Transcript Slide 1

Global Business Perspectives: Emerging Markets in Brazil
Go-to-Market
Strategy
Presented by:
Kathleen Cronin
16 September 2009
Overview
Objective: Determine feasibility of entering Brazilian market








Company & Product Overview
Why Brazil
Market & Environmental Analysis
Customer Segmentation
Recommendation
Marketing Mix (4P’s)
Implementation Plan
Financials
2
The Company: Bare Escentuals Inc.

Leading prestige cosmetic company in US

Innovator in mineral-based cosmetics

Develops, markets, and sells branded cosmetics and skincare products

Produces cosmetics with 100% all natural minerals

Appeals to public’s desire to have skincare and makeup in one product

International operations: United Kingdom, Ireland, Japan, and Germany

Retail contracts with department stores, home TV networks, spas & salons
Started: 1976 in Los Gatos, CA
2008 Sales: $560M
3,000 employees
112 privately owned boutiques
Worldwide Leader in Mineral Based Cosmetics
3
The Product Line: bareMinerals®
 Bare Escentuals’ first product
 Most popular and profitable product line among consumers
 bareMinerals was foundation that started Mineral Makeup Revolution
 Top Selling Product sold on QVC
 Bare Escentuals holds exclusive patent for extracting fine minerals
used in bareMinerals
 Complete line of loose, powder-like products that are 100% pure
bareMinerals
4
The Product

Made with crushed minerals from the earth, 100% pure bareMinerals








Ingredients include zinc oxide & titanium oxide – natural sunscreens, tints
Ground into fine powder without preservatives, talc, fragrance
Free of fillers and binders
Weightless
Provides adjustable coverable
Improves the condition of skin over time
Long Lasting - Stands up to heat and humidity
All skin types
 Especially those with skin sensitivities, allergies, scars, blemishes, rosacea and wrinkles

Foundation contains a natural SPF 15 sunscreen

Carries Skin Cancer Foundation Seal of Recommendation
Pure Natural Make-up from Earth
5
Video: Customer Testimonials
6
Why Brazil? Why Now?
Ranks as the world’s third largest market for cosmetics
– 18% growth from January to June 2009
– Color cosmetic sales expected to grow 19% over next 5 years
– Brazil to grow to be 2nd largest cosmetic market by 2011
Increase in niche cosmetic products to address
consumer demands
Very image conscious culture
– Increase in life expectancy and the desire for elderly to look their best
Sustained strength of Brazilian economy
More women in the workforce
Fastest Growing Cosmetics Market Worldwide
7
Market Potential Forecast
> 20% of
total
cosmetics
market
$5,000
Sales $R in millions
$4,500
$4,000
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
2008
2009
Colour cosmetics excluding facial (TAM)
2010
2011
Facial make-up (SAM)
2012
2013
Mineral facial make-up (SOM)
Facial Make-Up Will Consist of 20% of Total Market
8
External Analysis: Competitive Matrix
Avon Smooth Minerals
Natura
O Boticário
Better-than-bare beauty
The Company for women
Bem estar bem
“Well being well”
Sensitivity,
Harmony &
Beauty
%Mkt Share
34% Total Cosmetic Mkt Share
13% Total Mkt Share
8.3% Total Mkt Share
Strengths
• High Brand recognition
• Features: Sweat proof, skincare &
makeup in 1 product
• Strong infrastructure
• High Brazilian Brand
recognition
• Strong Distribution of
Direct Sales method
• Frequent release of new
products
• Brazilian brand
recognition
• Most successful
Franchise model in
Brazil
Weaknesses
• Broad product line; not focused on
solely launching Smooth minerals in
Brazil
• No dedicated product line
to mineral cosmetic
products
• Expensive
• Not 100% pure
mineral based
Significant Opportunity for Mineral Based Products Due to
Highly Saturated Market with Broad Range of Cosmetic Products
9
Business Environment in Brazil
 Economic Forces
 Strong economic growth
 GDP increasing at 5%
 Color cosmetics market increasing at 28% (YoY)
 Rapid rise of middle class (Class C)
 From 36% of population in 2003  52% in 2009
 Sales of personal beauty products increase during recession
 Exchange rate fluctuation risk
 Legal & Political forces




ANVISA (similar to FDA) approval required
High import taxes (approx. 70%)
Government bureaucracy
Register trademark and patents with National Institute of Industrial
Property (INPI)
10
SWOT Analysis
Strengths
• #1 mineral cosmetic product in U.S.
• U.S. Brand recognition
• Unique product characteristics
–
–
–
–
–
SPF
Mineral based
Weightless feel
Cosmetic & skin care combined
No preservatives
Weaknesses
• No Company Brand Recognition in
Brazil
• Lack of knowledge of unique product
characteristics
• High import taxes
Opportunities
• Ability to source raw materials &
manufacture in Brazil
• 18% growth rate over next 5 years
• Brazil-third largest cosmetic market
• Growing spending power of women
Threats
• Extremely saturated market
• Customer mindset is high brand
loyalty to competitors
• Complexity of ANVISA approval
• Difficulty in forming relationships with
distributors
Significant Market Potential for Mineral Cosmetics in Brazil
11
Market Penetration
Total Brazil Population (in Millions)
198.7M
A/Bclass: 16%
C: 52%
D/E:32%
Avg age
29 yrs
Total Market (All Female)
100.5M
Served Market
45.2M
Female /
A,B,C Classes/
15-64 years of age
Share of Market
7M
Female /
B,C Classes/
15-64 years of age/
Interest in Mineral
Facial Makeup
86% in Urban areas
12
Customer Segmentation of Potential Buyers in Brazil
SEGMENT
1
Bio-Diversity
Environmentally conscious
DEMOGRAPHIC
BENEFIT SOUGHT
Age: 15-45
University educated
Long-term thinkers
May already own other mineral based
products
Ecological benefits
Want to show they are green, trendy,
innovative, etc.
Want to make a political statement
Contains vitamins & minerals
2
Trend Setters
Age: 15-29
Innovative
Comfortable with new technology
Live in Cities
Clears skin of acne
Embrace new technology
Educated about new cosmetic products,
or become knowledgeable before
purchase
3
Minimalist
Age: 15+
All-in-one makeup
Desire to save money
Looking for one make-up that does all
4
Anti-Aging
Age: 30+
Reduce wrinkles
Removes dead skin
Reduce Rosacea Breakouts
5
Sensitive Skin
Age 15+
Hypo-allergenic
Clears skin of acne
bareMinerals Addresses All Customer Segments
13
Target Segment & Value Proposition
Target Segment: Urban females from 1564 years of age in Class B & C income
levels
bareMinerals is superior to traditional
cosmetic products because it provides the
unique combination of cosmetics, skin care,
and sun protection for women of all ages,
using the highest quality minerals.
14
Marketing Mix: The 4 P’s
• All in one make up
solution
• High Quality
Accessories
• R$99
• 3 x payments of
40
• Affordable for B/C
Classes
• Retail through
distributors
• Boutiques (SP,
BH, RIO)
• Online Sales
Product
Place
Pricing
Promotion
• Free Samples
• Orkut Advertising
• Social Network
Peer Marketing
• MakeOver Events
• Magazine Ads
15
Acquisition, Education, and Retention
Customer Acquisition
Customer Education
Customer Retention
• In store training
• Low priced refills
weekends
- Make-up bar at malls,
universities, and trade shows
• Formation of mineral
makeup Education
teams
• Frequent purchaser
program
• Introductory Starter Kit
offered at competitive price
• Makeup Artist Teams
• Consumer touch initiatives
- Brand building events on
• Free Sample Giveaways
Continued Consumer Education is Key to Growth
16
Implementation Timeline
Short Term
12-24 months
Long Term
2-5 years
 Customized Starter Kit with High
 Reduce costs and taxes by using
Quality Accessories
Contract Manufacturing
 Production in USA
 Online and Magazine Mass
 Promotion focus is on brand building
Advertisement
events: Makeup Sessions + Free
 Possible introduction of new product
Samples
lines and exploration of distribution
 Viral marketing through Orkut and
channels through direct sales.
other social media forums
17
Success Metrics
 Short-Term:





Repeat buyers
Conversion rate from other brands
Percentage of positive consumer feedback regarding the brand
Feedback from partners and distributors
Extent of viral marketing through Orkut and other online mediums
 Long-Term:
 Reduction in Production Cost
 ROI on Advertising blitz
 Market Share (>6%)
18
Projected Financials
Projected Income Statements for bareMinerals Brasil (2010 – 2014 in R$)
Year
2010
2011
2012
2013
2014
25,000
70,000
160,000
210,000
240,000
95
93
90
87
85
2,375,000
6,510,000
14,400,000
18,270,000
20,400,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
Production Costs
Import Taxes
750,000
562,500
2,100,000
1,575,000
4,800,000
480,000
6,300,000
630,000
7,200,000
720,000
Promotional Costs
240,000
672,000
1,536,000
2,016,000
2,304,000
3,552,500
6,347,000
8,816,000
10,946,000
12,224,000
(1,177,500)
163,000
5,584,000
7,324,000
8,176,000
-49.58%
2.50%
38.78%
40.09%
40.08%
Unit Sales
ASP
Total Revenues
Fixed Costs
Total Costs
Profit
Profit Margin
Healthy Profit Margins by 3rd Year
19
Break-Even Analysis
60,000,000
Total Revenue
Revenue / Cost (R$)
50,000,000
Fixed Costs
Total Costs
40,000,000
30,000,000
20,000,000
10,000,000
0
0
50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000
Units Sold
Break-even point reached at 207,000 units sold
and 2.88% market share
20
Summary
 Focused product satisfying multiple customer needs
 Target segment: Urban females from 15-64 years of age in
Class B and C income levels
 Fuse rapidly growing internet usage with social culture
through online distribution and marketing
 Transition to domestic production to reduce costs and
increase profit margin
 Provide Customer Experience is key to sales
Revolutionize the Brazilian Cosmetic Market Industry
21
Obrigado! Backup
22
Independent Clinical Results for bareMinerals®
In clinical studies of women between the ages of 18 and 65 with various
skin conditions who used bareMinerals for two weeks:
 76% reported that bareMinerals has corrected and improved the appearance of their skin
condition and:
 Skin dehydration was improved by 75%
 Overall condition of the skin, smoothness, elasticity and texture was improved by 49%
 Redness was reduced by 31%
 Over 80% of the women felt that bareMinerals is ideal for sensitive skin and noticed a
reduction in the appearance of flaws and imperfections.
 Over 75% of the women noticed an improvement in the appearance of their skin and saw a
reduction in redness and irritation.
 Over 70% of the women agreed that bareMinerals smoothes the appearance of fine lines
and wrinkles and that with continued use, their skin was less irritated and they had fewer
rosacea flare-ups.
 Over 60% of the women agreed that with continued use, the appearance of their skin was
improved and that they had fewer acne breakouts.
23
Break-Even Analysis
Fixed Costs (R$)
Manufacturing Costs
Promotional Costs
Import Taxes (75%)
Total Variable Costs
ASP
Units Sold
10,000,000
30
10
23
62
99
Total Revenue
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
550,000
600,000
650,000
700,000
750,000
800,000
0
4,950,000
9,900,000
14,850,000
19,800,000
24,750,000
29,700,000
34,650,000
39,600,000
44,550,000
49,500,000
54,450,000
59,400,000
64,350,000
69,300,000
74,250,000
79,200,000
Total Brasil Facial Makeup Market (2008 in R$)
Fixed Costs
Variable Costs
Total
10,000,000
0
10,000,000
3,105,000
10,000,000
6,210,000
10,000,000
8,185,000
10,000,000
10,160,000
10,000,000
12,135,000
10,000,000
14,110,000
10,000,000
16,085,000
10,000,000
18,060,000
10,000,000
20,035,000
10,000,000
22,010,000
10,000,000
23,985,000
10,000,000
25,960,000
10,000,000
27,935,000
10,000,000
29,910,000
10,000,000
31,885,000
10,000,000
33,860,000
700,486,000
Costs
Total Profit
Market Share
10,000,000
(10,000,000)
0.00%
13,105,000
(8,155,000)
0.71%
16,210,000
(6,310,000)
1.41%
18,185,000
(3,335,000)
2.12%
20,160,000
(360,000)
2.83%
22,135,000
2,615,000
3.53%
24,110,000
5,590,000
4.24%
26,085,000
8,565,000
4.95%
28,060,000
11,540,000
5.65%
30,035,000
14,515,000
6.36%
32,010,000
17,490,000
7.07%
33,985,000
20,465,000
7.77%
35,960,000
23,440,000
8.48%
37,935,000
26,415,000
9.19%
39,910,000
29,390,000
9.89%
41,885,000
32,365,000
10.60%
43,860,000
35,340,000
11.31%
Break-even point reached at 207,000 units sold and 2.88%
market share
24
2013 Market Size Forecast
Market Potential Forecast 2013
Facial Make-up Market
($R 913.1)
Mineral Makeup
($R 55M)
Colour Cosmetics
Market (R$4,411.2M)
TAM
SAM
SOM
Facial Makeup consists of 20% of Total Market
25
External Analysis: Porter’s 5 Forces
Threat of new
Entrants
Bargaining power
of suppliers
Low- Raw materials
available through many
commodity suppliers
High- Mineral makeup is
the new growth area in
today’s cosmetics
industry
Competitive Rivalry
High- there are multiple
competitors that are large
multi-national companies
and high numbers of local
competitors
Bargaining power
of buyers
Medium- Price is set but
Consumers have many
brands from which to choose
Threat of substitutes
HighLack of educated market
to understand benefits of
mineral makeup
26