Via Frontier Strategy Group, a look at Brazil’s market segmentation:

Multinationals in the consumer space are looking increasingly to the middle class for growth as high-end segments mature.

Local firms are following their traditional customer base as it moves into the middle and upper middle class, putting them on a competitive collision course with multinationals moving down market.

“New middle class consumers are bringing their traditional tastes and preferences with them, helping incumbent local producers tap into the emerging consumer segments.” – FSG Executive FMCG Company

Drivers

The middle class is surpassing the lower class in quantity of households, which changes the traditional shape of the market pyramid and demands a change in strategy.

Leading multinationals are acquiring local producers to enhance their product portfolio and distribution infrastructure in order to meet emerging middle class demand.

Companies that are reluctant to adapt products or stretch their brand equity risk losing middle class customers to more nimble local competitors.

Middle- and higher-end segments are becoming more competitive.

As more multinationals enter Brazil, higher-end segments are becoming increasingly saturated, forcing multinationals to look down-market for new opportunity.

Frontier Strategy Group View

Multinationals that continue to focus primarily on the higher-end segments risk losing emerging middle class consumers to local competitors who are consistently improving and expanding their capabilities in the  medium and high-tier segments in order to gain first-mover advantage.

A failure to plan accordingly will result in MNCs being restricted in their maneuverability as local companies grow in strength