Brazil Trucker Strike Hits Suppliers of Consumer Staples

06/20/2018 - 10h52

Multinationals operating in Brazil are counting the cost to their revenues following a nationwide trucker's strike that brought the country to a near standstill, disrupting supplies and hitting Latin America's largest economy.

Unilever, producer of Dove soap to Magnum ice cream, was the first to quantify the damage when it warned last week that revenues in its second quarter, ending June 30, would be reduced by €150m. Brazil accounts for 6 per cent of the Anglo-Dutch group's sales.

Others are expected to follow. Analysts at Goldman Sachs said: "The challenges Unilever has faced in Brazil are unlikely to be entirely company-specific and we believe a similar headwind to other [European] consumer staples companies with a meaningful exposure to Brazil is likely to include AB InBev, Ontex, Heineken and Danone."

	Pedro Ladeira/Folhapress
	Supplies were back in the shops, and trucks back on the roads. And yet, things are far from normal

Budweiser brewer AB InBev, which makes 16 per cent of its sales in Brazil, declined to comment. Rival Heineken said on Friday that although the strike had caused "major disruption" to supply chains, the blow was cushioned by having a few weeks' supply in the system. Stocks ran out in a few places but "we have also seen volumes picking up after the strike ended," Heineken said.

Coca-Cola said only that the strike, which lasted 10 days between late May and early June, had "impacted" on its Brazilian operations.

Bernstein Research predicted that among US companies operating in Brazil, cosmetics group Avon, Colgate-Palmolive, Kimberly-Clark, Procter & Gamble and PepsiCo, among others, were likely to be hardest hit.

Verônica Brito, who manages a grocery store in central São Paulo, said that during the strike, the shop was short on perishables, such as dairy products - an almost empty shelf usually packed with milk and cream cheese was testimony to that. "Some people started to get worried about the lack of goods but we managed to stay afloat," she said.

Although things have now returned to normal, Viva Lácteos, the association of Brazilian dairy producers, an industry group that represents local and global companies, including Mondelez, Danone, and Nestlé, estimates the sector lost about R$1.3bn (US$349m) following the discarding of 360m litres of milk.

João Carlos Basilio, executive president of ABIHPEC, the body that brings together the makers of personal care and hygiene products in Brazil, including Unilever, Colgate-Palmolive, Avon and Procter & Gamble, said that before the strike the industry expected sales of more than R$118bn in 2018. "Now, it is likely that we won't have real growth," he said.

The strike could cost Brazil's ailing economy more than R$15.9bn (US$ 4.2bn) , shaving 0.2 per cent off gross domestic product this year, according to the government.

Meanwhile, the strike is also likely to have hit the Brazil-based meatpacker JBS and its peer BRF, the world's biggest poultry exporter. The Brazilian animal protein association, ABPA, said the sector lost R$ 3.15bn (US$ 839m) after 167 chicken and pork abattoirs halted operations while lorry drivers blocked roads and highways.

"The good news is that the strikes seem to have abated and things [are] returning to normal, such that Unilever and Coca-Cola reiterated their organic toplines growth targets for the year . . . until the next headwind," analysts at Bernstein Research said.