Perception of broad-based inflation also reflects accelerating price increases in key regions such as the Northeast and São Paulo
02/10/2025
A combination of negative factors hitting consumers simultaneously in a short period has fueled the perception that price increases in stores have spread across Brazil, despite the official IPCA inflation rate closing at 4.83% in 2024.
It is widely acknowledged that food prices have been rising since last year, making up 21.3% of the preliminary IPCA-15 index—the highest share among all categories. In this segment, price increases were notably sharper, reaching 8.23% in 2024.
Additionally, food and beverages weigh more heavily on the budgets of lower-income groups, particularly in classes C and D, which have been severely affected by these adjustments. This amplifies the market’s perception that price hikes have spread across store shelves, even as some products have recently seen price declines.
However, other factors have also been identified in store research, ranging from price increases affecting nearly all types of sales channels—making it harder for consumers to avoid them—to the shrinking size of product packaging, which has driven up household food costs by as much as 5%.
Invisible inflation
This phenomenon, labeled as “invisible inflation” by consultants, forces consumers to purchase smaller-sized products and return to stores more frequently. While Brazilian law mandates that manufacturers follow strict guidelines to disclose reductions in package sizes, these rules are not always adhered to, according to a Valor investigation published in 2022.
Adding to these dynamics, a sharper acceleration in prices occurred in late 2024 in regions where increases had been milder, such as the Northeast—a key stronghold for President Lula, whose electoral base has remained strong there for decades.
To assess these trends, Valor compared price and sales volume data collected by research firms across different regions and sales channels and shared these insights with business executives and economists in recent days. The analysis included data from the technology and analytics firm Scanntech and market research company NielsenQI (NIQ) for 2024 and January 2025.
Regional prices
In the third quarter of 2024, price increases in the Northeast, Central-West, and São Paulo state remained relatively controlled, staying close to the national average for the year, according to Scanntech Brasil. Year-over-year increases ranged from 4% to 4.4%, compared to the overall average of 4.3% in these three regions.
However, in the last three months of 2024, all surveyed regions saw price hikes surpassing the annual average.
In the Northeast, price increases jumped from 4% in the third quarter to 6.3% from October to December, compared to the same period in 2023. São Paulo, Brazil’s largest consumer market and the biggest in Latin America—helping shape price perceptions and trends—saw inflation rise from 4.3% to 6.5% in the same timeframe.
“After October, the situation really worsened. Food inflation is already more resilient and persistent than in other categories, and we also faced additional pressure from the currency’s depreciation after November,” said Fábio Bentes, an economist at CNC, Brazil’s national confederation for commerce and services. In 2024, the Brazilian real depreciated 21.5% against the U.S. dollar compared to the previous year.
Scanntech separately analyzed price trends in Minas Gerais, Rio de Janeiro, Espírito Santo, and São Paulo, in addition to four broader regions: South, Northeast, North, and Central-West.
One positive aspect is that the wave of price hikes introduced by manufacturers to supermarkets since November, as previously reported by Valor, began to lose momentum after mid-January, according to the CEO of a retail group with 200 stores.
If this trend continues—alongside improved harvests for certain products and the effects of recent interest rate hikes on inflation—the long-awaited easing of price increases could gain traction, the source noted.
Another factor contributing to the perception of higher inflation is the more uniform nature of price increases across the market.
When comparing 2024 to 2021, a year of sharp inflation spikes often used as a reference in the industry, price hikes were much more pronounced four years ago. The IPCA inflation index surged 10.06% in 2021 compared to 2020, marking the highest rate since 2015.
Back then, it was nearly impossible for consumers to avoid price hikes, a situation that mirrors current trends.
Since 2024, the discount wholesale sector—historically a cheaper shopping alternative—has also been affected by price increases for essential items due to extreme weather conditions. Key products such as soybean oil, coffee, and rice have seen significant cost fluctuations, directly impacting wholesale prices.
At the end of last year, wholesale stores raised their per-unit prices by nearly as much as supermarkets—6.8% compared to 7%, respectively, according to Scanntech.
Another study by NIQ found that average food prices across all retail channels rose 5.2% in 2024 compared to 2023. However, in large supermarkets, prices jumped 7.9%, while discount wholesalers saw an even steeper increase of 12.9%. Hypermarkets, on the other hand, recorded a smaller rise of 2.2%.
Hypermarkets are also becoming less common in Brazil, as dozens of locations have shut down, with some transitioning into wholesale formats. This shift is part of strategic moves by major retail groups such as Carrefour and Extra Hiper—the latter ceased operations in Brazil in 2022, with many of its stores rebranded as Assaí.
Hypermarkets accounted for only 11% of the sector’s total revenue, according to NielsenIQ, while discount wholesalers represented nearly 35% in 2024—playing a more significant role in shaping overall price perceptions.
Monetary tightening
Leonardo Severini, president of the Brazilian Wholesalers and Distributors Association (ABAD), noted that retail chains have struggled with rising interest rates, which increased leverage costs after 2021 and left little room for businesses to absorb price hikes.
Additionally, some retail groups have expanded service offerings such as in-store butcher shops and bakeries, which may have led to price increases in those areas to maintain profitability.
Despite these inflationary pressures, major retailers insist that overall price increases in the sector have remained below double digits, with fierce competition helping to control service-related costs.
“My internal inflation rate was 7% in 2024—not that high,” said a director at a leading wholesale retailer in southern Brazil. “We sell a lot of commodities, which have surged in price, creating the perception that everything is expensive. However, plenty of items have dropped in price too—like beans, sugar, margarine, and cookies—but that’s not talked about as much.”
While he acknowledged that cash-and-carry stores have some ability to absorb price hikes due to lower fixed costs, he admitted that rising interest rates and domestic inflation still pressured retailers, prompting some stores to prioritize profitability.
Francisco Hirota, CEO of the Hirota supermarket group, said that retail price increases have not deviated significantly from the general IPCA inflation index.
However, he pointed out that consumers have faced a negative economic environment since late 2024, when concerns over Brazil’s fiscal outlook grew after the government introduced weaker-than-expected economic measures.
“I checked our company’s inflation figures, and the average cost of the products we sell rose 5.5% in 2024, while our retail prices increased 4.6% compared to 2023—less than the 8% food inflation rate,” Mr. Hirota said. “Promotions accounted for 31% of sales at the start of 2024, and this year they make up 35%, so Brazilians are clearly looking for ways to avoid price hikes. But I don’t think inflation is as bad as some people claim,” he added.
Shrinkflation
Another key factor behind rising price perceptions is the acceleration of inflation since October, with rates exceeding the annual average, according to Scanntech.
Food inflation, measured by the IPCA-15 index, exceeded 1% per month from November to January, said Mr. Bentes of CNC. Adverse weather conditions, increased meat exports reducing domestic supply, and a strengthening dollar have contributed to rising prices.
In December, when these pressures intensified, unit sales of consumer goods fell 6.5% nationwide, while average prices jumped nearly 8% compared to December 2023, according to Scanntech. In this case, beyond price pressures, some of the month’s sales may have been pulled forward to November due to Black Friday.
Amid this complex environment, consultants and executives agreed that “shrinkflation”—reducing product sizes while maintaining prices—has played a major role in cost increases.
This trend began in the late 1990s but intensifies when industry production costs rise. While suppliers can legally reduce product weight, they must comply with disclosure regulations established in a 1997 decree.
A Valor survey in 2022 revealed that some industries were not adhering to packaging transparency rules. A 2024 study by the Brazilian Institute of Planning and Taxation (IBPT) found that shrinkflation could increase household food expenses by up to 5.22%, eroding 3.78% of Brazilian consumers’ purchasing power for staple goods in 2023.
Data collected by Scanntech in 2024 showed that, from January to December, package sizes in stores shrank by nearly 1% compared to 2023, while average food prices rose 4.6%. “Our calculations indicate a 3% reduction in weight,” said the director of a cash-and-carry chain.
*By Adriana Mattos — São Paulo
Source: Valor International