Taco Bell opens a store in São Paulo during one of Brazil’s worst recessions in history- will they survive?

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Taco Bell is growing internationally. They have announced plans to add 1,300 new locations by 2023 globally. Taco Bell states that it will generate about $2 billion in sales. They plan to focus on markets in Europe, Asia, and South America. Taco Bell has been performing well in its’ domestic market due to its savvy digital marketing campaigns. However, can Taco Bell be successful in Brazil? In one of the world’s largest city, São Paulo?

 According to research, 35 million of Brazilians have rose to middle class and their purchasing power is continuing to increase. (Donatelli) However, the average Brazilian consumer has become more financially conscious due to its economic downturn. According to CNN, Brazil’s economy shrank 3.6% in 2016 and is still struggling in one of the country’s longest recessions. Unemployment peaked at 12% in January 2017 and almost 13 million Brazilians are still out of work. A recent survey reveals of 1,000 Brazilian consumers said that they are very concerned about their finances and plan to cut spending.

The Mckinsey Global Consumer Survey Sentiment Survey found 5 attributes of current Brazilian consumer Behavior (Donatelli) :

  1. They found that 3 out of 4 respondents agreed they are looking for ways to cut spending. They also found that more Brazilians are eating at home and are delaying purchases.

2. 35% of Brazilians in the survey claimed they would stay loyal to their brand. However, 14% are waiting until they are on sale.

3. 22% percent of Brazilians claimed they would substitute products to less-expensive brands ad 60% claimed they would not go back to the expensive brand again.

4. Although Brazilians are becoming more financially conscious, they still splurge in select categories, such personal-care products and alcohol.

5. Lastly, Brazilians consumers are increasingly shopping at discount chains.

Although the Brazilian economy is struggling and the average consumer is financially restraint, American chain-restaurants still continue to invest in the Brazilian market. 33% of bars and restaurants, which opened in 2017, reported their operation was a loss. (Galib, Veja São Paulo) Taco Bell recently opened its’ first restaurant in São Paulo on the famous Avenida Paulista and plans to open 6 in total in the city. Mexican-chain restaurant, Mexcla, also invested in the shopping malls in the neighborhood of Morumbi, São Paulo.

Companies can still find opportunities in the world’s 3rd largest city. Before the recession, Brazilian consumers in São Paulo enjoyed spending money and continue to spend their time at the many shopping malls in São Paulo. If Taco Bell successfully localizes their products at the right price point, they have a potential to be successful in Sao Paulo although the economy is performing poorly.

Paulistas (Residents of São Paulo) still enjoy eating out with their friends. Since they are becoming more “financially concerned,” they could substitute an expensive restaurant for a fast-food chain, such as Taco Bell. It is common to eat at shopping mall food courts during lunch breaks and on the weekends. According to a Taco Bell Press Release, the São Paulo location plans to differentiate themselves with a relaxed lounge atmosphere, with complementary wifi and charging stations. They also offer Brazilians beers as well. It is also recommended for Taco Bell to stay in large cities in the south of Brazil. Brazilians in the south have more purchasing power and travel abroad. Therefore most of Brazilians in the south have been exposed to some form of “Mexican food.” Taco Bell should not enter a region within Brazil, which is unfamiliar with the brand and food.

(Popular foodcourt in São Paulo, Shopping Iguatemi)

Taco Bell will have to fight aggressively against rivals already established at the malls in São Paulo. Consumers in the south of Brazil also do not typically enjoy spicy food. Taco Bell will have to localize and differentiate their food offerings at the right price in order to be profitable

Please Enjoy the video below!

https://www.youtube.com/watch?v=TWSOiZrs3oA


Sources:

“Taco Bell Fuels International Expansion with First Restaurant in Brazil.” Business Wire. Taco Bell Press Release, 29 Sept. 2016. Web. 25 Apr. 2017. <http://www.businesswire.com/news/home/20160929005325/en/Taco-Bell-Fuels-International-Expansion-Restaurant-Brazil>.

 Latin America’s Largest Country Is Still Crawling through Its Worst Recession in Its History. “Brazil Is Still in Its Worst Recession in History.” CNNMoney. Cable News Network, n.d. Web. 25 Apr. 2017. <http://money.cnn.com/2017/03/07/news/economy/brazil-gdp-2016/>.

Galib, Fabio. “Fast-foods Mexicanos Ganham Mercado Brasileiro | Fábio Galib.” VEJA SÃO PAULO. VEJA SÃO PAULO, 20 Apr. 2017. Web. 25 Apr. 2017.< http://vejasp.abril.com.br/cidades/fast-foods-mercado-renovado/>

Cruz, Billy. “Taco Bell’s Snapchat Game Is Strong Among Teens, But Does It Sell Tacos?”NPR. NPR, 10 May 2016. Web. 25 Apr. 2017. <http://www.npr.org/sections/thesalt/2016/05/10/477336641/taco-bell-s-snapchat-game-is-strong-among-teens-but-does-it-sell-tacos>.

Donatelli, Fernanda Hoefel, Suzana Resstom, and Fábio Stul, Mariana. “Meet the New Brazilian Consumer.” McKinsey & Company. N.p., n.d. Web. 25 Apr. 2017. <http://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/meet-the-new-brazilian-consumer>.

 

 

 

 

 

 

 

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