BW Confidential - Issue #16 - November/December 2013 - (Page 89)

Foreign appeal An analysis of how international companies can get a better grip on the market by Renata Ashcar F oreign brands often talk about the opportunity and potential in Brazil, but it is not all that easy doing business there. In addition to mountains of red tape, there is the all-encompassing ‘Brazil cost’ (due to high taxes). For Frank Lund, founder and general director of distributor Frajo, the cost is there for everyone, and as long as Brazil remains inefficient in terms of infrastructure, has an over-regulated business environment and a complex tax system, almost every company will suffer. One main problem is the country’s high taxes and the resulting cost of beauty products, which can be two to three times more expensive than in their country of origin. To get around this problem, more companies are looking at local production. This eliminates import duties and means that companies can use the savings to build their brand and expand distribution. Coty, for example, has begun producing the Rio Glow fragrance from its Jennifer Lopez brand locally, in partnership with direct-sales company Jequiti, thereby taking advantage of lower taxes. Another example is the Everlast fragrance (whose license is held by UK-based company IBML Group), which was developed locally by distributor Bright Star. Brazil was one of the best-performing markets for Everlast, which prompted IBML Group to begin local production of its fragrances in Brazil. The results of the collaboration have been positive and some of the locally produced products may even be exported to other markets. Spanish Group Puig also locally produced fragrances from Brazilian actress Juliana Paes. To get around the tax issue, some companies have sought to come up s More companies are launching fragrances tailored to Brazil, such as Kenzo’s Flower Legere and Puig’s introduction of a scent by Brazilian actress Juliana Paes with products with a lighter fragrance concentration, as levies on these items are lower. However, for general director of LVMH fragrance brands Brazil Renato Rabbat, this strategy has its limits. “If taxes were lowered the country would be looked at with new eyes, but today there is no volume to justify the development of Brazil by international brands, even with some successful limitededition lower concentration fragrances, such as Kenzo Flower Legere,” he comments. Adapting to local tastes Some analysts say that foreign brands need to better adapt their products to the tastes of Brazilian consumers. Companies such as Puig with Carolina Herrera and Paco Rabanne have done this, as has P&G with its Gabriela Sabatini brand. Puig for example, launched a special version of Black XS, Paco November-December 2013 - N°16 - BW Confidential Rabanne’s body Spray for a Rock’n Rio event that took place in Rio De Janeiro this year, and has introduced new brands, such as a scent by Brazilian actress Juliana Paes, n n n Brazil imported fragrance bestsellers 2012 Rank Women’s Men’s 1 212 (Carolina Herrera) 212 Men (Carolina Herrera) 2 J’Adore (Dior) Azzaro Homme (Azzaro) 3 Flower By Kenzo (Kenzo) Ferrari Black (Ferrari) 4 CH (Carolina Herrera) 1 Million (Paco Rabanne) 5 Lady Million (Paco Rabanne) Polo (Ralph Lauren) Source: Industry sources 89 Market watch: Brazil International brand strategies

Table of Contents for the Digital Edition of BW Confidential - Issue #16 - November/December 2013

Cover
Comment
Contents
Update
Brand & retail news recap
Companies on the move
Take note Market facts, figures & trends
Best of BW Highlights from our e-publication
Launches The latest in fragrance, skincare & make-up
Interview Coty ceo Michele Scannavini
Insight: Fragrance
Category overview
Regional breakdown
Launch strategies
The niche market
Retailer initiatives
Launch roundup
Strategy M&A analysis
Retail
The store of the future
Creative strategies
Store concepts
Digital Innovation strategies
Market watch: Brazil
Country overview
Natura & Grupo Boticário
International brand strategies
Prestige retailing
Trendwatch Upcoming innovation
Travel retail
Channel analysis
The CIVETs
Digital strategies
Interview: L’Oréal Luxe md travel retail worldwide Barbara Lavernos
Interview: WDFG global head of beauty Antonin Carreau
Radar Up-and-coming brands
Emerging markets Company profile: Shanghai Jahwa
Packaging
Luxury packs in the BRICs
Luxury innovations
Industry viewpoint
Last word Euromonitor International senior analyst beauty and personal care Oru Mohiuddin

BW Confidential - Issue #16 - November/December 2013