Cola Market in Brazil

Although The Coca-Cola Company is known as a largest worldwide beverage retailer and manufacturer it has met a few difficulties in obtaining Brazilian soft-drink market. Brazil is considered as Coca-Cola’s 3rd market in sales but ranked only a 20th position in profitability. The main problem lies within the number of domestic producers — the so called tubaínas. There are over seven hundreds of them. Although none of them has more than 1.5% market share, combined they hold up to 32% hence they are considered to be a competitor.

The Brazilian Market Research Association, ABIPEME, defines five social classes A, B, C, D, and E. Members of A and B classes possess the highest levels of income, education, purchasing power, and tend to be more sophisticated consumers. While classes D and E lack purchasing power and can hardly afford the basic goods and services. Class C consumers are described as typical workers in the lower middle class, and comprise 12.6 million Brazilian households with monthly family income between 4 and 10 times of the minimum wage. Members of class C are considered to be the main soft drink consumers — about 28% of total national consumption. The least factor affecting food-related purchases for class C is brand. So leaving them to choose between two approximately even qualified soft drink brands, they will prefer the lower priced one. This tendency of class C Brazilian to leave out the brand name applies not only to soft drink market but to other ones as well. These products have been widely referred to as B brands.

Coca-Cola’s primary distribution channel is supermarkets, but they count for only one quarter of sales in Brazil. Although most Brazilians live in urban areas along the Atlantic coastline, several million people live in small communities spread throughout the country. It is very costly to access such a small far-away markets.

Most of tubaínas work on a regional level. They produce wide range of low-profile soft drinks with...