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Final Brazil

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Project I completed in college regarding a hypothetical company trying to expand internationally.

Project I completed in college regarding a hypothetical company trying to expand internationally.


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  • 1. GumYum, Inc.International Business 200 Ian Harkavy
  • 2. GumYum, Inc. Background Situation Analysis  Strategic Advantages; Economic and Cultural Factors Market analysis  Market Size; Market Potential; and Competition Potential Entry Strategy Implementation plan  Brazilian Preferences  Product, Place, Price, Promotion Breakeven and S.W.O.T. analysis Future outlook1
  • 3. GumYum, Inc. Largest country in South America Mostly tropical climate, though temperate in the South Leading producer of agricultural products Recurring droughts in the Northeast with occasional floods and frost in the South Population: 203, 429, 7732
  • 4. GumYum, Inc. Multiple borders 7,491 miles of coastline 8,233 square miles of renewable water resources 1.134% population growth Low cost of production Competitive advantage for sugar production 3
  • 5. GumYum, Inc. Steadily improving macroeconomic factors by building up foreign reserves GDP (2010): $2.194 trillion  GDP growth rate (2010): 7.5%  GDP per capita: $10,900 Labor force of 103.6 million  7% unemployment rate 26% of population below poverty line $199.7 billion exports $187.7 billion imports 1.77 Brazilian Reals (BRL)= 1 USD 4
  • 6. GumYum, Inc. Languages: Portuguese 88.6% literacy rate 87% of total population is urbanized 67% of population between the ages of 15-64 5
  • 7. GumYum, Inc. Primary market: males and females between the ages of 13-50 Food retailing accounts for around 30% of total retail sales, approaching $50 billion in Brazil alone Population of over 200 million  Poorest 20% of Brazilians account for only 2% of income  Wealthiest 2.5% earn over 30% of all income Brazil is the world’s third largest market for sweets Confectionary value sales have risen 46% between 2004-2009 Gum sales:  2008- $1,286,000,000  2009- $1,207,000,000  2010- $1,460,000,0006
  • 8. GumYum, Inc.7
  • 9. GumYum, Inc.8
  • 10. GumYum, Inc. Current economic stability and lower inflation Surging sales among poorest 50% of 2008-2013 population Benefits from free trade agreements Huge potential for growth and variation 2008 2009 2010 2011 2012 2013 to appeal to many9 customers
  • 11. GumYum, Inc. Hershey Nestle Brasil (10% market share)  Especialidades Mentex, Nestle Classic, Alpino, Chikito, Galak, Nescau, Seducao Kopenhagen Cadbury Adams (74.9% market share)  Trident, Ping Pong Ploc, Clorets, Plets  Leader in the gum industry Arcor Group  Over 50 brands across product categories in Brazil  Sambapito, Big Big, Poosh, Samba, Blow Up and Tortuguita10
  • 12. GumYum, Inc. Point-of-purchase merchandising Awareness of health-conscious consumer preferences Mass production possible in the gum industry Santos Port Introduce new flavors into the core flavors market  “Burst and fade” effect  Ex: Pineapple, banana Majority of growth in the Brazilian market is due to the increase of sales of sugar-free chewing gum  One of the fastest growing subsectors in the whole confectionary industry  Consumers are heavily influenced by the benefits to dental health that sugar-free gum can provide  A growing number of products exploit this considerably 11
  • 13. GumYum, Inc. Contract with independent distributors and wholesalers to handle logistics and supply Electronic-data-interchange system Use transportation company with the longest and strongest presence in each region  Lower costs and greater speed  More sophisticated control of distribution Maintain the highest green and eco-friendly standards Have salespeople work in tandem with the distributors worldwide Colón port of Panama 12
  • 14. GumYum, Inc.13
  • 15. GumYum, Inc.  Geocentric staffing approach  Eliminates cultural barriers  Builds a strong, unified culture  Uses HR efficiently14
  • 16. GumYum, Inc.  Make it last long with full flavor to remain competitive in the market  Wrapper games  Eco-friendly wrapper and packaging  Offer different flavors and sizes  Fruity and minty varieties  Whitening and cavity protection  Calorie counters15
  • 17. GumYum, Inc. Free samples Bonus packs Rebate promotions Advertising:  Sporting events  Magazines  Commercials  Billboards Celebrity endorsements (Gisele Bundchen, Kaka) 16
  • 18. GumYum, Inc. Partner with Wal-Marts and other large retailers/grocery stores nationwide to sell at registers Gas stations and mini-marts Newspaper kiosks Padarias (hybrid bakeries) Centralize production in major cities  Salvador  Sao Paulo  Rio de Janeiro  Brasilia17
  • 19. GumYum, Inc.  Convert Brazilian reals to US dollars  1 USD = 1.5630 BRL 1 BRL = 0.6398 USD  $0.99 pack of gum = 1.55 BRL18
  • 20. GumYum, Inc. Packaging to combat the hot climate Majority of growth in the Brazilian market is due to the increase of sales of sugar-free chewing gum  One of the fastest growing subsectors in the whole confectionary industry  Consumers are heavily influenced by the benefits to dental health that sugar- free gum can provide  A growing number of products exploit this considerably Curb your appetite by chewing gum 19
  • 21. GumYum, Inc. ≈ $6,000,000 in capital for plant Cost of labor per year for 500 employees:  500 x $8,230 (GDP per capita) ≈ $4,115,000 Cost per pack of gum ≈ $0.03 Cost to export to the rest of South America and/or Central America: $860 per pallet (7,500 individual packs or 625 cases containing 12 packs each)  ≈ $0.11 per pack for shipping, $1.32 per case Sell pack of gum for the equivalence of $0.99 worldwide  Mass order quantity discounts  Intra-national shipping discounts 20
  • 22. GumYum, Inc. YEAR 1 YEAR 2 Estimated market share = 2% Estimated market share = 5% Sales: 10.27M at $0.99/unit Sales: 25.67M at $0.99/unit 10,167,300 25,413,300 Fixed Cost Fixed Cost Plant: $6M Depr: $0.6M Operation: $0.1M Operation: $0.1M Labor: $4.115M Labor: $4.115M Variable Cost Variable Cost Package: $0.03/unit Package: $0.03/unit Shipping: $0.11/unit Shipping: $0.11/unit Total Cost Total Cost (11,652,800) (8,408,800) Net Income before Tax Net Income before Tax (1,485,500) 17,004,50021 We will roughly break even on year 2
  • 23. GumYum, Inc. Strengths Weaknesses •Imports and exports are booming as record •Well-established and reputable competition numbers of exporters are gaining EU licenses already in place •Brazil’s huge population offers substantial •Income inequality, with consumption patterns return potential varying significantly according to salary •Brazil’s large market makes it an attractive •Regional cultural variations limit the extent to target for international retailers which producers can rely on a single marketing strategy for the entire Brazilian market •The convenience store formats are set to experience rapid growth Opportunities Threats •Trade officials are encouraging exports to •Economic stability cannot be guaranteed over the countries other than the US , resulting in longer term significantly higher total export volumes •High interest rates place constraints on company •Brazil has more unused commercially viable investment plans land than any other country in the world, •High inflation would have severe consequences on potential for incumbent as well as new producers this market, because price-stretched consumers would cut back on non-essential purchases •Rising production costs22
  • 24. GumYum, Inc. The Brazilian gum confectionary market grew by $17.3 million in 2009, to reach a value of $508.3 million Between 2010-2015, value sales are forecast to increase by a further 41%  Gradual trend towards the purchase of premium confectionary products, particularly among Brazil’s growing middle-class population By 2015, the market is forecasted to reach a value of $683.5 million, an increase of 25.8% Between 2005-2009, per capita food consumption increased by 49%  In the next 5 years, it is expected to grow by almost 54%23
  • 25. 24
  • 26. GumYum, Inc. http://www.alibaba.com/countrysearch/BR/gum.html http://www.datamonitor.com/store/Product/gum_in_the_bric_brazil_russia_india_chi na_countries_market_overview_and_forecasts_to_2014?productid=DBCM7234 http://www.21food.com/product/search_keys-Chewing+Gum_c-Brazil_cat- 101503.html http://store.mintel.com/gum-confectionery-in-brazil-2010-market-sizes.html http://www.marketresearch.com/product/display.asp?productid=2850847 https://www.cia.gov/library/publications/the-world-factbook/geos/br.html http://www.obamonteverde.com.br/ http://www.brazil-factoid.com/doing-business-in-brazil.html http://www.brazil-factoid.com/sao-paolo-contribution-to-brazils-design-as-an- emerging-superpower.html 25