Nestle to Sail Amazon Rivers to Reach Emerging-Market Consumers

Tuesday, June 22, 2010

Nestle SA will begin sailing a supermarket barge down two Amazon river tributaries tomorrow as it competes with Unilever to reach emerging-market customers cut off from branded goods.

The world’s largest food company will send a boat with 100-square meters (1,076 square feet) of supermarket space on a journey to 18 small cities and 800,000 potential consumers on the Para and Xingu rivers in Brazil, before starting the journey again. The vessel will carry 300 different goods including chocolate, yogurt, ice cream and juices.

“Direct distribution gives them a competitive edge over regionalcompetitors who don’t have the resources to do this kind of thing,” said James Targett, an analyst at Consumer Equity Research in London. He has a “positive” rating on Vevey, Switzerland-based Nestle.

Nestle expects as many as 1 billion people in emerging markets to exit poverty and be able to afford its products in the coming decade. The foodmaker has adapted its products in such regions by offering smaller, cheaper versions of products such as Alpino ice cream and Ninho milk powder through direct distribution to make them more accessible to low-income shoppers.Unilever has also been building a distribution network into Brazil’s shantytowns.

River Streets

“In Para, rivers act as streets and avenues,” Nestle Brazil President Ivan Zurita said today in an interview. “We have to adapt to this reality.” People’s “daily lives here are linked to fishing, to the region they live in. They don’t have the time or money to get to the capital.”

Nestle has invested 1 million reais ($560,000) in products and partnerships with local suppliers for the project, Zurita said. If successful, Nestle may expand it in Brazil or in other countries such as the Philippines, he said.

Supermarket purchases in Brazil’s impoverished northern and northeast regions have outpaced growth from richer states in the south and southeast for the last two years as social programs and a higher minimum wage increased disposable income for the poor, Sussumu Honda, head of the national supermarkets association, said in an interview June 2.

Brazil’s supermarket sales rose a record 15 percent in March from a year earlier, according to data from the country’s statistics agency. The increased demand means that supermarkets in remote areas have had difficulty keeping products on the shelves as suppliers are unable to meet orders, Honda said.

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