It’s a tough time to be an entrepreneur in Brazil. Markets have been wobbling since 2014 under the weight of ongoing corruption scandals, with political casualties at both state and national level.
Despite financial and economic malaise, Brazil remains a desirable place to do business. Part of the BRIC group of developing nations, Brazil’s immense size, population and potential for growth means multinational firms are increasingly turning their attention to the country.
Amazon is one such example, according to supply chain consultancy Crimson & Co. Despite the linguistic and geopolitical hurdles, the retail giant is anxious to replicate its international success in South America. “In turn”, says Richard Gurney, Crimson & Co’s general manager for Latin America, “this has acted as a massive wake-up call for how businesses locally manage their supply chain and logistics.”
This is a significant trend. Stagnant economic activity, combined with the need to ruthlessly innovate, is creating a pressurised atmosphere for firms in developing markets. But the long-term evolution of supply chains, and wider changes associated with globalisation, is a positive development for foodservice.
Supply chain sophistication
Crimson & Co’s analysis of the Brazilian supply chain makes for interesting reading. Slowly but surely, it suggests inefficient ways of working are being squeezed out.
Amazon’s aggressive investment has raised the bar for companies of all kinds. Central to this is the firm’s approach to shipping. Undaunted by the size of North America, Europe and now Brazil, technological and infrastructural innovation is helping to turn vast regions into profitable markets.
By contrast, domestic firms have fallen back on more traditional supply chains. This means failing to collaborate with other parts of the business, reluctance to spearhead change by mobilizing capital and trying desperately to minimise costs. Gurney concludes: “In crude terms it is often looking at how to get products of materials from point A to point B in the cheapest way possible.”
Amazon’s intervention has laid the ground for change. Although it will mean a period of rapid adaptation for the Brazilian economy, early signals suggest many businesses are up to the challenge. This includes designated supply chain teams and increased investment in personnel from the most cutting-edge organisations.
Gurney is upbeat about the implications for the region: “Firms are now much leaner and agile to market changes, and as more and more retailers come into the region we only expect this to improve further.” He points out the example of Sao Paulo-based magazine Luiza. The electronics retailer has invested heavily in online services to compete with the industry’s big hitting newcomers. “This has led to an important turnaround for its results over the past 2-3 years,” says Gurney, “driven through an excellent e-commerce platform for its customers.”
The foodservice perspective
Supply chains have been a more pressing issue in foodservice quarters than most. Particularly for South America’s biggest home-grown firms, distance from these operations has allowed reduced quality and bribery to creep in, with repercussions for the whole region.
In the last year alone, accusations that meat giants BRF and JBS were bribing health officials to export unsafe produce overseas culminated in a series of police raids. “This has seen a huge proportion of the Brazilian population actively avoid eating meat produced by JBS,” says Gurney. “This has presented huge challenges for the supermarkets who have actively needed to source products from a variety of new suppliers.”
The risks from supply chain flippancy are greater for foodservice firms than most. Crimson & Co’s research suggests globalisation will force small and medium businesses to adapt their operations or die. However, there are potential rewards to be found in the changing landscape. The reality could be much more collaborative.
Consider the entry of UberEATS to Sao Paulo at the end of 2016. The home delivery industry’s massive growth has forced caterers and restaurateurs across the world to evolve, but tapping into diners’ desires to eat quality food at home has made for a winning business model. It’s a great example of multinational corporations and regional producers working in tandem for the benefit of all – the former supply their capital and global outlook, the latter supply their local expertise and insights.
Nevertheless, as Gurney points out, the road ahead for foodservice firms is likely to be rocky. The burgeoning home delivery market is a positive development, but “has largely only taken off off among high-end consumers and more upmarket supermarkets.”
Additionally, Brazil’s ailing infrastructure is holding back supply chain innovators. Logistics and transport are the two standout challenges. “Soya and corn, for example, have suffered due to lack of acceptable infrastructure in road and rail links,” says Gurney. “In the first quarter of 2017, many tonnes were lost due to insufficient warehousing.”
Globalisation means the incursion of conglomerates into developing markets will accelerate in the coming years. This will have wide-ranging implications for how firms operate, from supply chain to the point of delivery.
Foodservice firms who prove unwilling to innovate may not survive the industry’s rapid evolution. But the example of other retailers in Brazil shows adaptation is possible. Caterers and restaurateurs must make the most of new platforms and the opportunities to press for infrastructural improvement as global firms enter the market. Over time, this will give the entire foodservice sector a much-needed boost.
This article was updated on 19 September.
Pictured: Sao Paulo’s bustling skyline