The de-commodification of the Brazilian market

It is not news to anyone that markets re-invent themselves. At any given moment, when everything seems unalterable and known, inexplicable innovations and opportunities arise.

It is this innovation that drives economies. There are several examples, and one of the best relates to consumer goods, which react daily to the growing dissatisfaction of consumers with globalisation.

In addition to this natural change that governs the competitive mechanism of all economies, for five years now the Brazilian market has also been affected by another type of transformation: the ‘de-commodification’ of previously untouchable sectors.

Before going any further, it is important to clarify what the term ‘commodity’ signifies. In the financial market, the term refers to raw materials or natural products arising from cultivation or extraction, produced on a large scale, by different producers and with almost uniform characteristics.

Generally, commodities are products of basic necessities, such as hard commodities that are extracted or mined: iron ore, aluminum, copper, gold, silver, palladium and platinum, and soft commodities that are cultivated: meat, fruit, fish, cereals, coffee and soya.

In principle, commodities are not differentiated from each other due to the absence of an added value, such as, for example, an identifying brand that seeks to link the product to a guarantee of origin and quality.

This is precisely what has happened in the Brazilian economy for many years. However, there is a new local trend of introducing trademarks into markets that were commodified before.

What was commonplace is now subject to differentiating criteria, highlighting the product and individualising it in its segment.

Therefore, the product now has a brand, quality and origin. These three elements provide added value to the commodity and distinguish it from the other products, highlighting it in the marketplace.

Changing habits

The Brazilian company JBS, the third largest food company in the world, did this with its trademark ‘Friboi’. Since 2010, it has adopted a process of construction and architecture for its brand of fresh meat, with the campaign ‘Choose Friboi. Trustworthy meat has a name.’

In simple terms, it wants to attribute and associate a trademark with a commodity.

"This competitive war that brands are waging in the market always tends to increase the quality of products and services, which can only benefit the consumer."

Because fresh meat is a commodity, Brazilian consumers were unaware before of its origin. Therefore, there was no possibility of buying a particular brand from a particular supplier, only the type of cut of meat.

This scenario has now changed. The uniqueness of the JBS campaign has been breaking paradigms and changing the habits of Brazilian consumers, who are now bombarded on a daily basis by campaigns designed to associate fresh meat with a particular supplier.

In order to achieve this, it was necessary to perform a well-articulated and organised campaign that included integrated communication, architecture and positioning of the brand, advertising, trade marketing, and activation of the point of sale and digital strategy, among others.

One of the first steps had the objective of establishing a relationship of trust between the brand and the public through the introduction of the trademark, from quality control in the processing of the meat and the origin of the animals.

After this, the next step was to help the public memorise the brand by redefining the point of sale material, the inclusion of a new logo for the meat packaging, and other measures.

The JBS advertising strategy was certainly successful. Sales of the Friboi brand in Brazil rose by 20 percent after the company began its publicity campaign. In only five months, earnings increased by 300 million real ($135 million).

Due to this success, fresh chicken has become the next target. There has been an advertising war between ‘Sadia’, the trademark of BRF, and ‘Seara’, the trademark of JBS, with respect to the origin and quality of chicken.

This mobilisation of the construction of brands in the meat commodity market is not by chance.

Brazil is one of the largest producers of animal protein in the world and its domestic market is the main destination of its production. In 2010, Brazilian meat production from cattle, pigs and poultry was estimated to be 24.5 million tons, of which 75 percent was consumed domestically.

According to the Brazilian Ministry of Agriculture, the expectation is that, by 2020, national meat production will supply 44.5 percent of the world market.

Furthermore, Brazil has led the world ranking of the largest exporters of beef since 2008, and the statistics indicate growth in forthcoming years.

This proves that, slowly but surely, commodities are gaining personality, origin and quality and, in this way, new markets and opportunities are being realised and exploited.

Generally, it can be concluded that there are more favourable points than unfavourable points with de-commodification.

One of the greatest benefits is to provide the consumer with the opportunity to choose the brand that pleases him the most, based on its added value, with quality, background, values, ethics, social and ecological responsibility, etc.

This competitive war that brands are waging in the market always tends to increase the quality of products and services, which can only benefit the consumer.

The cons

It can be seen that one of the negative aspects of de-commodification is the rise in price of the products.

While adding value to a product, transforming a commodity by giving it a brand, the final cost of the product always tends to be higher, due to having to pay for the expense of all the industrialisation and innovation processes linked to its de-commodification. This differs from the price of a commodity, which generally is more stable due to its being defined by the international market and being mainly dependent on natural factors.

Innovation is the most powerful weapon in the process of de-commodification and Brazil already knows this. The two combined are continually exploring new markets and soon fruit and vegetables will also have their brands, as has already happened with rice, water, and now meat. n

Cristiane Ruiz de Moraes Vianna is a partner at Daniel Advogados. She can be contacted at: cristiane.vianna@daniel.adv.br