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01\/31\/2025 <\/p>\n\n\n\n
Inflation is forcing Brazilians to further revise their shopping baskets, already impacting the pace of sales volume growth in stores in 2025, according to an exclusive NielsenIQ (NIQ) report obtained by Valor.<\/p>\n\n\n\n
The expansion rate of units sold in January, compared to the same period in 2024, dropped to 2.4% from 11.2% over roughly 20 days, from the first to the third week of the month.<\/p>\n\n\n\n
Another exclusive study by Scanntech shows that over the past six months, half of the volume growth seen in early 2024 has been erased. This means inflation has already forced Brazilians to give back part of the gains achieved just months earlier.<\/p>\n\n\n\n
Amid weakening consumption, the Northeast states\u2014where the government\u2019s key voter base is concentrated\u2014are the only region among those analyzed where supermarket and hypermarket sales are declining simultaneously. Only cash-and-carry stores posted growth in the third week of January compared to the previous year, according to NIQ.<\/p>\n\n\n\n
For the past two weeks, this trend has been raising concerns in the government, which is seeking short-term measures to slow price increases. The negative impact of inflation on President Lula\u2019s popularity, as highlighted by a Quaest poll on Monday (27), is a key concern. On Tuesday, Mr. Lula publicly addressed rising prices.<\/p>\n\n\n\n
The surveys have yet to account for the impact of Petrobras\u2019s recent diesel price hike, which is expected to drive up food transportation costs in a country where distribution relies heavily on highways, further pushing prices upward.<\/p>\n\n\n\n
According to NIQ\u2019s weekly tracking, based on sales data from partner retail chains, the total units sold slowed at a faster pace than revenue growth in the first three weeks of January\u2014a typical sign of accelerating shelf inflation.<\/p>\n\n\n\n
In the first week of the month, revenue was up 20.4%, while unit sales increased 11.2% year-over-year. By the second week ending January 12, volume growth slowed to 9.9%, while revenue expanded by 16.4%.<\/p>\n\n\n\n
Over the following seven days, until January 19, the trend shifted further: revenue rose 9.4%, but the number of units sold increased by only 2.4%\u2014just a quarter of the previous week\u2019s pace and far below the nearly 20% growth seen at the start of January.<\/p>\n\n\n\n
For the CEO of a wholesale retailer, this modest 2% growth represents the \u201cnew normal\u201d for sales volume in an environment of repeated price hikes.<\/p>\n\n\n\n
\u201cWhat we saw at the beginning of January, with double-digit growth, was an anomaly. There was a strong replenishment purchase because the year started in the middle of the week, which typically boosts restocking sales,\u201d he said. \u201cI think we\u2019ll see more of this 2%-2.5% growth throughout the year, and that\u2019s weak.\u201d<\/p>\n\n\n\n
This slowdown occurred just before President Lula warned his ministers in a January 21 meeting that workers were feeling the pinch of rising prices and urged swift action.<\/p>\n\n\n\n
\u201cWe\u2019ve seen supermarkets trying to plan purchases further in advance with suppliers to keep inventory levels as low as possible [to reduce fixed costs]. This has been happening since October. There\u2019s also been a push for greater brand variety to balance price increases,\u201d said Marcio Milan, vice president of ABRAS, the retail food association.<\/p>\n\n\n\n
Mr. Milan estimates that prices in stores rose about 1% in January alone. The association is in ongoing negotiations with the government to find ways to curb accelerating prices, though there is skepticism within the sector about the effectiveness of such measures.<\/p>\n\n\n\n
Gabriel Fagundes, director of industry insights at NIQ, said while the first two weeks of January were positive, the subsequent slowdown was driven by price hikes linked to the rising dollar. Many raw materials and agricultural commodities are priced in the U.S. currency.<\/p>\n\n\n\n
New price lists began arriving in stores between December and January. \u201cThe data shows a widening gap between value growth and units sold, which is driven by price increases,\u201d Mr. Fagundes noted.<\/p>\n\n\n\n
Price gap<\/strong><\/p>\n\n\n\n Between November and December\u2014the holiday shopping and Black Friday period\u2014average revenue in retail, wholesale, and pharmacies grew 6.3%, while unit volume increased just 1.2% year-over-year, according to Valor\u2019s calculations based on monthly data.<\/p>\n\n\n\n Thus, as Mr. Fagundes pointed out, there was a roughly 5-percentage-point gap between the figures, reflecting inflation and shifts in product mix. This gap has widened further in 2025.<\/p>\n\n\n\n By January 19, the accumulated gap had reached 7.5 percentage points\u2014sales in value terms grew 15.5%, while unit volume increased only 8%. \u201cWe need to see how much wider this gap will get. If it keeps growing, it could signal additional price hikes ahead. February brings increased demand for beverages and personal care items [due to Carnival], which are also sensitive to dollar fluctuations,\u201d Mr. Fagundes said.<\/p>\n\n\n\n The wholesale CEO noted a positive development: the recent drop in the dollar\u2019s exchange rate, which he believes could ease pressure for further price hikes in the industry.<\/p>\n\n\n\n Mr. Fagundes emphasized that more data is needed to determine volume trends for early 2025 but confirmed that price increases are becoming more widespread. He noted that the latest hikes are compounding existing inflationary pressures from late 2023.<\/p>\n\n\n\n Economists had previously warned that household budgets were being squeezed by persistently high price levels in 2024. Now, additional increases on top of those levels are evident, depending on the product category.<\/p>\n\n\n\n NIQ\u2019s survey covers the so-called modern retail segment, which includes supermarkets, hypermarkets, cash-and-carry stores, and pharmacies\u2014accounting for 80% of national consumption. It does not include smaller independent retailers, which make up the remaining 20% and typically do not influence broader market trends.<\/p>\n\n\n\n Consumer behaviour<\/strong><\/p>\n\n\n\n The food retail and pharmacy sectors generate R$1.6 trillion annually, representing just over 60% of the country\u2019s total restricted retail sales.<\/p>\n\n\n\n This inflationary acceleration is partly due to agricultural crop failures, climate issues, and new waves of price hikes across various product categories, including dollar-linked raw materials.<\/p>\n\n\n\n Between late October and early January, the exchange rate per U.S. dollar rose 7.3%. Since then, it has fallen 5.6%. The exchange rate surpassed R$6.20 on January 2, following a loss of government credibility after announcing insufficient fiscal adjustment measures to restore public finance order.<\/p>\n\n\n\n Since November, retailers and food, hygiene, beauty, and cleaning product manufacturers have been negotiating price adjustments of 5% to 10%, depending on the category, as previously reported by Valor.<\/p>\n\n\n\n According to Scanntech\u2019s internal data analysis, currency-sensitive supermarket items accounted for 76% of total food retail price increases in the fourth quarter of 2024.<\/p>\n\n\n\n Another key finding is how consumers are responding at points of sale.<\/p>\n\n\n\n The Northeast states were the only region among the seven analyzed by NIQ in January where supermarket and hypermarket sales declined simultaneously. Hypermarket sales fell 16% from January 13-19 compared to the previous year.<\/p>\n\n\n\n Only cash-and-carry stores grew during this period in the region (9.2%), offering prices 5%-10% lower than other retailers.<\/p>\n\n\n\n Scanntech Brasil\u2019s data, based on transactions from 45,000 partner stores, indicates that Brazil has reversed recent consumption gains. In the fourth quarter, sales volume fell 0.7%, following a 1.2% decline in the third quarter. This contrasts with the first and second quarters, when volume grew 3% and 1%, respectively.<\/p>\n\n\n\n This outlook echoes past downturns, though not as severe as in 2015-2016 during the Dilma Rousseff administration, when industries and retailers lost years of growth due to declining sales and revenue.<\/p>\n\n\n\n Priscila Ariani, marketing director at Scanntech Brasil, estimates that, in the fourth quarter of 2024, Brazilians saw a 5.7% decline in purchasing power, driven by a 9.3% increase in average food retail prices, while average income rose by just 3.1% for the year. \u201cWith price pressures persisting into January, purchasing power is expected to take an even greater hit,\u201d she said.<\/p>\n\n\n\n “Shrinkflation”<\/strong><\/p>\n\n\n\n Ms. Ariani highlighted another trend: consumers shopped more frequently in 2024 but bought less per trip to hunt for deals.<\/p>\n\n\n\n Calculations show that from January to December 2024, food retail sales in value terms increased by 5.2% compared to 2023, driven primarily by a 4.7% rise in prices over the year. The remaining 0.5% of growth came from a higher sales volume.<\/p>\n\n\n\n In other words, over 90% of the revenue expansion resulted from price adjustments on store shelves. As for units sold, the modest 0.5% increase was supported by a 2.3% rise in in-store traffic, which contributed to the overall index.<\/p>\n\n\n\n She also pointed to \u201cshrinkflation,\u201d where manufacturers reduce package sizes while maintaining prices, embedding an often unnoticed inflationary effect that impacts consumers\u2019 wallets.<\/p>\n\n\n\n In 2024, the average product package size shrank by 0.9% compared to 2023, while consumers increasingly opted for smaller, lower-weight products to cut costs.<\/p>\n\n\n\n \u201cThis 0.9% reduction may seem minor, but in a market that moves tonnes of goods annually and generates nearly R$1.4 trillion in food sales, it is far from insignificant,\u201d Ms. Ariani explained.<\/p>\n\n\n\n A leading wholesale club in S\u00e3o Paulo reports that packaging downsizing has already led to a 3% decline in the volume sold in 2024.<\/p>\n\n\n\n \u201cIf you factor in the reduction in product quantities per package and subtract it from the overall volume increase for the year, the total tonnage sold in Brazil is actually lower than reported,\u201d a source said.<\/p>\n\n\n\n According to the Scanntech Brasil\u2019s study, around 83% of grocery product categories saw packaging sizes shrink by late 2024, leading to a 4.5% drop in volume sold.<\/p>\n\n\n\n Ms. Ariani highlighted that this trend impacts business predictability and planning, affecting investment decisions throughout the year\u2014an issue also flagged in analyst reports. Since the pandemic, rising interest rates and inflation-driven cost pressures have led some retail chains to scale back expansion plans and new store openings.<\/p>\n\n\n\n This article was translated from Valor Econ\u00f4mico using an artificial intellig<\/p>\n\n\n\n *By\u00a0Adriana Mattos \u00a0\u2014 S\u00e3o Paulo<\/p>\n\n\n\n Source: Valor International<\/p>\n\n\n\n