BIG COMPANIES, BIG BUSINESS: GOOD FOR WHOM? GOOD FOR WHOM? FOR GOOD Companies operating in Brazil are increasingly larger and internationalized. Through market control, they have the power to dene prices and boost shareholder returns, many of them foreign. But for consumers who shop at the supermarket or have to sign a contract with a cell phone operator or a bank, these trends in Brazilian capitalism can mean worse service quality and higher costs. BIG BUSINESS BIG IG COMPANIES, IG B The trend toward concentration and internationalization of important production chains and COMPANY CONCENTRATION IN SUPERMARKET SHELVES sectors of the Brazilian economy has characterized recent economic growth. The problem is that this process, many times encouraged by the use of public resources, can jeopardize the basic rights Perhaps those who go to the supermarket are not aware that just a few huge transnationals are behind most of citizens who purchase goods and services. brands purchased by Brazilians. Ten large companies – among them Unilever, Nestlé, Procter & Gamble, Kraft and Coca-Cola – have a share of between 60% and 70% of a family’s purchases and make Brazil one of the This is the warning of this small publication, issued by 'Repórter Brasil' with the support of the countries with the highest level of market concentration in the world. About 500 smaller, regional companies Friedrich Ebert Foundation (FES). The result of research done for the purpose of measuring market are left to ght for the remaining market share. An example of this concentration? When consumers go to the concentration within three sectors of the Brazilian economy – consumer goods, telephony and personal hygiene sector of a commercial store and pick up a Gilette razor, a packet of Tampax tampons and a banks –, it includes the most recent data available and criticism on the issue. packet of Pampers nappies, they are buying three brands from the portfolio of American giant Procter & The aim is to provide a qualied discussion and oer the public material that can be used in training Gamble – which is also owner of Oral-B products, for the teeth. courses or even in debate rounds held by social movements, unions and other civil society organizations. Further information on this work is available on the Repórter Brasil webpage (www.reporterbrasil.org.br). UNILEVER’S POWER A housewife goes shopping in the supermarket. For the kitchen, she puts Knorr sauce, Maizena, Ades juice and Hellmann’s mayonnaise in the shopping cart. For house-cleaning, Omo and Brilhante soap. She also buys Comfort for washing clothes. In the cosmetics sector she picks up a Rexona deodorant for her Rede Brasileira pela Integração dos Povos husband, and a Lux toilet soap for her. She buys Closeup toothpaste, her daughter’s favorite, and Kibon ice cream for the son. All the brands she purchased belong to Unilever, the largest investor in Brazil’s This website has been produced with the assistance of the European Union. The contents of this website are the sole responsibility of Oxfam GB and its partners and in no way be taken to reect the views of the European Union advertising market in 2013, with R$4.5 billion invested. Big companies, big business: Good for whom? Coordination: Marcel Gomes IResearch and text: Roberto Rockmann Strips and drawings: Gilberto Maringoni Graphic design project: Marcel Matsunaka Support: Friedrich Ebert Foundation Free distribution in 2014 Repórter Brasil content can be copied and distributed, but the source. Rua Bruxelas, 169 – Sumaré. CEP 01259-020 – São Paulo (SP) must be mentioned. Contact: [email protected] = 49,1% = 55% of market share Humor: EVERYTHING IS ONE AND ONE IS EVERYTHING ELEPHONY T EVERYTHING IS LET’S CHECK ONE HELLMANNS THE GOOD THING EVERYTHING DID YOU SAY JUST ONE THING! SIX DOVE SOAP JAR, ONE OMO ABOUT OUR IS UNILEVER… THE SHOPPING VARIOUS BRANDS? BARS, THREE WASHING POWDER SOCIETY IS THAT LIST ADES BOXES, BOX, TWO KNORR WE CAN CHOOSE ONE KIBON ICE SAUCES, ONE AMONG VARIOUS CREAM… ARISCO… BRANDS… ANKS B MARKET SHARE CONCENTRATION ALSO IN BRAZILIAN COMPANIES BRF – created from the merger of Sadia and Perdigão – is the leading brand at supermarket shelves: it is in 28 of the 30 types of perishable food items analyzed by the Nielsen Institute, such as pasta, frozen meat, CONSUMER GOODS CONSUMER margarine and dairy products. It accounts for 20% of the world’s poultry trade. The company has 52.5% of the country’s pizza market and 60% of the frozen pasta market. Another Brazilian company ever-present in the Brazilian diet and in other countries is JBS, which has a range of well-known brands, including Friboi, Seara, Swift, Maturatta and Cabana Las Lilas. With this product variety and with a presence in 22 countries across the ve continents (from production platforms to oces), it serves customers in more than 150 nations. SECTORS ANALYZED SECTORS of the 45 is found on the 90% million Brazilian households. table of some BIG COMPANIES, BIG BUSINESS GOOD FOR WHOM? THE BEVERAGE MARKET VERY FEW OPTIONS IN TELEPHONY Vivo, Tim, Claro and Oi concentrate nearly 100% of the cell phone market, 76% of land lines, 60% of the What do Coca-Cola soft drink, Powerade energy drink, Del Vale juice, Crystal bottled water and Matte Leão cable television, and 75% of the broadband market. And this concentration has been increasing. tea have in common? They are brands from Coca-Cola, which in the soft drink industry alone accounts for nearly 60% of the domestic market. According to ANATEL, the four largest Brazilian companies in this industry had: 91,86% 99,56% in 2003 in 2013 MARKET SHARE QUESTIONS AND ANSWERS ARE THE ADVANCES CELL PHONES HAVE MADE STILL MODEST? There are 275.5 million cell phones all over the country, of which 77% are owned by prepaid service customers, with an average credit of five Reais 10% (Brazilian currency) per month. In other words, most mobile phone users in Brazil do not speak much and very rarely use mobile internet. SLOW BROADBAND? The average internet connection speed in Brazil is 2.5 Mbps, putting it in 70% the ranking 83rd out of 133 countries, according to a ranking made by Akamai, an internet company in the U.S. The world average is 3.8 Mbps. 10% ARE PHONE AND INTERNET RATES IN BRAZIL EXPENSIVE? WOULD YOU CARE Yes, they are. They are among the most expensive in the world. According FOR SOME CHOCOLATE? to a study by the UN International Telecommunications Union, the cost of Mondeléz, Nestlé internet services for the poorer population is 20 times higher than what it and Garoto have a represents for the richer. market share of 80% 80% TRIED TO MAKE A CALL BUT YOU HAD NO SIGNAL? Does concentration bring benefits? Even after 16 years of privatization, the Brazilian telecommunications sector is the most expensive in the world for cellular telephony and the 62nd in infrastructure, access and use THE TOP 5 BRAZILIAN BANKS of services (below Azerbaijan, Kazakhstan and Macedonia). Itaú Unibanco, Bradesco, Banco do Brasil, Caixa and Santander. These ve banks concentrate a large part of the money allocated to savings and investment funds in Brazil. In 1995, 68% of deposits were in the ve major CONCENTRATION IN THE MOBILE TELEPHONY MARKET groups; in 2012, this gure jumped to 83%. “The high degree of concentration brings a high degree of Does concentration benefit consumers? By holding potential systemic risk. Problems or bankruptcy of one of the three largest banks can destabilize the entire 2014 ranking of network operators with most complaints at PROCON-SP* a great market power, companies can make nancial system,” a new IMF study says. GENERAL POSITION TOTAL ADDRESSED agreements among them for their benefit alone. In 1º Vivo/Telefônica 23.918 85,62% In 2012, individuals and legal entities kept 2º América Móvil** 17.968 85,95% addition, consumers lose their bargaining power, by 5º SKY 7.387 86,39% depending on four companies, and this market can 7º TIM 5.405 83,31% become even more restricted: If Telefônica gains R$ 1,7 TRILLION of bank deposits, (100%) 10º Oi 3.386 67,28% control of TIM in Brazil, as the press has been saying, 21º Nextel 1.407 90,12% concentration would further increase, since the new 83% of which, that is, 39º GVT 668 73,76% group would control more than 50% of the cell *Until July 25 **owner of Claro, Net and Embratel Source: Teleco phone market in Brazil. R$ 1,4 TRILLION (83%) are in these ve banks. , BRAZIL S RANKING OF NETWORK CONCENTRATION IN BANKING INDUSTRY AND ITS COSTS OPERATOR MARKET SHARE Banks are getting bigger and bigger in Brazil. Because they are bigger and bigger, people have less freedom to choose a smaller bank by themselves, and this has impact on the day-to-day life: Competition among them for customers is smaller, loans at low rates are harder to get, and there is not much room left for bargaining when it comes to getting lower service prices. In addition, bank concentration brings about fragility in the banking system: 2º 3º Telecom Italia The bankruptcy of a large financial institution must be prevented by the government due to the size of the damage América Móvil 26,91%* 4º that might ensue. Taxpayer money can many times be used to save these financial institutions. 24.95%* 74,203** 68.776** Portugal Telecom 1º 18,53%* Telefônica 51,081** 28,78%* PROFITS RISE WITH CONCENTRATION 79,357** Market Share* The bigger banks get, the more money they make. According to data from the Regional Economic Council of the Number of cell phones (in thousands)** Federal District, profits by the five major banks in Brazil increased 354% between 2003 and 2011, while the inflation measured by the IPCA (the official index) was 55%.