Investing in the Consumer Market
One of the major stories of the Brazilian boom is the growth of its domestic consumer market fueled by a swelling middle class with rising purchasing power. This middle class, or Class C (according the official class stratification scheme), with family incomes between US$750 and US$3,229 a month, has grown by almost 40 million since 2003, and now includes about 105 million people, or half the Brazilian population, accounting for nearly half of the country´s total purchasing power. Class AB (the upper-middle and upper classes) has also grown in the last decade. All classes of the population are spending more, with Class C expected to increase its total spending 19% this year. Brazilian fund managers and foreign investors are looking to the consumer market as one of the best means to gaining exposure of Brazilian growth.“One of the most interesting sectors to be in right now is companies within the consumer goods sector, where you can play on this growing, emerging middle class and relatively little dependence on foreign factors which may affect other sectors,” said Eduardo Menge, Portfolio Manager at Olimpia Partners, an independent strategy and asset management firm based in Sao Paulo. “The companies in this sector are extremely interesting because they´re not as susceptible to foreign risk as commodity, energy, or export companies are; you´re playing purely this domestic growth.”
Mauricio Levi, Chief Investment Officer of FAMA Investimentos, a Brazilian asset management company, agreed, explaining how, from 1997 to 2003, FAMA invested in companies that profited mostly from exports, but in 2003 began shifting their portfolio toward the domestic market. “We have been investing in the domestic story for several years now, and that includes the consumer story, the service industry, the home-building sector – those companies that are driving their earnings from the Brazilian market and not from abroad.”
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