resulting from Complementary Law 173/20, she said. The suspension of debt payments in 2020 also helped generate some leeway and contributed to the current fiscal picture, although the situation among states is heterogeneous, Ms. Dias Peres said.

All 27 federal entities increased investments in the first half of 2022 year-over-year in real terms. In 19 of them, investment at least doubled. The total expenses of the states grew much less than the investments. In the first half, they increased 5.8% in real terms in relation to the same period last year. Current expenses, which are linked to regular and payroll expenses, rose by 2.4%.

Manoel Pires — Foto: Wenderson Araujo/Valor

Manoel Pires — Foto: Wenderson Araujo/Valor

The level of growth in total spending, above the expected GDP growth for this year, shows that states, although with divergent performances, expanded combined demand during the first half, said Manoel Pires, a researcher at Fundação Getulio Vargas’s Brazilian Institute of Economics (FGV/Ibre). In the analysis of spending, he highlighted the “impressive” growth of investments, which reflects the good performance of revenues, and the elections. The result also reinforces the idea that these amounts were significantly subdued before, he said.

Spending on salaries is expected to put more pressure on states since they were adjusted earlier this year, said George Santoro, finance secretary of Alagoas. The greatest pressure is expected to be felt in the second half, he said, when collection is likely to fall due to the changes in ICMS collection. Alagoas is expected to maintain investments of R$1.8 billion foreseen for 2022, but a larger portion is likely to be financed by credit operations, not by own funds.

São Paulo’s Secretary of Finance and Planning Felipe Salto says that even with the impacts of the new ICMS changes, tax collection in the state is expected to reach R$201.9 billion in 2022, compared with R$195.4 billion foreseen in this year’s budget law. The “good fiscal indicators” and a cash flow of nearly R$35 billion give the state “a certain comfort,” he said. Investments are seen above R$20 billion in 2022, which would be one of the highest levels ever, he said.

But Mr. Salto is not so upbeat. He recalled that the compensation to states for ICMS losses is still being discussed. And, in his view, “the unbalance in the federation pact caused by the federal government’s attempt to interfere in the states is worrisome. There is no guarantee for increased spending, as the federal government seems to suggest.”

The secretary also points out that there is a “clear” slowdown in revenues. In the 12 months through March, the collection of ICMS increased 14.5% year-over-year. In the 12 months through June, it decelerated to 8.9%, and in the 12 months through July, to 6.9%. In July, collection dropped 0.7% year-over-year in real terms. In March, also in a year-over-year comparison, the increase was 8.2% in real terms.

Estimates for tax collection next year are not yet closed, Mr. Salto said, but the scenario will be “much more adverse” with the perspective that the Brazilian economy will slow down compared with 2022. In 2023, we will have lower inflation rates, but the interest rate “will take time to return to civilized levels,” he said. Nominal revenue will grow less and increase pressure, with a performance “that may be quite different from what we had in the last two years.” In São Paulo, according to the most recent collection figures, inflation contributed with about 40% of the revenue increase, while 60% were structural factors, Mr. Salto said.

In 2023, Mr. Pires said, with the possibility of a collection impacted by changes in ICMS, the sensation that state governments will boast fiscal space can change a lot. The data show that the current fiscal situation has mainly benefited investments.

Christiane Schmidt, treasury secretary of Goiás, also highlights the cyclical nature that led to the most recent increase in tax collection, and says the big challenge will come in 2023. Part of the positive fiscal result of 2021 in Goiás is expected to be used in 2022. “What happens from 2023 on?” Next year, she says, mandatory expenses, including salary adjustments, are expected to weigh, although still cushioned by spending limitations on states.

The secretary says that for now, one of the focal points this year is to comply with the spending cap rule put in place by Complementary Law 156/16, established in exchange for renegotiation of debt with the federal government. The drop in revenue with the change in ICMS collection can give rise to spending beyond the constitutional minimum limits to health and education, which makes compliance with the ceiling more difficult, she said. In addition, the inflation rate, previously estimated at 9% in 2022, may stand at 7.5%, which would reduce the margin for increased spending.

For Ms. Dias Peres, the performance of state accounts in the next term is uncertain. On the revenue side, the most obvious question marks are the recent changes in ICMS tax rates levied on fuels, electricity and telecommunications. “It was a structural adjustment for a cyclical problem driven by international prices, exchange rates, and inflation.” In her view, it is not yet clear how the new state administrations will deal with this. Another factor expected to weigh on revenues is the reduction in the Industrialized Products Tax (IPI), a tax collected by the federal government, but whose collection helps finance the federal government’s transfers to state governments and municipalities.

In the expenses front, there should be the effect of adjustments for public servants, in some places already scheduled for next year. Besides this, she points out, the current investments are also expected to give rise to an increase in current expenses, due to maintenance and personnel. Equipment in the health sector, she highlights, generates annual expenses corresponding to 90% of the amount invested.

*By Marta Watanabe — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Ambev unveils new approach for growth

Jean Jereissati — Foto: Carol Carquejeiro/Valor
Jean Jereissati — Foto: Carol Carquejeiro/Valor

Ambev, the owner of beer brands Brahma, Skol and Antarctica, is presenting a “new chapter” of its history to investors this Tuesday. “To say we are a beverage company no longer represents us entirely,” CEO Jean Jereissati told Valor. The group wants to be, more and more, a platform, which goes beyond selling beer or soft drinks and includes food and even services, such as credit and renewable power generation.

Ambev has been successful until now with a model of strong expansion, search for efficiencies and inorganic growth. “The company conquered the world,” the executive said. “But when we turned 20 [in 2019], we rethought what the next 20 years would look like, and it became clear that what brought us here was not what would take us there.”

The company now wants to make alliances, like the ones it already has with BRF, M. Dias Branco or Pernod Ricard to sell its customers salami, cookies and vodka.

The Covid-19 pandemic in 2020 has somewhat opened the “technology window” for the company to put into practice what it began discussing as recently as late 2015 and early 2016. “The world went to online retail, it is digital now, and we were prepared when the pandemic came.”

If before only 15% of around 1 million customers were digital, today 80% are. “[The digital channel] was an option before. Now it is our core business. That’s where everything happens.”

Increased digitalization has had a major impact on the operation, speeding up the business. A bar, for example, can place orders through the Bees platform. This has given Ambev’s salesperson more time. Before the pandemic, a salesperson had only seven minutes to talk to a customer – there are 5,000 salespeople for a portfolio of one million customers. With Bees, a bar or restaurant ends up being in contact with the company for 37 minutes.

Digitalization also increased the umbrella of activities and the productivity of the salespeople, now called representatives by the company. The same 5,000 workers that served 750,000 customers in 2019 now deal with 1 million and will serve 1.2 million soon, the executive said.

To do so, a workforce of another 5,000 people has been assembled, with programmers and developers working on improving the several technologies used by Ambev and to creating new products and services. One priority is to improve logistics. The company started using small warehouses as distribution centers and motorcycles to speed up deliveries.

“Our acquisitions now should be more about improving our capabilities, in technology and logistics, and making alliances,” Mr. Jereissati said. The company plans, for example, to develop or buy a company that has created software for managing orders.

In the last three years, the company’s investments, including innovation, totaled R$17.5 billion, or R$7.77 billion last year alone.

In the last two years, the company has launched and managed to consolidate digital services such as the end consumer sales app Zé Delivery and Bees, for sales to bars and restaurants.

The platform Mr. Jereissati puts at the center of his strategy includes offering credit to customers. From the beginning of the pandemic until the end of 2021, the mass of credit offered to small retailers has doubled and is expected to double again this year. Sanitary restrictions, which required the closing of bars and restaurants for months on end, caused a crisis in this segment. For this reason, Mr. Jereissati said, “we were very flexible and rolled over the payments.” Fintech company Bees Bank, formerly called Donus, has 250,000 digital accounts.

This new operating model helped Ambev to sell 180 million hectoliters in 2021, a record level. Net revenue grew 24.8%, to R$72.85 billion. According to him, the year was less about big industry growth and more about market grabbing. “We were very countercyclical in the pandemic.”

Competition became fiercer. Heineken complained to antitrust regulator CADE this year against Ambev’s exclusivity contracts with bars. Mr. Jereissati showed itself to be calm. “It represents very little of our sales.” According to sources heard by Valor, exclusivity contracts account for about 2% of Ambev’s revenue.

Source: Valor International

https://valorinternational.globo.com

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Brazil’s inflation, growth may be pressured by Ukraine conflict

Boletim Focus: Mercado eleva previsões para inflação e economia em 2019

The war between Russia and Ukraine may put even more pressure on Brazilian inflation in the short time this year, experts say. In practice, the conflict, close to oil and grain-producing regions, will raise commodity prices and Brazil will be somewhat impacted. Analysts say oil giant Petrobras could raise gasoline and diesel prices and warn about more expensive products, especially those made of grains like wheat and oats, in the wholesale and retail markets.

“It is indeed something that will affect inflation, not only in Brazil but on a global scale,” said Étore Sanchez, chief economist at Ativa Investimentos, on the beginning of the Russian invasion of Ukrainian territory. He warned that, in the case of gasoline, which has a great weight in the formation of Brazil’s benchmark inflation index IPCA, calculated by the Brazilian Institute of Geography and Statistics (IBGE), this product already operates with a price that has “a 20% lag” in relation to the international price, according to his calculations. This was before the conflict in Ukraine, which started at dawn on Thursday.

The conflict may contaminate Brazil through two channels, said Alessandra Ribeiro, a partner and head of macroeconomics and sector analysis at Tendências Consultoria. One is the financial one, due to capital flight from emerging economies to less risky assets. The other is the “real economy,” with the increase in commodity prices reducing consumption in global terms.

According to calculations by Rafaela Vitória, chief economist at Banco Inter, the gasoline price lag has been between 10% and 12% — and has been “admirably” controlled by Petrobras. But the specialist admitted that the situation has changed completely with the entry of Russian troops into Ukraine. This is because the situation leads to an escalation in the price of the Brent-type oil barrel, she noted. “We may have imminent readjustment of fuels [in Brazil],” she admitted.

André Braz, an economist at Fundação Getulio Vargas (FGV) and responsible for inflation calculations in the General Price Indexes (IGPs) family, agrees. “With this situation, oil has already reached the $100/barrel threshold,” he warned. “It’s a situation that could get worse as this conflict evolves and perhaps compromise oil production, oil extraction. This will still involve other countries and it is just beginning,” he warned.

Mr. Braz commented that oil was already rising before the conflict, but the recent appreciation of the real against the dollar helped to offset the impact, in Brazil, of the rising prices of dollarized commodities. “Brazil is being visited by a large speculative volume, the smart money,” he pointed out, explaining that, with more dollar inflows into the country, the foreign exchange rate dropped: “It is a volatile money, but it helps to reduce the impact of dollarized commodities. So, if we had not accumulated a positive variation of the real, it would be a harder impact,” he said.

The FGV expert noted, however, that although a recent appreciation of around 10% of the real against the dollar softens some impacts, it “softens but does not prevent” the inflationary impact of high commodity prices in Brazil. For the specialist, it is possible that there will be news of fuel hikes in the coming days, such as gasoline and diesel.

Besides oil, another warning from the specialist is the probable increase in the price of grains and their products in Brazil. He recalled that Russia is a strong producer of wheat, and Brazil is not self-sufficient, which is important both in the calculation of wholesale and retail inflation, he noted. “If wheat flour goes up, it contaminates a long chain [in retail] that goes to wheat flour, pasta, bread, crackers, noodles, a series of component items of the basic food basket,” he listed. “We don’t reap anything positive from a war, and the effects of it will certainly get to inflation,” he said.

Rodolfo Margato, an economist at XP, also sees “an upward pressure bias” on oil products and grains produced in conflict areas, such as wheat, rye and oats. But he pointed out that it is impossible to project impacts in percentage points in inflationary indicators at the beginning of the conflict in the region.

But, in the case of commodities, he said that before the war between Russia and Ukraine the world was already facing reduced stocks of commodities and, in the case of Brazil, domestic inflation in 12 months already was in double-digit levels. This week, before the Russian invasion of the neighboring country, the IPCA-15 for February, a preview of the IPCA, the official inflation indicator, already saw a 12-month increase of 10.76%. “The scenario is of higher global uncertainty, especially commodity prices rising,” he acknowledged, adding that, in general, the conflict in Ukraine makes it more difficult to fight inflation in Brazil.

(Anaïs Fernandes, Marina Falcão and Marta Watanabe contributed to this story.)

Source: Valor International

https://valorinternational.globo.com

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