Increased focus on healthy and organic food in Brazil

Date : 09 July 2019

Oliver Butterworth

Retail Analyst

Over the last 18 months, we have seen a growing trend for the major grocery retailers in Brazil to shift their focus towards promoting healthy, fresh and organic products. There is an increasing consumer demand to buy healthier and natural products.

Carrefour and GPA (part of the Casino Group) have addressed this by implementing dedicated health-food zones in their stores and in both cases, these have helped to drive improved sales performances.

Carrefour Brazil sees huge growth potential in expanding its organic offer

Carrefour has announced plans to increase its organic product offer by 85% in 2019. It aims to achieve this by working with new suppliers, expanding its organic assortment and through promotions of organic products with its My Carrefour app.

In its Q1 results, Carrefour reported sales of its organic products had grown by an average of 67%, versus Q1 2018.  This year-on-year increase demonstrates a growing demand for organic products. Carrefour said it expects its sales of organic food to reach BRL500m (US$131.5m) by 2022.

Carrefour’s Organic range in a Carrefour Market proximity store, São Paulo

Source: IGD Retail Analysis

 

Health categories helping to drive improved sales performances

Carrefour recently launched ‘Healthy Corridors’ in over half of its hypermarkets. The initiative brings together healthy products across multiple categories into one easy-to-shop, health-focused aisle. As of March 2019, this had been introduced in 49 stores, more than double the 24 stores it had at the end of 2018. The initiative led to a 24% sales increase in its health food categories in Q1 and Carrefour aims to extend this to 32% by the end of 2019.

Carrefour’s Health Corridor in a hypermarket

Source: IGD Retail Analysis

 

GPA has been remodelling many of its Pão de Açúcar supermarkets into its new health-focused ‘G7’ concept. The stores feature a new layout which brings fresh categories to the front of the store and incorporates a new dedicated health-foods zone.

They also feature a revitalised product mix which contains more healthy and organic lines. In its Q1 results GPA’s Pão de Açúcar stores delivered a 4.6% growth in same-store-sales and the business said the G7 stores were significantly outperforming the average sales for the banner overall.

Health-food zone in a Pão de Açúcar store, Rio de Janeiro

Source: IGD Retail Analysis

 

Developing new products and growing private label penetration

Carrefour is developing many new healthy and organic products, which it aims to launch later in 2019. It is also reformulating and relaunching many existing lines to improve their nutritional content.

More broadly Carrefour plans to launch 740 own-brand products by December 2019 and expects private label to account for 20% of its total sales by 2022.  In 2018 Carrefour launched its new private label line Sabor & Qualidade (taste & quality), which is predominantly made up of high-quality and sustainably sourced fresh lines. This is part of its ‘Carrefour 2022’ transformation plan, which aims to ‘expand the supply of healthy and organic food at a fair price'.

Source: Carrefour Brazil

 

GPA is also expanding its private label offer and at the end of 2018 it announced plans to increase private label sales penetration from c. 10% to 20% in the next three years. As of Q1 2019, penetration was at 11.6%, with c. 3,000 SKUs. 90 new products were launched in the quarter, with an aim of launching a further 500 by the end of 2019. GPA’s Taeq private label, which focuses on healthy and organic products, is growing rapidly and is merchandised alongside known brands in its new health-food zone.

GPA’s Taeq organic coffee in a Pão de Açúcar store

Source: IGD Retail Analysis

 

Our view

The health food offering is still at its infancy in Brazil, but there seems to be a growing consumer interest. Providing a wider range of healthy, organic and natural products is becoming increasingly ingrained in Carrefour and GPA’s long-term strategies. We feel this will be a growing trend which other retailers will have to follow to stay competitive. Both retailers’ private labels will continue to grow in range and sales penetration and to incorporate more healthy products.

Zoning health food categories will make it much easier for customers to shop this category and to conveniently make price comparisons between branded and private label products. This could also encourage less affluent shoppers to shop healthier as the private labels will be more affordable.

This report covers six examples of Brazil-based retailers celebrating their fresh ranges. This covers a mix of store formats located in Rio de Janeiro and São Paulo.

We visited one of GPA's latest stores which has been remodelled to its new G7 concept. One of 20 stores opened in this format in 2018, the store has a new layout and product mix which focuses on fresh and healthy categories.

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