Nestlé SA plans to open a 270 million-real ($86 million) pet-food plant in Brazil, betting that higher-income Brazilians who love their pets will help it expand sales in Latin America’s largest economy.
The plant in Ribeirao Preto, in the interior of Sao Paulo state, will produce Purina wet food for dogs and cats, said Laurent Freixe, the head for Nestlé’s Americas business. The Vevey, Switzerland-based food maker sees huge growth potential in the market, he said.
“The entire growth in pet-care area is in premium products,’’ Freixe said in an interview in Sao Paulo. “Today the largest part of value creation is from premium products,’’ among Nestlé products in general, he said.
Worldwide, pet care has been one of Nestlé’s biggest sources of growth, climbing 5.5% in the first nine months of 2016, excluding acquisitions, divestments and currency shifts. The business represents about 13% of total global sales.
The Purina factory will produce 30,000 tonnes of wet pet food per year. About 75% of the output will stay in Brazil, and the rest will be exported to surrounding countries such as Argentina, Peru, Chile and Colombia, said Fernando Merce, Purina’s head for Latin America.
Brazilians have more than 132 million pets, according to the National Statistics Agency, compared with a human population of more than 200 million. The Brazilian market for pet care grew 5.7% to 19 billion reais last year, according to Abinpet, the Brazilian Association for the Pet Products Industry. While the growth was the slowest in the last six years, the sector has held up well considering the country’s economy contracted 3.5% in 2016, according to economists’ forecasts.
Pet food accounted for 68% of the sales tracked by Abinpet. Only 15% of pet food sales in Brazil today are of pricier wet food, compared with 70% in more mature markets such as the US and Japan, Merce said.
“We have a very ambitious target in terms of where we want to get to,’’ Merce said. Annual production from the new plant will provide about 50% of what Brazil’s market needs, he said.
Brazil is Nestlé’s top priority in Latin America, followed by Mexico, Freixe said. He expects Brazil to resume growth “gradually.”
The International Monetary Fund last month cut Brazil’s 2017 growth outlook to near stagnation, citing weaker-than-expected activity in the country.
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