Sara Lee Sees Organic Growth In Brazilian Coffee Business

Date : 05/21/2012 @ 6:53PM
Source : Dow Jones News
Stock : Hillshire Brands Company (SLE)
Quote : 18.5  0.0 (0.00%) @ 2:05AM

Sara Lee Sees Organic Growth In Brazilian Coffee Business

Sara Lee (NYSE:SLE)
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Sara Lee Corp.'s (SLE) Brazilian coffee business plans to focus on innovation and developing its existing brands as it seeks to consolidate its leading share of the world's No. 2 coffee market.

Coffee demand in Brazil is seen rising faster during coming years than in other consumption hot-spots such as the U.S. and Europe. The domestic coffee market has been growing 3% to 5% per year, a pace that should continue as the economy grows and incomes rise, said Ricardo Souza, Sara Lee's local marketing director, in a phone interview.

But the company, which bought up a slew of major coffee brands since arriving to the South American country in 1998, now expects innovation and organic growth to lead the way forward. Sara Lee currently claims a 22% share of the domestic coffee market and owns Brazil's top-selling brand, Pilao.

"We have a size that allows us to be sophisticated and bring novelties to the portfolio of brands that we already have," Souza said.

Brazil, the world's largest coffee grower by far, has long exported its best product to high-paying consumers in Europe and the U.S., leaving the lower-quality "surplus" coffee at home.

But while retail coffee remains cheaper in Brazil than elsewhere, and roasters' margins have been squeezed in the past couple of years by the rising cost of raw beans, the domestic market has potential to add value as it expands in scale.

With unemployment at record lows, Brazilians are buying more coffee outside their homes--in restaurants and cafes--than ever before. They are also looking for better quality.

"The highest-quality segment of coffees, the premium segment, has been growing faster than the cheapest brands," Souza said.

He added that Sara Lee's Sensao brand of single-dose coffee machines, which the company recently launched in Brazil via its partnership with Dutch electronics maker Philips (PHG), has been well received.

"We're having great success with this product," Souza said. "It's a segment that has been growing a lot and has helped to recover profitability in the market."

-By Paul Kiernan, Dow Jones Newswires; (+55)11-3544-7074; paul.kiernan@dowjones.com




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