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Nestlé invests R$2bn in Brazil, bets on ‘ESG coffee’

Company will sell capsules made of paper and a biodegradable polymer that can be used in home composting

11/10/2022

Marcelo Melchior — Foto: Claudio Belli/Valor

Marcelo Melchior — Foto: Claudio Belli/Valor

When asked about what scenario he draws for 2023, the CEO of Nestlé in Brazil, Marcelo Melchior, raises his eyebrows, opens a smile, and says “next year in Brazil is never peaceful. I have been working at Nestlé for 34 years and it is that way. We are confident, though. We have great investments, in many fronts.”

Next year Mr. Melchior will run investments of R$2 billion. In 2022, he had planned to invest R$1.8 billion but will reach December having disbursed R$1.3 billion, due to delays in some construction works. The difference of R$500 million will be spent in 2023.

The company is expanding operations in several areas — from animal feed to coffee. And Mr. Melchior, who spoke to Valor this week alongside Nestlé’s top coffee executive Rachel Muller, is especially excited about Dolce Gusto, the coffee brand that debuted in Brazil in 2009, three years after Nespresso.

The company that invented the market for coffee in aluminum capsules to be used in its machines, and was copied by rivals, chose Brazil to launch its newest business in the coffee market: the sale of capsules made of paper and a biodegradable polymer that can be used in home composting. They break down in the ground in six months and have a watermark on the lid that can be “read” by the coffee maker, adjusting the machine to the type of coffee. This project in Brazil received investments of R$300 million.

The new machines, made in China by Wik, can be activated by the consumer’s cell phone, through an app. This way, Nestlé collects data and knows how the product is being consumed. “We can establish a closer relationship with the consumer,” says Ms. Muller. If the customer used to drink four coffees a day and now drinks one or none, the company can send him a message. The development of the machine and capsules took five years and was done by Nestlé technicians in Switzerland.

The executive notes that the Dolce Gusto Neo project was designed to be an environmentally friendly line, in line with ESG practices. The factory in Montes Claros (Minas Gerais) is the first Nestlé unit in the world to receive neutral environmental impact certification at all stages — it uses only reuse water, does not generate waste for landfills, and neutralizes 100% of its emissions. Women make up 50% of the workforce and some hold leadership positions.

The sale will start slowly, on December 1st, through Nestlé’s website. The marketing campaign will debut on November 20 on social media. “We will not make a massive sale because we do not know the size of the demand yet,” said Mr. Melchior. It takes 90 days for the machines shipped from China to arrive in the country.

Those who want to buy the novelty can sign up for a list on Nestlé’s website. On December 7, a megastore for Dolce Gusto Neo, as the new machine was named, is expected to be inaugurated. Also in December three kiosks are expected to be opened in shopping malls in the city of São Paulo.

This is not a cheap product. The machine, made from recycled plastic and metal, will cost R$899, and each capsule will cost R$2.8. There are 10 flavors of coffee from farms in Minas Gerais and Espírito Santo — six of the regular line, two organics, and two of Starbucks brand.

The Minas Gerais plant received new machinery to manufacture the capsules, certified by the non-governmental organization Forest Stewardship Council (FSC). The paper and polymer are imported, but Nestlé is already in talks to have local suppliers.

Melchior estimates that exports to other Nestlé units around the world will begin in 2023. His goal now is to map the Brazilian market. The consumer who likes coffee is concerned about the environment and has enough income to afford the machine and the capsules.

The executive says that this new biodegradable line is the future of the capsule system. The new capsule can be used in composting at the consumer’s home — mixed into the soil of a vase, for example, or it can go into the household’s regular organic waste. The paper and biodegradable polymer are gone within six months. The Nespresso line uses aluminum capsules. To recycle, consumers must take their capsules to the brand’s collection points.

Nestlé is not alone in this segment. The Swiss supermarket chain Migros announced two months ago for its CoffeeB coffee machines a biodegradable coffee capsule, covered by an algae-based film, which can also be used in home composting.

In Brazil, Nestlé says it is a pioneer in compostable capsules — made of paper and that can be composted at home, with certification. Other capsules on the Brazilian market “communicate the attribute of being biodegradable, however, they are made of plastic and require industrial composting,” Nestle says in a statement.

The new launch is being seen by the company as a way to get closer to customers — a concern that was put to the test a few weeks ago when Nestlé decreed a recall of Garoto brand chocolates. The sensor of a control equipment had broken on top of the production line and there was suspicion that glass fragments could have contaminated the product. The recall is now over, and the company has received no complaints from consumers.

When asked about what measures had been taken so that the accident would not happen again, Mr. Melchior said: “We are going to change the control and we are not going to use glass.” He was emphatic when affirming that the company is present in 99% of Brazilian homes and that it is concerned with the quality of what it produces. “We cannot disappoint. Otherwise, you buy another brand.”

*By Cynthia Malta, Ana Luiza de Carvalho — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Amazon invests heavily to gain market share in Brazil

Company is far behind competitors but vows to grow

08/23/2022

A global trade giant — second only to Walmart, the world’s largest retailer — Amazon has invested over the last two years in Brazil to expand its market share. Since 2020, the company has increased the number of distribution centers in Brazil to 12 from one, with sizes between 30,000 and 50,000 square meters. Logistics, according to specialists, is gaining more importance in retail, in view of a consumer who wants to receive products in a shorter and shorter time.

Even with the expansion, the number of Amazon units is still smaller than that of competitors, which have up to 30 centers, as is the case of Via (owner of Casas Bahia and Ponto chains). Americanas S.A. (Lojas Americanas and B2W Digital) has 25 distribution centers, while Magazine Luiza totals 24 and Mercado Libre has 10.

Many retailers also bet on the so-called “cross-docking” model — a smaller warehouse for redirecting deliveries within the chain itself, like a warehouse — or even in the use of brick-and-mortar stores as small distribution hubs, not only for their own products but also for third-party sellers, case of Magazine Luiza.

Unlike the world market, where it is the vice-leader, Amazon’s performance in Brazil is still far behind that of its rivals, according to market estimates. The Brazilian Society of Retail and Consumption (SBVC) ranking of the largest online marketplaces shows Amazon in sixth place, with R$3.832 billion in goods sold in 2021. The figure does not include third-party sales. If these other sales are considered, the estimated number rises to R$10 billion, according to consulting firm Varese Retail.

Still, those numbers are much lower than the first four in the ranking: Mercado Libre (R$68 billion), Americanas S.A. (R$42.2 billion), Magazine Luiza (R$39.7 billion) and Via (R$26.4 billion).

Ricardo Pagani — Foto: Divulgação

Ricardo Pagani — Foto: Divulgação

The leader of Amazon’s operations in Brazil, Ricardo Pagani, does not reveal investment or revenue figures but says that “important investments” have been made and that the company is just at the beginning of its operations in Brazil. Although it arrived in 2012, initially selling only digital books and Kindle e-readers, the expansion of the offer of products and categories was gradual. The hard-copy books began to be sold in 2014, then came the items in partnership with third parties (sellers) and only in 2019 Amazon began to acquire products for resale and sell devices such as Alexa. Currently, there is a variety of 50 million products available to customers, in 30 categories.

“As in other markets, Amazon is in Brazil with a long-term vision. We are building an operation in a sustained way. These are important investments made now, initially with a return of investment horizon of five to 10 years,” he said. Mr. Pagani downplayed the competition for leadership in Brazil and reinforced that it is possible to evaluate the position of each competitor in different categories. In the case of books sold through the online channel, for example, Amazon is the leader.

The investments in distribution centers, according to the executive, were planned before Covid-19 hit in Brazil but were accelerated during the pandemic.

Five of the 12 centers are in the city of Cajamar, about 40 kilometers from São Paulo, two in Cabo de Santo Agostinho (Pernambuco), one in Nova Santa Rita (Rio Grande do Sul), one in São João de Meriti (Rio de Janeiro), one in Santa Maria (Federal District), one in Betim (Minas Gerais) and the other in Itaitinga (Ceará). Each one is named after the nearest airport.

Amazon intends to continue investing in new distribution centers. The idea is also to expand the number of delivery stations, which today are five: (three in São Paulo, besides Rio de Janeiro and Minas Gerais). The units are responsible for the so-called “last mile,” which is the final step for the consumer, and operate in certain situations.

Logistics, says the founder and director of 360Varejo, Luiz Claudio Dias de Melo, is the next big thing, and requires high investments. A sign of Amazon’s concern with deliveries, according to him, is the recent purchase of 10% of Total Express, a logistics and distribution company.

But Amazon arrived later in this retail offensive to expand distribution centers in Brazil, notes Mr. Melo, who says the company faces “a minefield.” While it dominates the U.S. market, in Brazil it faces competitors that are bigger and ahead in terms of logistic structure: “This movement that Amazon is doing is late. The market is very busy and mined. The investments of the large operators have been happening for years”, he said.

The assessment of the late arrival is shared by the partner and founder of the consultancy Varese Retail, Alberto Serrentino, who points out an aggressive escalation of the retailer founded by Jeff Bezos. “Amazon started later, it is structuring itself, but it has been climbing very aggressively, with heavy investments, with many fulfillment centers,” says Mr. Serrentino. He refers to centers that not only receive and ship goods, but also provide other services to third parties that use its platform. The distribution centers that Amazon is setting up in the country “will provide the infrastructure and the muscle to improve the level of service and the ability to provide logistics services to sellers, which is their stronghold in the United States.”

One of the ways for the company to expand the customer base in Brazil, says Mr. Serrentino, is the Prime program, which provides free delivery for a range of products, regardless of value, and Prime Video, which is the streaming service.

Asked to comment on Amazon’s growth in Brazil, Mercado Libre, Americanas, Magazine Luiza and Via did not immediately reply, but gave indicators about the delivery times, one of the parameters in the competition for consumers.

According to the head of Logistics at Via, Fernando Gasparini, more than 15% of the company’s deliveries are currently made on the same day of purchase and more than 40% of the products arrive within 24 hours. As for Americanas S.A., 61.2% of deliveries are made within 24 hours, and 40% are made in just three hours, according to data from the second quarter of the year.

Magazine Luiza says 80% of the orders for its own products (that is, not considering the sellers) are delivered within 48 hours, and a “significant” portion within 24 hours.

Amazon itself does not disclose those figures but reveals that, through Amazon Prime, free shipping within one day is in 100 cities, and two-day shipping is in more than 1,000 cities.

*By Lucianne Carneiro — São João do Meriti, Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
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IBM sees Brazil as worth investing in

Global corporate spending on cloud services reached $55bn in the second quarter, according to data from Synergy Research Group

08/17/2022

Howard Boville — Foto: Divulgação/IBM

Howard Boville — Foto: Divulgação/IBM

IBM, one of the largest technology companies in the world, is trying to increase its share of the cloud computing market and has Brazil, especially banks, as a niche worth investing in.

Lenders are long-time clients of the company both for the acquisition of mainframe computers, which are the large ones capable of processing a massive volume of information, and cloud computing, a model in which clients pay for using technology resources via the Internet.

For the banking segment, IBM advocates the adoption of a hybrid cloud by companies, which comprises the private cloud, service and on-demand processing allocated within the company’s technology infrastructure, and the public cloud, based on the structure of cloud service providers.

Banks of all sizes are migrating part or all of their technology infrastructure to cloud computing. Itaú Unibanco, for example, should migrate 45% to 50% of its infrastructure to the cloud by the end of the year – currently, 30% of its applications are in the cloud provided by AWS, sources say. AWS, the leader in the global cloud market, is controlled by Amazon.

The offer of hybrid cloud services is IBM’s strategy to gain ground against competitors. In the second quarter, the company known as Big Blue was in the fifth position in the ranking of cloud services and infrastructure in all segments, with a 4% share. AWS leads the pack with 34% of the market, followed by Microsoft (21%), Google (10%), and Alibaba (5%).

Global corporate spending on cloud services reached $55 billion in the second quarter, according to data from Synergy Research Group. “Despite turbulence in currency markets and a much strengthened U.S. dollar, that still represents 29% growth from last year,” the consultancy said.

Banks are also accelerating their cloud investments against a difficult macroeconomic backdrop compounded by the risk of recession in the United States, said Howard Boville, senior vice president and head of IBM Cloud Platform. “All global institutions will do whatever it takes to preserve their margins. And that will include looking more closely at the projects that are bringing value to them,” the executive, also a former chief technology officer at Bank of America, told Valor.

Mr. Boville, who came to Brazil to participate in a panel at the Febraban Tech event last week, sees the migration of applications from Brazilian banks to cloud computing services as more advanced compared to other countries. “A lot of the work being done with Brazilian regulators is paving the way around data privacy and cybersecurity,” he said.

Marcelo Braga, IBM’s CEO for Brazil, agrees with the accelerated migration to the cloud among Brazilian banks and notes that this is not happening across the infrastructure. Mobile banking and internet banking are the first segments banks are moving to the cloud, he said.

Among structural systems, mainframes, which IBM provides, are still dominant among large banks, Mr. Braga said. “This connection [between mainframe and cloud] is what makes products faster in terms of innovation and opens up new opportunities,” he said.

Mr. Boville, who also created a technology best practices council, currently with 120 participating banks worldwide, notes that the advance of “open banking” here and in other markets still worries the industry about the security of smaller lenders.

“If you’re sharing consumer data, it allows you to have open banking and therefore more competition in the market,” he said. “That could mean that small companies that want to enter the market could put consumer data or technology operations at risk to the standard expected of a large lender,” he said.

According to Mr. Boville, who specializes in offering cloud computing tied to regulatory issues, especially in the financial industry, IBM’s proposal is to eliminate this risk with a turnkey cloud offering. “Whether you’re a big bank or a fintech, you inherit the cybersecurity controls, technology operations controls, and all the laws, rules, and regulations that you need to comply with and that the biggest banks operate,” Mr. Boville said.

In the second quarter, IBM reported a net profit of $1.5 billion, up 81% year-over-year, while revenues were up 9% to $15.5 billion. The hybrid cloud services represented 38.1% of total revenue, equivalent to R$5.9 billion in the quarter, up 24% year-over-year. The infrastructure division, which includes mainframes, invoiced $4.2 billion in the period, up 19% year-over-year. Revenue with mainframes increased 69% in the period, according to the company.

*By Daniela Braun — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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