BOSTON: Brand owners need to understand the divisions within Brazil's fast-growing middle class and adjust their product portfolios accordingly, if they are to fully exploit the opportunities of a market that will be worth $1.6tr by 2020.

These are the conclusions of Boston Consulting Group (BCG), whose Center for Consumer and Customer Insight developed a proprietary methodology for segmenting Brazilian households by comparing monthly income with consumption per household for more than 200 product categories.

It identified five income segments on the basis of critical shifts in household consumption. Subsister households live in poverty and make purchases only to meet their most essential needs; restricted households increase purchases of basic goods as they can afford them; emergent households have entered the middle class and trade up to higher-value products within those same categories of essential goods; established households increase spending in new product categories; and affluent households dramatically increase their consumption of luxury goods.

BCG predicted that between 2010 and 2020 some 5.3m households would move from the restricted category into the emergent segment, while an additional 1.6m would move into the established middle class and 1.9m into the affluent middle class.

Overall, families in the emergent, established and affluent segments were forecast to account for more than 85% of incremental spending over this decade.

BCG recommended that product portfolio strategies take account of these shifts with more emphasis on premium brands and innovation.

BCG also suggested that brands would need to develop a footprint in smaller cities, as those with a population of less than 500,000 would account for two thirds of incremental expenditure. Emerging consumer clusters were located in the north, north-east and south-east regions.

Particular sectors earmarked for growth included personal services, financial services and private education. Apparel, groceries, telecommunications, transport, and leisure and entertainment sectors were also expected to see a significant increase.

Data sourced from Boston Consulting Group; additional content by Warc staff