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International marketing plan for cosmetic products launch in Brazil

  1. 1. 2015 International Marketing Plan for Cosmetic Products Country: Brazil
  2. 2. P a g e 1 | 94 A Project Report On Launching of Cosmetic product In Brazil For In partial fulfillment for the award of the degree of PGPGBM Subject: International Marketing Batch: 2014-16 Submitted to: Submitted by: Dr.Jitendra Sharma Mahesh Kumar Meena (M220) Zuber Momin (M002) Dipa Nasare (M239)
  3. 3. P a g e 2 | 94 Acknowledgement We would like to take the opportunity to express my deep gratitude to all those who have been the part of this report in some way or the other. First and foremost, we would like to thank Dazzeler manager Mr. Bhargav Joshi (Gujarat Regional head, Marketing), for his valuable guidance, and for allowing me to work on the topic that developed my marketing skills, for getting knowledge for my career growth. We are thankful to our faculty guide Mr. Jitandra Sharma for his encouragement and timely suggestions which helped me greatly during the course of this project. Last but not least: We would acknowledge my all those in college, Xcellon Business School who helped us make this project reality. Mahesh Kumar Meena Zuber Momin Dipa Nasare
  4. 4. P a g e 3 | 94 Declaration I hereby declare that the report which is being present here is my own work carried out during my PGPGBM program. For the partial fulfillment for the award of the degree of the PGPGM and has not been presented elsewhere for the completion of any other course. Date: 13 December 2015 Place: Ahmedabad Mahesh Kumar Meena Zuber Momin Dipa Nasare (PGPGBM) Xcellon Institute-School of Business
  5. 5. P a g e 4 | 94 Executive Summary Cosmetic Industry is very innovation and competitive industry where product innovation and brand image is the key to success. The purpose of this report is to fulfilled partial requirement of the international marketing project. It includes detail study of the market along with it marketing strategies to acquire space in the market. Chapter 1: Country Analysis- It Gives detail about country’s economic condition. The performance of any country can be known by its GDP, per capital income, Balance of payment, Rank amongst all the countries, Import Export, most traded countries, Government policies, public finance, Investment etc. Chapter 2: Product & Company Analysis- It focuses on cosmetic industry in Brazil. The current trend prevailing in the market, consumer taste and preferences regarding product and details about selected country such as SWOT analysis, 4p’s and product offered in the current market. Chapter 3: Industry & Competitors Analysis- This chapter covers international consumer taste and preferences in cosmetic industry, demand and supply of the preferred product, major players existing in the market, porter five force model, Chapter 4: Introduction of the company in Brazil- it gives detail about different strategies to be followed to break the current market, it includes target segmentation organization structure, financial plan and marketing plan.
  6. 6. P a g e 5 | 94 Table of Content: Particulars Page No: Chap: 1 Country Analysis 6 1.1 Introduction 7 1.2 Brazil’s Geographic Location 8 1.3 States of Brazil 9 1.4 Economic environment 11 1.5 Structure of Brazil economy 19 1.6 Brazil in the global economy 21 1.7 Impact of Doha round Agreement 24 1.8 Beauty & personal care in Brazil 27 1.9 Mass dominates Brazilian Beauty Marketing 35 1.10 Future of Brazilian Market 36 Chap: 2 Company Analysis 43 2.1 Introduction of Dazller Company 44 2.2 Dazller Products 47 2.3 SWOT analysis 59 2.4 Competitors 61 Chap: 3 Competitor’s Analysis 64 3.1 Unilever 65 3.2 Nature 77 3.3 P & G 80 Chap: 4 Introduction of Company in Brazil 86 4.1 Entry strategy 87 4.2 Financial market 88 4.3 Organizational Structure 90 4.4 Shipping Route 91 4.5 Distribution Chanel 92 4.6 Advertisement & Other Strategy 92
  7. 7. P a g e 6 | 94 Chapter 1: Country Analysis
  8. 8. P a g e 7 | 94 1.1. Introduction Population: 198.3 million GDP (PPP): $2.4 trillion 2.3% growth in 2013 5-year compound annual growth 2.6% $12,221 per capita Unemployment: 6.6% Inflation (CPI): 6.2% FDI Inflow: $64.0 billion Public Debt: 66.3% of GDP Brazil’s economic growth rate has been positive for the past eight years, after two decades of setbacks and extreme volatility. The country has once again been growing—for a sustained period—at rates that exceed its population growth, with average gross domestic product (GDP) growth per capita averaging 1.63 percent from 2000 to 2007. This exceeds average per capita GDP growth of 0.83 percent from 1980 to 1989 and 0.28 percent from 1990 to 1999, although it still falls well short of the 5.92 percent per capita growth rate from 1970 to 1979. Brazil’s engagement with the global economy has played a largely positive, if secondary, role in this recent economic progress, with a positive external balance of 1.5 percent in 2007 and 2.9 percent in 2006.1 Exports grew by 150 percent from 2000 to 2006, while imports grew by 62.5 percent during the same period (United Nations Statistics Division 2008). Brazil has also emerged as a leading actor in twenty-first- century global economic policy discussions. With regard to trade policy, it heads the Group of Twenty (G-20), a coalition of developing countries united to press their interests in negotiations at the World Trade Organization (WTO).2 It also plays a leading role in regional integration with its neighbors in the Mercado Comun del Cono Sur (Southern Cone Common Market, known as Mercosur) and has expressed interest in an economic alliance with India and South Africa known as the India–Brazil–South Africa Dialogue Forum (IBSA). In the Western Hemisphere, it almost single-handedly blocked agreement on the Free Trade Area of the Americas, due to its conviction that the proposed pact was unbalanced. Brazil is also an important actor in a different G-20, in this case the group of leading economies from both developed and developing regions.3 In that forum, it has urged a greater role for emerging powers in international macroeconomic policy making. The strides in overall economic growth have been accompanied by some progress in job creation, income distribution, and poverty alleviation, although many challenges remain. Unemployment has fallen since 2003 but still stood at 8.2 percent in 2007. Slightly over half of the population is employed informally.4 After years of slow improvements (and a rapid fall during the inflation spike of 2003), labor earnings rose at a rapid annual rate of 3.8 percent from mid-2005 through 2007. Nonetheless, average earnings in 2007 of R$960 per month were lower than the level of 1994. The share of the population living in poverty declined from 37.5 percent in 1999 to 33.3 percent in 2006, while the share living in extreme poverty declined from 12.9 to 8 percent during the same period.5 It appears that this progress was a result of direct cash transfers
  9. 9. P a g e 8 | 94 from the government to poor households (primarily the Bolsa Família program) as well as the effects of increases in the minimum wage, which boosted incomes among low- wage workers.6 Inequality has also decreased somewhat. Between 1995 and 2004, the Gini coefficient decreased from 0.599 to 0.571, with most of the reduction attributable to improvement in the distribution of labor income (Soares and others 2007). Given the depth of Brazil’s employment and poverty-alleviation challenges, and in the context of a global economic downturn that may reduce externally driven growth, it is clear that Brazilian economic and social policy makers face difficult tasks. New or additional policies, including international economic policies, may be needed to prevent unemployment from rising and to address the continuing deficits in wages and poverty. This study seeks to contribute to the knowledge base that the Brazilian government and public can draw on for evaluating international economic policy choices in the current context. The study is the result of a collaboration between the Carnegie Endowment for International Peace, a global think tank, the Employment Sector of the International Labour Organization, a specialized agency of the United Nations, and the United Nations. In this study, the Carnegie Endowment builds on its work in recent years in producing path-breaking studies that assess the likely impact of trade policies and other international economic changes on employment and livelihoods in developing countries. The study is also meant to complement ongoing work by the International Labour Organization to assist policy makers in addressing any negative consequences of trade and preparing enterprises and workers to take advantage of potential opportunities. The present study uses computable general equilibrium models to simulate the impact of different policy choices and international developments on the overall economic growth of the Brazilian economy, as well as on sectoral restructuring, labor demand, labor income, and differing regional effects. We use a global trade model and a national model of the Brazilian economy to explore the impact of a potential Doha Development Round agreement in the WTO and of potential South–South trade agreements. We also employ 1.2. Brazil Geographic Location Brazil lies on the continent of South America. It is comprised of 26 states and a Federal District, which has a population of 2, 557,158 people. Brazil is bordered to the east by the Atlantic Ocean, and to the north, west, and south by ten other countries. Brazil is the biggest country in South America and it is the fifth largest country in the world. In addition, it has the fifth largest population in the world with 180 million people. Most Brazilians live in large cities in the southeast part of the country. The capital of Brazil is Brasília, which is a modern new city where elected federal officials live and work. Many different people have settled in Brazil through the years. The first people to settle there were migrants from North America several thousand years ago. They are known as indigenous people or Amerindians. Brazil was conquered in the 1500s by invaders from Portugal. That is the reason why Brazil’s official language is Portuguese.
  10. 10. P a g e 9 | 94 1.3. States of Brazil and its Federal District
  11. 11. P a g e 10 | 94 Brazil’s States, Capitals, Area, and 2008 Population by State Brazil’s 26 states differ from one another in terms of area, geographic location, and population. Most Brazilians live in big cities. Brazil has 13 cities with a population of more than a million people. The three biggest cities in Brazil are São Paulo, Rio de Janeiro, and Belo Horizonte. State Capital Area in Km. Sq. Population Pará Belém 1, 247, 689, 515 7, 321, 493 Maranhão São Luís 331, 983, 293 6, 305, 539 Piauí Teresina 251, 529, 186 3, 119, 697 Ceará Fortaleza 148, 825, 602 8, 450, 527 Rio Grande do Norte Natal 52, 796, 791 3, 016, 430 Paraíba João Pessoa 56, 439, 838 3, 742, 607 Pernambuco Recife 98, 311, 616 8, 734, 194 Alagoas Maceió 27, 767, 557 3, 127, 557 Sergipe Sergipe 21, 910, 348 1, 199, 374 Amapá Macapá 142, 814, 585 613, 164 Tocantins Palmas 277, 620, 914 1, 280, 509 Acre Rio Branco 152, 581, 388 680, 073 Amazonas Manaus 1, 570, 745, 680 3, 341, 096 RondÔnia Porto Velho 237, 576, 167 1, 493, 566 Goiás Goiânia 340, 086, 698 5, 844, 996 Rio Grande do Sul Porto Alegre 281, 748, 538 10, 855, 214 Santa Catarina Florianópolis 95, 346, 181 6, 052, 587 Paraná Curitiba 199, 314, 850 10, 590, 169 São Paulo São Paulo 248, 209, 426 41, 011, 635 Mato Grosso do Sul Campo Grande 357, 124, 962 2, 336, 058 Mato Grosso Cuiabá 903, 357, 908 2, 957, 732 Minas Gerais Belo Horizonte 586, 528, 293 19, 850, 072 Rio de Janeiro Rio de Janeiro 43, 696, 054 15, 872, 362 Espírito Santo Victória 46, 077, 519 3, 453, 648 Bahia Salvador 564, 692, 669 14, 502, 575
  12. 12. P a g e 11 | 94 1.4. ECONOMIC ENVIRONMENT (1) OVERVIEW 1. The Brazilian economy grew at a fast pace during 2003-07, triggered by strong domestic demand and a favourable external environment. Growth reached an annual average rate of 4.5% in the 2004-07 period, and an annualized rate of 6% in the first half of 2008; however, it will have slowed subsequently, reflecting weaker global activity. Macroeconomic policies have continued to focus on achieving primary fiscal balance goals and inflation targets. The inflation rate decreased until 2007 but picked up to 6.25% in the twelve months to September 2008. Despite posting primary surplus and reduced interest payments, the overall consolidated public sector has remained in deficit (an estimated 2.1% of GDP in the first half of 2008). Brazil maintains a floating exchange rate regime, within which the real appreciated by over 60% in nominal terms between 2004 and mid 2008. Foreign exchange regulations have been liberalized but without full convertibility of the Real. 2. Brazilian exports performed strongly between 2003 and 2007, increasing at a nominal average annual rate of almost 22% in U.S. dollars terms. Imports grew even faster, at a nominal average rate of some 26% during the same period. Brazil posted a surplus in the current account of the balance of payments throughout 2003-07, although a deficit was recorded in the first half of 2008. Brazil's export structure remained relatively stable over the period under review; Brazil is an important exporter of both manufactured and primary products, and has benefitted from strong global demand and high prices for commodities. Manufactures remained the largest importing sector, accounting for almost 71% of total imports in 2007. The European Communities continued to be the main destination for Brazil's merchandise exports, although its share of total exports declined. The share of the United States also decreased, while those of Argentina and China rose. The shares of imports from Asia and Africa increased during the period, while those of the United States and Europe declined. However, imports from all these sources increased in value terms. (2) OUTPUT AND EMPLOYMENT 3. Brazil's GDP per capita was some US$7,000 in 2007. Gross National Income (GNI) per capita, in U.S. dollars, as measured by the World Bank's Atlas method, was US$5,910 in 2007; GNI per capita in terms of purchasing power was US$9,370 in the same year.1 The UNDP has classified Brazil as having a high level of human development, ranking it in 70th place out of 177 countries, based on a range of indicators. Despite important advances, resulting in improved living conditions, income inequality and poverty levels remain high. The World Bank estimates that some 22% of the population lived below the national poverty line in 2007 (less than US$2 a day). The OECD considers it essential to reduce widespread informality and tax evasion in order to improve growth performance through better use of labour and to alleviate income disparities.
  13. 13. P a g e 12 | 94 4. After expanding by just 1.1% in 2003, the Brazilian economy entered a period of rapid growth in 2004, with an annual average growth rate of 4.5% during 2004-07 (Table I.1).2 Growth during the period was supported by a positive international environment and strong domestic demand. Fiscal and monetary discipline allowed a reduction in interest rates. There was also an increase in the potential growth rate during the period under review, which has been estimated at 4%. 5. The contribution of domestic demand to GDP growth has been strong, particularly since 2006. Private consumption growth has been stronger than GDP growth since 2004, supported by increasing wages and facilitated access to credit. Consumer spending has been gaining share of GDP since 2004, accounting for 60.9% in 2007. After a period of weakness in 2003, gross fixed capital formation gathered strength in 2004 as interest rates fell, credit conditions and expectations about the economy improved, and private consumption increased. The share of gross fixed capital formation in GDP consequently rose, while the savings/GDP ratio remained relatively stable BASIC ECONOMIC INDICATORS, 2003-08 2003 2004 2005 2006 2007 2008a Current GDP (R$ million) 1,700. 0 1,941. 5 2,147. 2 2,332. 9 2,558. 8 2,766 .0 Current GDP (US$ billion) 556.3 663.8 882.4 1,072. 0 1,313. 9 1,536 .7 Per capita GDP (US$) 2,789. 3 3,660. 2 4,820. 4 5,744. 1 6,983. 6 8,003 .5 Real GDP, growth rate (%) 1.1 5.7 3.2 3.8 5.4 6.0 Real GDP per capita, growth rate (%) -0.3 4.2 1.7 2.3 4.0 3.5 Domestic demand, contribution to growth (%) 0.1 5.1 2.8 4.6 6.4 .. Private consumption, growth rate (%) -0.8 3.8 4.5 4.6 6.5 6.7 Public consumption , growth rate (%) 1.2 4.1 2.3 2.8 3.1 5.6 Gross investment, growth rateb (%) 1.7 11.8 -2.5 11.1 13.2 19.0 Gross fixed capital formation, growth rate (%) -4.6 9.1 3.6 10.0 13.4 15.7 Exports of goods and services, growth rate (%) 10.4 15.3 9.3 4.7 6.6 -1.6 Imports of goods and services, growth rate (%) -1.6 13.3 8.5 18.3 20.7 22.4
  14. 14. P a g e 13 | 94 2003 2004 2005 2006 2007 2008a Foreign balance, contribution to growth (%) 1.7 0.7 0.5 -1.4 -1.4 -2.5 Exports of goods and services, contribution to growth (%) 1.5 2.3 1.5 0.7 1.0 0.2 Imports of goods and services, contribution to growth (%) 0.2 -1.6 -1.1 -2.1 -2.4 -2.8 GDP by type of expenditure (% of current GDP) Private consumption 61.9 59.8 60.3 60.4 60.9 60.9 Government consumption 19.4 19.2 19.9 19.8 19.7 18.7 Gross fixed capital formation 15.3 16.1 15.9 16.5 17.6 18.6 Change in inventories 0.5 1.0 0.3 0.4 0.4 2.0 Exports of goods and services 15.0 16.4 15.1 14.6 13.9 12.7 Imports of goods and services 12.1 12.5 11.5 11.7 12.3 12.9 Memo items Industrial production (% change) 0.1 8.3 3.1 2.8 6.0 6.3 Gross savings c (% of GDP) 16.0 18.5 17.3 17.7 17.6 17.9 Population (million) 179.0 181.6 184.2 186.8 189.3 192.0 Unemployment rate 12.3 11.5 9.8 10.0 9.3 7.8 Unit labour costs (in R$, 2002=100) 94.3 101.5 107.3 122.0 133.7 133.6 GDP deflator 13.7 8.0 7.2 4.7 4.1 4.0 Source: WTO, based on information provided by the Central Bank of Brazil and by the IBGE.
  15. 15. P a g e 14 | 94 6. Exports of goods and services performed well during most of the period under review. Growth during the 2003-05 received a positive contribution from net exports, but the appreciation of the real and strong demand for imports turned this contribution negative since 2006. Exports of goods and services increased at an average annual rate of 9.2% between 2003 and 2007, while imports grew at an average annual rate of 11.5%. Exports and imports of goods and services as a proportion of GDP decreased slightly from 27.1% in 2003 to 26.2% in 2007. 7. Reflecting strong growth, the unemployment rate declined considerably during the period under review, from 12.3% in 2003, to 9.3% in 2007 and 7.8% in mid 2008. Employment growth during the period was accompanied by an increase in real wages, reflecting a nominal average wage increase of over 33% between 2003 and 2007.3 Unit labour costs increased by over 40% between 2003 and 2007. Productivity growth was 4.1% in the twelve months to December 2007, up from 2.3% in December 2006. 8. The sectoral composition of the Brazilian economy remained broadly stable over 2003-08, although traditional activities such as agriculture have been subject to cyclical variations . Services continue to generate the largest share of GDP.
  16. 16. P a g e 15 | 94 SECTORAL DATA ON GDP AND EMPLOYMENT 2003 2004 2005 2006 2007 2008 a Structure of GDP (% of current GDP at factor cost, including imputed bank service charges) Agriculture, hunting, forestry and fishing 7.4 6.9 5.7 5.1 5.5 7.2 Industry 27.9 30.1 29.3 30.1 28.7 27.0 Manufacturing 15.6 19.0 18.1 18.3 17.8 15.7 Electricity and water 3.5 3.8 3.8 4.1 3.7 3.3 Construction 4.7 5.1 4.9 5.1 5.3 5.4 Mining and quarrying (including petroleum) 1.7 1.9 2.4 2.6 2.0 2.5 Services (total) 64.7 62.9 65.0 64.7 65.8 65.8 Distributive trade (including restaurants and hotels) 10.6 11.1 11.2 10.8 11.0 10.9 Transport 4.6 4.7 5.0 5.2 5.5 5.6 Communications 3.6 3.8 4.0 3.8 3.9 3.6 Financial and insurance services 7.1 5.8 7.1 7.0 7.6 8.3 Real estate 9.6 9.1 9.0 8.7 8.8 8.6 Government services 15.1 14.7 15.0 14.7 15.0 14.7 Other services 14.0 13.9 13.8 14.2 14.0 14.0 GDP at basic prices 100.0 100.0 100.0 100.0 100.0 100.0 Structure of employment (% of the total) Agriculture, hunting, forestry and fishing 4.1 4.2 3.9 3.9 3.7 .. Mining and quarrying (including petroleum) 0.4 0.5 0.5 0.5 0.5 .. Manufacturing 18.1 18.9 18.5 18.8 18.8 ..
  17. 17. P a g e 16 | 94 Electricity and water 1.1 1.0 1.0 1.0 1.0 .. Construction 3.6 3.6 3.7 4.0 4.2 .. Services (total) 72.8 71.9 72.4 71.9 71.8 .. Distributive trade (including restaurants and hotels) 17.3 17.8 18.1 18.0 18.1 .. Government services 23.7 22.6 22.7 22.0 20.9 .. Other services 31.8 31.5 31.6 31.9 32.8 .. (3) FISCAL POLICY 9. Fiscal policy is implemented under the umbrella of the Fiscal Responsibility Law of 2000 (Supplementary Law No. 101 of 4 May 2000), which sets the rules for the management of public resources and establishes limits to federal, regional, and local government expenditure.4 Further elements of fiscal reform were set out in the Multi- Year Plan 2004-07, including proposals to review taxation and the pension system. 10. The Government seeks to maintain fiscal discipline by setting annual targets for the primary surplus of the public sector. Targets are set in monetary terms taking into account existing macroeconomic conditions as well as medium-term prospects and debt dynamics. Targets were relatively stable as a share of GDP during most of 2003-07, a target equivalent to 4.25% of GDP was maintained for the primary surplus of the non- financial consolidated public sector. This goal was set at R$95.9 billion for 2007, which due to an upward revision in the calculation of GDP, was equivalent to 3.8% of GDP. In 2008, the primary surplus target reached R$105.1 billion, equivalent to 3.8% of forecasted GDP, but the authorities indicated that the Government will save an additional 0.5% of GDP, and the primary surplus will reach 4.3% of GDP. The primary surplus target for 2009 was set at R$118.3 billion, equivalent to 3.8% of the forecasted GDP. 11. The Central Government primary balance (Federal Government plus the Central Bank) was in surplus throughout the period under review (Table I.3). Strong revenue growth has resulted in primary fiscal surpluses, which have somewhat exceeded primary targets, while current spending has also grown rapidly. In 2007, the public sector's primary surplus was equivalent to 4% of GDP, compared with a 3.8% target. Fiscal accounts improved during 2008, when the public sector posted an estimated primary surplus of 4.6% of GDP during the twelve-month period to September 2008, above the revised target for the year. Despite a decrease in the interest payments burden since 2005, to 4.7% of GDP in 2007 (Table I.3), primary surpluses have not been sufficient to cover them completely, resulting in an overall Central Government deficit of 2.2% of GDP in 2007, and a consolidated public sector deficit of 2.3% of GDP.
  18. 18. P a g e 17 | 94 12. Considering that expenditure has been growing at a faster pace than revenue, and while, recognizing Brazil's progress on the fiscal front, in its 2008 Article IV consultation with Brazil, the IMF recommended containing public spending growth while protecting priority areas to help alleviate the burden of adjustment on monetary policy. The IMF also recommended, in the context of heightened uncertainty about future revenue, a cautious approach to revenue and expenditure projections for 2009, to minimize risks to the fiscal outlook.5 2003 2004 2005 2006 2007 2008a Revenue 21.2 21.8 22.8 23.3 24.2 23.9 Treasury 15.2 14.8 15.5 15.4 16.3 15.6 Tax on industrial products (IPI) 1.1 1.1 1.1 1.2 1.2 1.3 Earmarked social taxes (COFINS; PIS/PASEP, CSLL) 5.4 6.1 6.2 6.1 6.4 6.6 Trade taxes 0.5 0.5 0.4 0.4 0.5 0.5 Income taxes 4.9 4.7 5.4 5.4 5.8 6.0 Financial operations tax (IOF) 0.3 0.3 0.3 0.3 0.3 0.7 Bank debit tax 1.4 1.4 1.4 1.4 1.4 0.0 Social security contributions 4.7 4.8 5.0 5.3 5.5 5.6 Other revenue 1.9 2.2 2.3 2.7 2.4 2.6 Transfers to states and municipalities 3.5 3.5 3.9 4.0 4.1 4.3 Total net revenue 17.7 18.3 18.9 19.3 20.1 19.6 Expenditure 15.0 15.3 15.9 16.5 17.1 16.7 Current expenditure 18.5 18.8 19.8 20.5 21.3 21.0 Capital expenditure 0.3 0.5 0.5 0.7 0.7 0.8 Public sector primary balance 3.9 4.2 4.4 3.9 4.0 4.6 Central Government primary balance 2.3 2.7 2.6 2.2 2.3 3.1 State governments primary balance 0.7 0.8 0.8 0.7 1.0 1.0 Municipal governments primary balance 0.1 0.1 0.2 0.1 0.2 0.1 Public enterprises primary balance 0.8 0.6 0.8 0.8 0.5 0.4 Central Government nominal interest payments -5.9 -4.1 -6.0 -5.4 -4.7 -3.5 Public sector overall balance -4.6 -2.4 -3.0 -3.0 -2.3 -1.3
  19. 19. P a g e 18 | 94 The authorities consider tax reform a priority and have identified a number of problems to be addressed, including: high compliance costs; improving tax neutrality; reducing tax complexity; eliminating distortions and fiscal competition; abolishing cumulative taxes; elimination levels of different state value-added taxation; and reducing excessive taxation on payrolls. The authorities consider that Brazil currently has the fiscal space for tax reform.6 To this end, as at October 2008, a tax reform Bill was under examination by Congress. The authorities estimate that the measures contained in the Tax Reform Bill could prop up GDP growth by half a percentage point per year over a 20-year period Financial accounts of the Central Government, FY2003-08 (Percentage of GDP) 6 Ministry of Finance (2008a). Central Government overall balance -3.7 -1.4 -3.4 -3.2 -2.3 -0.4 State and municipal governments overall balance -1.6 -1.8 -0.3 -0.7 -0.5 -1.3 Public enterprises overall balance 0.6 0.7 0.7 0.9 0.6 0.4 Memo item Total net public debt (as a percentage of GDP) 53.7 49.3 46.7 45.8 45.0 40.3b
  20. 20. P a g e 19 | 94 1.5. The Structure of the Brazilian Economy The Brazilian economy is the largest in South America and the tenth largest in the world, worth about $1.3 trillion at the official exchange rate1 and $1.8 trillion at purchasing power parity in 2007.2 it is reasonably diversified, with fairly well-developed agricultural, mining, petroleum, manufacturing, and services sectors. Recent discoveries of large petroleum reserves suggest that the country may be able to avoid disruptions caused by future global oil price shocks and indeed may become a major petroleum exporter. The current global financial turbulence is affecting Brazil through withdrawals of foreign investment, currency fluctuations, and a shortage of trade finance. However, the country’s macroeconomic fundamentals are reasonably sound. Brazil holds over $200 billion in foreign exchange reserves, giving it a cushion against external disturbances. Contrary to popular notions, Brazil is not that deeply integrated into the global economy compared with other countries.3 Most production is mainly for the domestic market (table 2.1), and the large role of domestic consumption means that the country may be able to weather a period of slower demand for exports reasonably well, although lower global economic growth will undoubtedly reduce the country’s rate of growth to some extent. As will be seen in subsequent chapters, our simulations of various scenarios for global or regional trade liberalization, shocks from other developing countries’ growth, and global price volatility have relatively modest effects on the country. (Note: The data in the following tables and figures are drawn from the database, called a social accounting matrix, or SAM, used in the models in this report Macroeconomic Components of Brazilian GDP (EXPENDITURE AS PERCENTAGE OF GDP) Private consumption 61 Government consumption 20 Investment consumption 16 Import demand 14 Export supply 17 Source: Social accounting matrix (see appendix C). Reported in table. In evaluating external shocks to the economy, it is important to remember that some commodities that are strongly exposed to trade, such as soybeans and minerals, nonetheless make up a relatively small share of total exports and an even smaller share of production. Therefore, the current contraction in the global economy may have relatively modest effects on Brazil, while expansion of trade (as represented in the simulations) may have smaller or different effects than some popular assumptions about the economy might suggest.
  21. 21. P a g e 20 | 94 As inadequate employment creation, extensive informality, income inequality, and poverty continue to be major problems for the Brazilian economy and society. the wide variation in unemployment by region and by years of schooling. Source: Social accounting matrix service 53% Agriculture 6% Food 8% Manufactures 30% Natural Resources 3% Sector Composition Of the Brazilian Economy
  22. 22. P a g e 21 | 94 1.6. Brazil in the Global Economy Brazil’s Main Exports and Imports, 2004 Commodity or Activity Exports (thousand retais) Percentage of Exports Automobiles and other transportation equipment 43,993 13.7 Metals 33,462 10.4 Other services 27,435 8.5 Other food products 24,649 7.7 Mineral extraction 20,393 6.3 Wood and paper 20,129 6.2 Meat products 17,331 5.4 Refined petroleum products 15,786 4.9 Machinery 15,253 4.7 Soybeans 14,774 4.6 Commodity or Activity Imports (thousand reais) Percentage of Import Electrical machinery 41,624 16.0 Other services 32,084 12.3 Chemicals 29,946 11.5 Petroleum and gas extraction 26,270 10.1 Refined petroleum products 24,218 9.3 Automobiles and other transportation equipment 19,571 7.5 Machinery 18,970 7.3 Metals 13,668 5.2 Transportation 10,983 4.2 Other food products 6,587 2.5
  23. 23. P a g e 22 | 94 Unemployment Rate for People Ten Years or Older, by Years of Schooling, 2005 (PERCENT) Region Total 0 to 8 9 to 11 12 or More Brazil 9.3 8.5 12.7 6.1 North 7.9 6.7 11.7 6.7 Other Northeast 8.4 8.3 13.5 6.1 Pernambuco 11.2 10.4 16.6 7.8 Bahia 9.9 9.3 14.9 8.3 Minas Gerais 8.5 7.9 11.3 6.5 Espírito Santo 9.6 8.2 14.0 5.9 Rio de Janeiro 12.6 12.4 14.7 8.1 São Paulo 11.5 11.3 14.3 5.9 Other South 5.5 4.4 7.4 4.7 Paraná 6.7 6.7 8.5 3.9 Central West 9.6 9.6 11.2 5.4 Source: IBGE (2005,). Helping Workers Adjust to the Impact of Trade and Structural Reform The following are the principal labor market programs that are available in Brazil to assist workers who are negatively affected by trade opening, economic restructuring, or other causes. Unemployment insurance. Although somewhat limited by international standards, Brazil’s unemployment insurance program is the most extensive in Latin America. The program is available to only about 35 percent of workers, primarily because it covers only wage workers in the formal sector. The program provides benefits for three to five months to registered workers who meet minimum contribution requirements (specifically, three months of benefits for workers employed at least six out of the last 36 months, increasing in steps to five months of benefits for those employed at least 24 out of the last 36 months). Because the turnover rate in the Brazilian labor market is high, even among formal workers, only about two-thirds of formal-sector workers who lose their jobs are eligible for benefits. Nevertheless, the number of recipients is still significant. In 2005, 5.3 million workers received an average benefit of R$389 (equal to 1.36 times the minimum wage) for an average period of 4.2 months. Public Employment Service. The Brazilian public employment service, Sistema Nacional de Emprego (SINE), was created in 1975 to provide guidance to unemployed workers, improve information on the labor market, and aid in the design and development of labor market policies. The sharp increase in unemployment in the 1990s led to the creation of additional training
  24. 24. P a g e 23 | 94 and certification programs and an increase in the number of branches. The number of workers registered at SINE has surpassed 5 million annually since 2002. Training programs. The 1995 National Plan for Professional Formation (PLANFOR) sought to increase labor productivity and set the goal of training 20 percent of the country’s economically active population. The program was implemented through state governments and social entities without the involvement of SINE. Eleven million workers were trained between 1990 and 2001; however, many courses did not meet program guidelines. In 2003, PLANFOR was replaced by the National Qualification Plan (known as PNQ), which established specific pedagogic content and increased the hours of training. Microcredit programs. The Program for the Creation of Employment and Income (PROGER) was established in 1994 for the purpose of extending credit to microenterprises and small enterprises, cooperatives, and production initiatives in the informal sector. The goal was to generate employment and income by making loans available to entities that otherwise would have little access to credit. Credit is offered through various public financial institutions. The program initially focused on urban workers in metropolitan regions with the highest unemployment levels. In 1995, credit was also made available in the rural sector, first through the Rural PROGER and later through the National Program to Strengthen Family Agriculture (known as PRONAF). In 2006, roughly 2.8 million loans were offered by the various programs with an average credit of R$9,000. Cash transfer programs. Although not a labor market policy per se, the conditional cash transfer program, Bolsa Família, serves as a safety net for workers from poor families. The program was established in 2003 by combining several existing cash transfer programs. Families with per capita income of less than R$120 per month are eligible to obtain benefits if they meet requirements for school attendance, immunizations, and prenatal and postnatal care. More than 11 million Brazilian families received benefits in 2006.
  25. 25. P a g e 24 | 94 1.7. The Impact of a Doha Round Agreement in the World Trade Organization The 153 member countries of the World Trade Organization have been engaged for the past seven years in an effort to revise the rules of the multilateral trading regime. This effort is known as the Doha Round, named after the city in Qatar where the negotiations were launched in late 2001. Brazil has taken a keen interest in the Doha Round and has become one of the key actors in the negotiations, both on its own behalf and as a representative of the G-20 group of developing countries. A multilateral trade agreement would affect Brazil’s trade relations with all its trading partners, and thus it could have a larger impact on the economy than bilateral or regional free trade agreements. The Doha Round also will include reductions in domestic agricultural subsidies by all countries, in contrast to most bilateral trade agreements, which do not address subsidies. At the same time, it should be noted that the depth of tariff reductions in a multilateral agreement is likely to be less than in full bilateral or regional FTAs, which typically involve full elimination of most tariffs over time. The Doha Round negotiations have been prolonged and difficult; however, there is no indication that WTO members have abandoned the goal of concluding a new multilateral trade regime. Therefore, it is useful to simulate the impact of a plausible Doha outcome on Brazil. We employ a liberalization scenario for manufactured goods that is very close to the overall level of liberalization under consideration in late 2008, based on the December 2008 negotiating text. Our scenario for the liberalization of trade in agricultural goods is somewhat more ambitious than envisioned in the current negotiating text for agriculture, as discussed in more detail. Therefore, our results for agricultural liberalization can be considered an upper bound of possible effects. Specifically, we simulate applied tariff reductions of 36 percent by developed countries and 24 percent by developing countries, including Brazil, on agricultural and nonagricultural goods. In addition, we simulate a reduction in domestic agricultural subsidies by one-third and the complete elimination of agricultural export subsidies. These reductions are also taken from applied rates. We simulate each of the Doha changes separately to discover the relative contribution of changes in agriculture and nonagricultural liberalization. We begin by presenting the results of these simulations using the global model. Thereafter, we present the results of simulations using the country model, which allows us to probe the effects on Brazil at more disaggregated evils, including the results for different regions and households. The final section of the chapter presents and compares results from several other studies of the Doha Round that use CGE models. Results From the Global Model Simulations The aggregate results for the Brazilian economy after all the changes required by the Doha Round scenario have been implemented and a new equilibrium has been achieved. The tables in this section present the separate contributions of agricultural liberalization and nonagricultural market access liberalization, referred to as NAMA, in the WTO. Agricultural liberalization comprises primary agriculture and semiprocessed agricultural goods, while excluding fish and forestry. Nonagricultural liberalization comprises manufactures, minerals, and other natural resources but not services.
  26. 26. P a g e 25 | 94 The aggregate results suggest that Brazil would see small net gains from the Doha Round, with real GDP increasing by 0.2 percent. Overall economic welfare would increase by 0.4 percent compared with the level of household expenditures before the simulation.1 Both imports and exports rise modestly in real terms, with a slightly larger gain in exports. The increase in exports is driven largely by nonagricultural trade liberalization, contrary to a popular belief that Brazilian agricultural exports would be the main winner from the Doha Round. By contrast, imports are stimulated more by agricultural liberalization. To understand the modest results for Brazil from agricultural liberalization, it is instructive to separate the components of such liberalization: domestic subsidy reduction, export subsidy elimination, and tariff reduction. Appendix D presents the results from the separate components of the agricultural liberalization simulation in greater detail. The reduction of domestic subsidies in high-income countries such as the United States and EU member states, which has been a major goal of many developing countries, including Brazil, in the Doha Round negotiations, produces both positive and negative results for Brazil. For cereal grains, among the most heavily subsidized sectors, EU and U.S. supply prices rise in response to the drop in support. As a result, demand by domestic residents, food processors, and exporters is reduced in those two regions. In the European Union, the same direction of Table 4.1 Doha Round Scenarios: Main Macroeconomic Results for Brazil From Global Model Simulations (PERCENT CHANGE) Measure Agriculture Non-agriculture Full Doha Net welfare 0.31 0.08 0.40 Real imports 0.81 0.58 1.41 Real exports 0.16 1.36 1.52 Real GDP 0.09 0.11 0.20 Terms of trade 0.69 –0.80 –0.09 Unskilled employment 0.29 0.30 0.59 Source: Global model simulation results. Equivalent variation as a percentage of initial consumer expenditures effects also occurs for oilseeds and the animal agriculture sector. However, the associated drop in demand for land by the shrinking sectors spurs a substantial drop in the rental price of land in the two regions. The equilibrium rental price of land falls by 39 percent in the EU and by 19 percent in the United States relative to the presimulation price. Though the net effect on heavily subsidized sectors is dominated by the loss of subsidies and equilibrium, supply prices in those sectors are higher than before. For the less heavily subsidized sectors, the general equilibrium land price effect dominates the effects of the subsidy cut, so that—counter to partial equilibrium intuition—equilibrium prices for the sectors that were not highly subsidized actually fall in the two regions.2 As a consequence, the EU “other crop” agriculture sector and all U.S. agricultural sectors except cereal grains are able to increase their world market exports to some extent after the reduction in domestic subsidies. These results clearly highlight the need for, and value of, a general equilibrium perspective in the context of multilateral trade analysis. It should be noted that several other major studies of the Doha Round also find that the reduction of domestic
  27. 27. P a g e 26 | 94 agricultural subsidies and agricultural export subsidies would not be a source of large gains for developing countries including Brazil (discussed below). Brazil’s terms of trade deteriorate slightly. (“Terms of trade” refers to the quantity of exports that can be exchanged for a given quantity of imports. A gain in a country’s terms of trade means that the same amount of exports can be traded for a larger volume of imports, whereas a loss means that more exports are required.) In this case, the terms-of-trade loss results from the liberalization of manufacturing import duties and is largely offset by terms-of-trade gains from the reductions in distortions to trade in agricultural and processed food commodities. Doha Round Scenarios: Change in Brazil’s Real Exports by Commodity (PERCENT CHANGE, EXCEPT BASE LEVELS IN BILLION DOLLARS) Commodity Level Base Agriculture Non agriculture Doha Full Cereal grains 0.73 11.19 1.37 12.81 Oilseeds 2.86 0.07 1.31 1.41 Other crop agriculture 3.28 –1.03 1.21 0.18 Animal agriculture 0.26 0.11 0.32 0.43 Minerals 3.84 –0.41 0.28 0.74 All other extractive 0.49 –0.34 0.74 0.42 Vegetable oils and fats 0.61 –1.20 1.53 0.35 Sugar and related products 1.48 4.26 1.17 5.52 Animal products 2.99 9.66 1.64 11.51 Other food products 4.10 1.35 0.81 2.19 Textiles 1.16 0.03 0.94 0.83 Leather products 2.62 –1.81 4.27 2.41 Wood and paper products 4.79 –1.03 1.91 0.86 Petroleum and chemicals 5.60 –0.48 1.24 0.75 Mineral products 1.30 –0.51 1.55 1.02 Ferrous metals 3.29 –0.97 1.75 0.76 Metals 2.21 –1.96 3.00 0.98 Metal products 0.76 –0.54 1.99 1.41 Motor vehicles and parts 5.22 –0.42 2.38 1.92 Transportation equipment 3.64 –1.71 2.95 1.21 electronic equipment 7.83 –0.27 0.19 –0.09 All other manufactures 0.68 –0.06 0.22 0.16 Utilities 0.01 0.01 0.20 0.21 Construction 0.03 0.00 0.00 0.00 Trade 0.71 0.00 0.01 0.01 Transportation 2.70 0.04 0.19 0.23 All other services 6.00 –0.15 0.25 0.10 Source: Global model simulation results.
  28. 28. P a g e 27 | 94 Change in Employment of Unskilled Labor 1.8. BEAUTY AND PERSONAL CARE IN BRAZIL Growth Slows in Beauty and Personal Care in Brazil The Brazilian beauty and personal care market saw a moderate performance in 2011 when compared with the growth rates observed in the period 2006-2011. On the demand side, there was an overall slowdown in the economy, with a significant proportion of consumers’ disposable incomes destined to pay off debts acquired in the past, along with rising food prices and an overall increase in the cost of living in major urban centres. On the supply side, the weak performance of major direct sellers and disruption in distribution systems, allied with growing competition, marked a year which surprised most observers. Leading Direct Sellers Face Major Disruptions Both the leading direct selling companies in Brazil – Natura Cosméticos and Avon Cosméticos – presented a weaker than expected performance in 2011. According to trade sources, both companies faced structural problems. Natura faced problems
  29. 29. P a g e 28 | 94 mainly due to factory expansion and the poor implementation of new information systems, whilst Avon had problems mostly related to its transfer to a new distribution centre in Cabreúva. the Leading Beauty Specialist Retailer Presents Healthy Growth Botica Comercial Farmacêutica (O Boticário) performed well in 2011, presenting strong double-digit growth in the year. In recent years O Boticário made important investments in production capacity and new distribution centres. Continued product innovation and heavy marketing spend supported its recent growth, and also mean a positive outlook for the company. Health and Beauty Retailers Gains Share of Distribution Whilst grocery retailers lost share of distribution within the beauty and personal care market between 2006 and 2011, health and beauty retailers increased its share from 31% in 2006 to 32% in 2011. Two main reasons explain this trend. On the one hand, O Boticário quickly expanded the beauty specialist retailers channel with new franchised stores. On the other hand, parapharmacies/drugstores also expanded sales of beauty and personal care products due to more physical space on shelves, which became available due to tighter restrictions on product display by the Brazilian health watchdog ANVISA a few years ago. Brazil May Have Lost Some of Its Shine, But A Positive Outlook Remains for 2011-2016 The beauty and personal care market in Brazil is expected to see a good performance between 2011 and 2016, with a CAGR of 7% in constant value terms. Hair care and fragrances will remain the largest categories in value terms, accounting for a combined 37% share of overall value sales in 2016. Depilatories is expected to register the most dynamic performance over the 2011-2016 forecast period. Consumers are also expected to trade up to more complex and sophisticated products in the coming years, a trend which has already started, and will define a different quality of growth in the Brazilian market through to 2016. KEY TRENDS AND DEVELOPMENTS Competitive Environment Natura Cosméticos, Unilever Brasil, Avon Cosméticos, Procter & Gamble do Brasil and Botica Comercial Farmacêutica (O Boticário) were the five leading companies within the overall beauty and personal care market in 2011, accounting for sales of R$34.7 billion, or 50% of overall value sales. In 2011, the weak performance of the direct selling companies – Natura Cosméticos and Avon Cosméticos – was related to structural problems such as factory expansion, new distribution centres and poor implementation of new information systems. In addition, growing competition from local players such as Jequiti from Grupo Silvio Santos, as well as the entry of new direct selling companies such as Eudora from Botica (O Boticário) and Ebel, the Peruvian-based direct selling company, contributed to the poor performance of the top direct selling companies in 2011.
  30. 30. P a g e 29 | 94 Botica Comercial Farmacêutica (O Boticário) and JBS saw the biggest growth in share, increasing by one percentage point each during 2011 over the previous year. The former outperformed the market, increasing from R$4.5 billion in 2010 to R$5.7 billion in 2011. New franchised stores, marketing campaigns and the launch of products in core categories within its portfolio (fragrances, cosmetics and skin care) contributed to it achieving such strong results in the year. On the other hand, JBS acquired Bertin’s hygiene division in 2011, including key brands in its beauty and personal care division such as Ox, Neutrox, Kolene and Francis, amongst others. Avon Cosméticos saw the worst performance in 2011, mainly in facial skin care, including anti-agers, mostly due to problems in its Cabreúva distribution centre. Avon’s main current strategy for the Brazilian market is to reduce the company’s portfolio in order to concentrate on key lines. For example, Avon in Brazil is gathering products under the same umbrella; examples are Avon Erva Doce under Avon Naturals and Avon Basics under Avon Care, amongst others. Ranked fourth within beauty and personal care, Procter & Gamble do Brasil has invested significant resources in increasing its market share, mainly in oral care, in particular in toothpaste and mouthwashes/dental rinses under the Oral-B brand. The company also increased investment for its Pantene brand in order to increase its share in hair care, with top model Gisele Bündchen as the celebrity endorser to promote the line, mainly in shampoos and conditioners. In 2011 the company introduced its global brand Olay in facial skin care, having chosen Juliana Paes, actress from Rede Globo de Televisão, to endorse the brand. Several marketing activities were carried out during the year, focusing mainly on parapharmacies/drugstores. At the beginning of 2012 Avon rejected a buyout offer of U$10.7 billion from Coty Inc. According to trade sources, Coty’s offer was not in the best interests of shareholders, and it substantially undervalued the American direct selling company. Also, the company announced a new CEO, Sherilyn S McCoyas, in April 2012, in order to turn around shrinking profits. Over the 2011-2016 forecast period, domestic companies are expected to increase their shares within the beauty and personal care market through new launches, the expansion of industrial plants and investment in the North and Northeast regions of the country, which concentrate low-income consumers, but still have good potential to explore in the coming years. The future scenario for the Brazilian market will be a more crowded competitive landscape. According to trade sources, multinational companies expect stronger competition, mainly from large domestic groups including Hypermarcas, Niely do Brasil Industrial, Phitoteraphia Biofitogenia Laboratorial Biota (Embelleze) and JBS, which are expected to increase their shares during the forecast period. In general, domestic companies often have higher flexibility and agility, and are sometimes pioneers in terms of innovation. On the other hand, multinationals have more resources to invest in new formulae, engage in qualitative consumer research and, advertising campaigns and introduce new packaging. They will tend to launch new beauty and personal care products with high technology and performance over the 2011-2016 forecast period.
  31. 31. P a g e 30 | 94 In order to increase its market share in the coming years, Natura Cosméticos will receive a loan of US$19 million, of which half will be used for the development of new products and half for the installation of a new distribution centre in São Paulo. Both projects will be financed by Banco Nacional de Desenvolvimento Econômico e Social (BNDES). Acquisitions Positively Impact Beauty and Personal Care in Brazil Key acquisitions affected important categories in the beauty and personal care market during the period 2010-2011, involving in part domestic companies and in part multinationals. In May 2011 Bombril, an important domestic company in home care, announced the purchase of Ecologie Cosméticos in the beauty and personal care market. For R$15 million Ecologie transferred 75% of its ownership to Bombril. The brand Ecologie, which is mostly distributed through parapharmacies/drugstores, will begin to be distributed via grocery retailers, taking advantage of Bombril’s wide distribution network. Another important acquisition in 2011 was JBS’s acquisition of Bertin’s hygiene division, including its portfolio of key brands such as Ox, Francis, Neutrox and Kolene, amongst others. Bath and shower and hair care were the main categories in which Bertin had a leading position. A key move in 2010 was made by LVMH Perfums & Cosmetics do Brasil, which acquired Sacks, the leading Brazilian internet retailer specialised in beauty and personal care products, particularly premium brands. As a first step, in March 2011 the French luxury group associated Sacks with the Sephora name in the Brazilian market, and intends that gradually Sacks will become Sephora.com. Current impact The beauty and personal care market is increasingly consolidated, with large groups acquiring small- and medium-sized companies in order to gain market share, in particular in hygiene products. Internet retailing is also increasing its participation within distribution in Brazil, due to its great extension of territory. For instance, internet retailing in beauty and personal care doubled its participation in value terms between 2006 and 2011, increasing from 0.7% in 2006 to 1.4% in 2011. Despite having a small presence in hair care, Bombril considers the acquisition of Ecologie as its first step to increasing its share within the beauty and personal care market. The company intends to achieve commercial and administrative synergies in both industries: home care and beauty and personal care. The acquisition of Sacks by Sephora will serve as a stepping-stone for its entry into the Brazilian market through retail stores. Sacks offers approximately 280 beauty and personal care brands, particularly premium fragrances, premium colour cosmetics and premium facial skin care products, and has four million visitors per month. Besides this, the Sacks operation provides infrastructure and expertise in regulatory matters in a country in which the rules are very complex. The strength of Sacks is considered by
  32. 32. P a g e 31 | 94 LVMH/Sephora as an advantage in a market with huge potential for premium brands, although sales of such products remain limited compared with mass brands. Teenagers Is an Emerging Group within Beauty and Personal Care According to the latest official data available, which was updated in 2010 for IBGE, the Brazilian Geography and Statistics Institute, pre-teens and teenagers between 10 and 18 years represented 18% of the total Brazilian population, which means 35 million potential buyers which are increasingly responsible for their own purchasing choices. In particular, the number of teenagers was approximately 23 million in 2010. These consumers are very self-conscious, care about their appearance, and appreciate well-known and traditional brands for daily use. Consequently, manufacturers are exploring such drivers in important categories within beauty and personal care, focusing mainly on colour cosmetics, deodorants, hair care, fragrances and skin care in recent years. Leading companies including Unilever Brasil, BDF Nivea, Avon Cosméticos, Johnson & Johnson Industrial and Botica Comercial Farmacêutica (O Boticário), amongst others, have developed specific products targeting this consumer group. Current impact Consumption of beauty and personal care products saw important growth in recent years, with high demand for products from teenagers between the ages of 13 and 17. There was also rising demand for pedicures, manicures, facial acne treatments, special shampoos, colour cosmetics, body lotions and fragrances; these products will continue to be very important to this consumer group in the coming years. In 2010 Unilever invested R$5 million to develop a new deodorant for teenagers under its key brand, the Rexona Teens Love brand, whose main character is Lucy, created by the famous Argentinean street artist Pum Pum. Rexona Teens Love promises 24-hour protection and provides a pleasant sensation of freshness, with a floral fragrance, fruity and woody. In the same year, BDF Nivea launched a new family of products under the Nivea Angel Star brand, targeted specifically towards girls 14-18 years old, comprising a deodorant in spray format in an easy to carry, compact version (100ml) and two body hydrating in body lotion and soft soufflé versions, with a fast-absorbing formula and the scent of raspberry; these features are much appreciated by this target niche. Another key line in the Brazilian market which focuses on teenagers is Capricho from Botica (O Boticário). The line comprises mainly deodorants, colour cosmetics, women’s mass fragrances, and facial and body care products. The best-selling product within this line is Day & Night fragrance, which has been a huge success, offering two different fragrances, which when mixed create a new one. Make-up Capricho Cores also achieved tremendous success amongst this consumer group, offering fashion items for lips and eyes, such as lip gloss and eye shadow. The new line is targeted towards girls aged between 13 and 18 years. In acne treatments, Avon Cosméticos and Johnson & Johnson led through specific lines for teenagers under the Avon ClearSkin and Clean & Clear brands respectively. Avon ClearSkin is the leading brand, whose line was released in November 2010, bringing modern packaging design, new formats of packaging and colourful icons on the labels. Clean & Clear has a wide variety of products, mainly facial cleansers, and different packaging in order to meet different needs.
  33. 33. P a g e 32 | 94 Outlook According to Euromonitor International, the number of teenagers is expected to grow by 1% between 2010 and 2020, rising from 23 million in 2010 to 24 million in 2020, representing 11% of the total population. This shows that this niche is slowly growing, and remains a considerable proportion of the population, making it a strong force in the marketplace. One of the strongest current trends amongst female teenagers is that they are using colour cosmetics at a younger age. More female teenagers are starting to use some kind of make-up daily, even to go to school, not just to go to a party. Therefore, Clean & Clear has also developed cleaning products which cater to this habit, such as make-up removers. Future impact In general, teenagers are spending a significant number of hours each day connected to the internet and using mobile phones to chat with friends or access social networking sites. For this reason, Hypermarcas created a new website focusing on female teenagers (10- 16 years old) during 2011 for its Monange brand, which is one of the most important brands in its portfolio, with an outstanding position within skin care. The company also intends to increase its share with Monange in hair care, developing its shampoos and conditioners, which were recently relaunched with high resources allocated to publicity. Potential company activity could be to develop masstige fragrances focusing on young consumers aged 12-18 over the 2011-2016 forecast period. According to research, households with the presence of this segment spend 40% more on clothes, shoes and hygiene and personal care products compared with families without teenagers. Celebrity premium fragrances have been successful amongst female teenagers in recent years, and are expected to continue attracting more consumers in the coming years, as new products will arrive in the Brazilian market. The media also plays an influential role in teenagers’ desire to mature at a quicker rate. The general media and public obsession with celebrities is highly accessible through magazines such as Capricho, Atrevida and Toda Teen, all of which can influence consumer spending. As teens are increasingly conscious of the media and are better informed about the world around them, they are demanding a say in the clothes they wear, the food they eat, the gifts they receive and how they spend their spare time. The brands which target this consumer group should offer a wide variety of products in terms of packaging, colours and scents. Besides this, it is expected that manufacturers will include differentiated marketing actions, with a focus on digital media such as blogs and social networking websites. Despite Single-digit Growth in Local Currency in 2011, Brazil Leads Value Growth Within Bric Countries The Brazilian beauty and personal care market saw a moderate performance in 2011 when compared with the growth rates observed in the period 2006-2011. On the demand side, there was an overall slowdown in the economy, with a significant proportion of consumers’ disposable incomes destined to pay off debts acquired in the past, along with rising food prices and an overall increase in the cost of living in major urban centres. On the supply side, the weak performance of major direct sellers and disruption in distribution systems, allied with growing competition, marked a year which surprised most observers. Current impact
  34. 34. P a g e 33 | 94 Despite the weaker than expected growth in 2011, Brazil saw the highest value growth within BRIC countries in overall beauty and personal care in US$ current prices. Within the so-called BRIC countries, Brazil saw faster value growth in 2011in the following categories: baby and child-specific products, bath and shower, depilatories, hair care, oral care and sun care. In addition, Brazil was second among these countries in terms of value growth in US$ current prices in 2011 in categories such as deodorants, fragrances, men’s grooming and sets/kits. Outlook During the 2011-2016 forecast period, Brazil is expected to see the third highest growth within overall beauty and personal care in total value sales in constant 2011 prices, (fixed 2011 exchange rates) of 38%, whilst Russia, India and China are expected to grow by 11%, 47% and 48% respectively in the same period. Meanwhile, Brazil is expected to rank second amongst BRIC countries in important categories such as baby and child-specific products, deodorants, depilatories, hair care and sets/kits in the 2011- 2016 forecast period. Brazil is expected to rank first in oral care and third in the remaining categories (bath and shower, colour cosmetics, fragrances, men’s grooming, skin care and sun care) within the BRIC in the forecast period, considering the same currency conversion. Future impact During the 2011-2016 forecast period Brazil is expected to maintain its leading position in retail sales prices in constant 2011 prices, (fixed 2011 exchange rates) within BRIC countries, accounting for 46% of total sales in 2016, whilst China and India will improve their participation to 32% and 10%, respectively, whilst Russia will lose share to 12% in this year. A key factor in on the demand side that will enable Brazil to maintain its leading position should be the migration of consumers from D economic group to C emergent economic group, mainly in the Northeast region of the country, where the majority of this population are concentrated. This should continue strongly in the period 2011-2016, positively affecting sales of beauty and personal care products. Recent acquisitions have positively impacted the market. Bombril, a large and well- know Brazilian company operating in the home care industry, entered the beauty and personal care market after acquiring Ecologie in 2011. JBS acquired Bertin’s hygiene division in the same year. These recent moves suggest Brazil should continue to attract new international players and also large domestic groups due to its vigorous growth in recent years.
  35. 35. P a g e 34 | 94 MARKET DATA Table 1 Sales of Beauty and Personal Care by Category: Value 2006-2011 R$ million 2006 2007 2008 2009 201 0 2011 Baby and Child- specific Products 1,561.2 1,610.8 1,894.2 2,370.4 2,889.8 3,341.1 Bath and Shower 2,951.4 3,280.2 4,284.6 5,349.0 5,588 .9 5,899.9 Colour Cosmetics 2,806.3 3,102.4 3,627.6 4,505.2 5,632.9 5,966.2 Deodorants 3,664.1 3,957.1 4,841.5 5,577.8 6,551.7 7,200.6 Depilatories 148.8 1 71.9 207.3 269.9 362 .3 438.8 Fragrances 5,798.3 6,930.3 7,697.2 8,674.0 10,169.4 10,882.2 Hair Care 10,316.8 11,498.9 10,841.2 11,980.6 13,539.9 14,507.7 Men's Grooming 3,275.0 3,635.8 4,176.4 4,742.9 5,673.4 6,375.7 Oral Care 3,789.8 4,275.9 4,517.9 5,250.7 5,112.8 5,768.1 Oral Care Excl Power Toothbrushes 3,762.6 4,243.5 4,479.5 5,206.5 5,063.4 5,711.0 Skin Care 4,225.2 4,855.5 5,765.3 6,594.8 7,383.7 7,762.4 Sun Care 947.6 1,132.3 1,437.2 1,724.5 1,954.7 2,311.6 Sets/Kits 725.1 817.6 948.6 1,083.7 1,293.1 1,460.6 Premium Cosmetics 768.0 908.7 1,239.6 1,563.7 1,900.9 2,166.9 Mass Cosmetics 32,227.9 57,165.5 36,276.4 40,097.9 46,296.3 53,103.2 Beauty and Personal Care 43,636.855, 38,760.0 846.1 63,659.4 48,291.2 69,268.8 Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources Note 1: Premium/mass cosmetic sales are additionally included within baby and child-specific products, bath and shower, colour cosmetics, deodorants, fragrances, hair care, sets/kits, skin care and sun care. Note 2: Sum of categories is greater than market size because the four men’s toiletries categories are included in men’s grooming as well as in bath and shower, deodorants, hair care and skin care.
  36. 36. P a g e 35 | 94 1.9. Mass Dominates Brazilian Beauty Market Sales of premium cosmetics remain tiny in comparison with other markets that have similar levels of value sales. 27% of all beauty and personal care sales in the USA and 41% in Japan are comprised of premium products. In contrast, just under 2% of Brazil’s sales in beauty are made up of premium brands. The main reasons behind this are high excise taxes and limited distribution of premium brands in Brazil, which have kept premium cosmetics largely out of Brazil and enabled the mass market to thrive. To meet the demand of the public in Brazil for premium brands, mass tige -priced beauty products have become very popular, and feature especially among the product ranges of direct sellers such as Avon and Natura. Mass tige-priced goods are particularly prevalent in skin care: Avon’s anti-ageing product Renew Ultimate Elixir is one of the most popular mass tige products. Premium/ Mass Value Sizes 2008 0 10000 20000 30000 40000 50000 60000 USA Japan Brazil China Germany Farance Mass Premium
  37. 37. P a g e 36 | 94 1.10. Future for Premium and Mass in Brazil By 2013, predicted value sales of US$575 million for the premium beauty category in Brazil means that despite big increases in disposable income, premium beauty will still only account for less than 2% of total beauty and personal care value sales. This is because there will still be strong barriers to sales due to the high import tax on premium beauty products, which is very discouraging for many would-be entrants to the Brazilian market. Several factors are set to cause the very modest forecast rise in premium beauty and personal care in Brazil from 2008-2013. Firstly, the Brazilian currency has recently appreciated against the US dollar. This means that imported brands in Brazil will have more of a competitive advantage than they did before, and this should aid sales of imported premium brands. Combination of Factors Pushing Down Unit Prices High import and excise taxes on imported products and limited distribution of premium products 98.5% of the total market is considered ‘mass’ Heavy presence of direct sellers and local specialists High competition because of high numbers of players in the beauty and personal care industry High investment in NPD and state-of-the-art equipment mostly among top 10 leaders Increased presence of direct sellers bypassing high distribution costs through wholesaling
  38. 38. P a g e 37 | 94 Fragrances 19% Skin care 13% Depilatories 1% Sun care 3%Baby care 3%Bath and shower product 8% Deodorants 10% Hair care 25% Colour Cosmetics 8% Oral hygiene 10% Cosmetics and Toiletries Category % Share
  39. 39. P a g e 38 | 94 Competitive Landscape Brazilian Personal Care Market Moves towards Consolidation  There were 1,694 registered companies operating in the beauty and personal care market in Brazil in 2009  This growing market has attracted 327 new companies in the last three years  Despite the huge number of players, the 10 largest companies hold 61% of the market  The leading personal care company Natura has increased its share from just under 9% in 2001 to almost 13% in 2008 Low Entry Barrier Has Helped Shape Industry Structure • The country’s large territory has favored direct sellers and specialists (par pharmacies/drugstores channel) . • Brazil has low barriers to entry in its par pharmacies/drugstores industry, the simplicity of some formulas and mass products predominant. • The sheer size of the Brazilian territory makes a suitable environment for regional/small companies. 1. Brazil ranks # 1 in the world with 58,000 parapharmacies/drugstores outlets 2. India ranks # 2 with 47,000 parapharma ies/drugstores outlets 3. USA ranks # 3 with 28,000 parapharmacies/drugstores outlets Beauty and Personal Care Market Composition by Company • Natura Cosméticos ranked first in cosmetics and toiletries in 2008, due to its leadership in important categories, namely baby care, fragrances and skin care. The company has also performed very well in bath and shower products, deodorants and colour cosmetics, to rank second in these categories. One of the most aggressive players in the Brazilian CT market, the company increased its marketing expenditure by 60% in 2008 and plans to invest R$400 million in 2008-2010 in media and training sales representatives. • O Boticário is a chain of beauty specialists with over 2,500 outlets in Brazil 70% of all sales of fragrances in Brazil are accounted for by the retail brand. O Boticario Botica (O Boticário) focuses its product range on masstige fragrances, as well as in the development of its colour cosmetics and fragrances, specifically created for teenage girls. In 2008, the company performed very well, with growth driven mainly by such products.
  40. 40. P a g e 39 | 94 Cosmetics and Toiletries Company Share (% Breakdown) Strong Growth in Beauty Specialist Retailer Outlet Numbers • Health and beauty specialist retailers experienced 13% value growth in 2008. • A number of large specialists today started out as chemists/pharmacies and today dominate the store-based specialist retailer channel. • There were an estimated 10,000 beauty specialists (outlets) in Brazil in 2008. • Investment by health and beauty specialist retailers is still centred on urban areas. More than 50% of all parapharmacies/drugstores, for example, are in the Southeast and South of Brazil. In the case of beauty specialist retailers however, the number of stores has slowly been increasing in rural areas, through franchising. Procter & Gamble Co, 7% Colgate- Oalmolive co. 6% Botica Comercial Farmaceutical ltd. 6% L'Oreal Group 5% Avon Product Inc. 9% Unilever Group 10% Natura Cosmeticos Sa 13% Others 38% jonson& johanson 3% Hypermarcas Sa 2% Beiersdorf AG 1%
  41. 41. P a g e 40 | 94 Future… Brazil Topped Absolute Growth Over 2003-2008... Between 2003 and 2008, Brazil’s absolute growth in beauty and personal care eclipsed the growth in all other countries. Per capita spend on beauty and personal care in Brazil (US$148 in 2008) still greatly surpassed the spend in nearest rival China (US$13) because the population in Brazil has far larger disposable incomes. (US$9,368 in Brazil in 2008 compared to just US$2,000 in China). Cosmetics and Toiletries Absolute Growth in Key Markets for Cosmetics and Toiletries % CAGR 2003-2008US$ mn 2003-2008 Brazil 13,870 Venezuela 30 China 7,672 Belarus 26 Russia 6,028 Uzbekistan 23 USA 4,666 Argentina 20 United Kingdom 3,042 Ukraine 19 Spain 2,830 Azerbaijan 18 Mexico 2,384 Costa Rica 15 Venezuela 2,275 Romania 15 Japan 2,222 UAE 15 India 1,977 Brazil 14
  42. 42. P a g e 41 | 94 And Will Rank Second Over 2008-2013 The leading personal care markets in absolute growth terms are forecast to be more susceptible to the effects of the recession, with drastically reduced absolute growth in markets such as the USA (not listed) over 2008-2013. Brazil is set to continue to be among the top performers in absolute growth over 2008-2013 because it has far lower levels of consumer debt than developed markets such as the USA and the UK, meaning that consumers in the country are less affected by the global banking crisis. Cosmetics and Toiletries Absolute Growth US$ mn 2008-2013 Key Markets for Cosmetics and Toiletries % CAGR 2008-2013 China 7,658 Peru 9 Brazil 7,457 India 8 India 2,470 China 7 Russia 1,355 UAE 7 United Kingdom 1,304 Vietnam 7 Spain 835 Tunisia 6 Thailand 820 Morocco 6 Mexico 668 Belarus 6 Peru 655 Indonesia 5 Canada 606 Brazil 5
  43. 43. P a g e 42 | 94 Cosmetics and Toiletries Growth by Category and Value Size 2003-2008
  44. 44. P a g e 43 | 94 Chapter: 2 Company Analysis
  45. 45. P a g e 44 | 94 A.V. Srinivasan (Founder) 2.1. Introduction of Dazller Company ARAVIND LABORATORIES AND EYETEX Aravind Laboratories is the flagship of the Group of Companies engaged in the manufacture of cosmetics since 1938, when Sri Vasudevan started to make Kajal under this Brand. Initially he manufactured Kajal (Kanmye / Katuka / Kankappu / Kanmashi/Kohl etc.,) and Kumkum (Bindi) “Chandu” liquid in glass bottles. With superior quality and unique preparations, the Brand Eyetex gained immense popularity & was sold in the then Madras State only. The Kajal was so popular that the brand became synonymous with Kajal. In March 1958, the current Promoter’s family headed by Late Sri A.V. Srinivasan acquired the business. The business expanded considerably with the launch of Kumkum (Bindi) preparations (Liquid Kumkum, Kumkum Paste, Kumkum Powder, Sticker Kumkum, Multi-color Kumkum liquid, Kumkum pencils), Eyebrow Pencils and Eyeliner liquid all under the brand name . The Firm expanded its Range with attractive Plastic Containers and introduced the concept of Multi Coloured Kumkum in Liquid, Paste and Powder forms. Since the 1960s the Firm expanded their sales in South India by appointing Distributors in Andhra Pradesh, Kerala and Karnataka. From mid seventies, the Firm extended its marketing reach in North India by entering Maharashtra, Madhya Pradesh, Orissa and Gujarat. In 1968, the Firm built an exclusive facility of 4500 Sq.Ft to produce Lamp Black from Vegetable Oils such as Gingili (Til OR Sesame) & Castor Oils with an installed capacity to burn 180 kgs of Oils and get adequate Lamp Black as per Traditional Ayurvedic Systems that are in vogue in INDIA over 1000’s of years for the manufacture of Kajal.
  46. 46. P a g e 45 | 94 Early seventies saw the introduction of liquid Kumkum in Plastic containers of different sizes. Matt Finish Kumkum was launched in Plastic Tubes in two sizes in mid seventies. Gradually the Brand gained the top position amongst the Trade & the consumers for these varieties; nearly 18 million pieces are sold/year in three sub brands Poornima, Divyaa and Pallavi. In 1982, the Firm added another 6000 Sq.Ft of factory space and leased another 5000 Sq.Ft for their ever-expanding production needs. Mid-eighties saw the launch of Kumkum Stickers under Pallavi sub Brand. This was converted to a 2in1 pack selling double the number of Kumkum Stickers Spots in all sizes to the Consumers for the MRP of the single pack charged by all manufacturers. Thus, we are the originators of “Buy 1 Take 1 Free” concept in India! This became so popular over the years that other leading Brands have followed us by offering 2in1 Packs! In 1996, the Firm added 30,000 Sq.Feet of additional space in their own 2.33 acres’ plot in Ramapuram, Chennai 600089, to house all manufacturing activities under one roof. The Firm upgraded the quality of the Pallavi Kumkum Stickers in 1997 by switching over to an exclusive non-woven based flocked fabric (only Brand in India to do so till date) & doing away with the harmful PVC based flock fabric. The manufacturing procedure was so upgraded that no part of the human skin retained any traces of the adhesive applied on the fabric. The adhesive never gets transferred to the skin on the forehead and the pH of the adhesive matched that of the skin avoiding any chances of skin irritation. Gradually, the Brand gained immense popularity and Trust from the millions of women who had become its loyal consumers. A variety of attractive packs, excellent quality of the products, regular coverage of the markets with excellent after sales services resulted in becoming the market leaders in town after town and state after state. Brand became a living legend for Traditional or “Religious” range of Cosmetics. The foray into the “Colour” Cosmetic segment began in 1985, with the introduction of Eyeliner; since 2002, the firm launched a wide range of Colour Cosmetics such as Mascara, Nail Polish, Lipstick, Lip Gloss, Liquid Makeup, Compact Powder, Nail Polish Remover, Liquid Lip Colour, Lip Gel, Face Powder, Talcum Powder, Eyeshadow, Combination Packs etc., under the sub brand . Currently there are over 440 Staff in the factory engaged in the production apart from plant and machinery worth several millions producing State of the Art, World Class Cosmetics & Personal Care Products. The firm is committed to produce best quality products and constantly upgrades the manufacturing processes, packaging & labelling on a regular basis to deliver “More Value for Less Money” to their millions of Customers all over the country and abroad. Latest Raw materials, Packing Containers, Colours & Chemicals are imported from
  47. 47. P a g e 46 | 94 China, Taiwan, Europe, United States, Japan etc., to ensure that the best possible finished products are brought on line for the consumers. The Firm has added another 60,000 Sq.Ft of Factory Floor Space in Ramapuram for its expansion and to ensure GMP Norms in the Production, Storage etc., and has mechanised many of the operations to ensure consistent quality. The firm has extended its marketing on an All-India level by opening up the States of Bihar, Chattisgarh, Delhi, Goa, Punjab, Haryana, Jammu & Kashmir, Jharkhand, Rajasthan, Uttaranchal, Himachal Pradesh, Uttar Pradesh, West Bengal, etc., – now totalling 22 states. There are two main depots & 25 Super Stockist points efficiently supplying stocks on the trot to 750 distributors all over the country, serviced by 600+ Marketing Staff & Beauty Advisors, at different levels. This Supply Chain ensures that our products reach over 135,000 exclusive retail & wholesale outlets all over India. The popularity of the brand is also evident from the fact that the products are available in markets around the world where Indians are settled. The Firm has two Testing Laboratories to test the Raw Materials & Finished Products for conformity with the Legal Requirements of the Drugs & Cosmetics Act & Rules and the relevant BIS Specifications. We also test the products for Bacterial & Micro Biological Contamination. We are now authorised by the State Drugs Control Directorate to carry out In House Testing and issue Test Certificates thereof. Eight of the ten partners are Post Graduates; all Partners have a wide range of experience in Development / Production / Testing / Logistics / Sales / Finance / Administration.
  48. 48. P a g e 47 | 94 2.2. Products: Dezller have big number of products range, and that’s why this USP of Dezller in present market time So now we discuss about the products of Dezller. So products of Dezller company divided in three part 1. Traditional Cosmetics 2. Color Cosmetics 3. Skin & Body care 1. Traditional Cosmetics 1.1. Traditional Cosmetics Kajal
  49. 49. P a g e 48 | 94 1.1.1 Traditional Cosmetics Kajal (Paste) Detail of Traditional Cosmetics Kajal Paste . Irritation-free intense-black and unperfumed kajal Kajal Standard in a smaller size in rich black colour and unperfumed. Time-tested formulation, brilliant shine and unperfumed.
  50. 50. P a g e 49 | 94 1.1.2. Traditional Cosmetics Kajal (Stick) Details of Traditional Cosmetics Kajal(Stick) Enhance with 7 herbals. Aloe, Amla, Daruharidra, Cineraria, Eyebright, Eclipta, Harichaki. Soft and Velvety feel. Easy application. Smooth application. Rich texture. Sleek and convenient packaging. Eyetex Kajal in special packing.
  51. 51. P a g e 50 | 94 1.2. Traditional-Cosmetics Detail of Traditional Cosmetics Kumkum  This products are using in Indian as traditional products. This products are using by Indian women after she married.  So Dezller provide this product in varies range like Kumkum Liquid with different colors, Kumkum Sticker, Kumkum stick, Kumkum powder ECT. 2. Color Cosmetics of Dezller In Dezller Colors Cosmetics products include different product 2.1. Eye Colors Cosmetics. 2.2. Nail Colors Cosmetics. 2.3. Lips Colors Cosmetics. 2.4. Face Colors Cosmetics.
  52. 52. P a g e 51 | 94 2.1. Eye Colors Cosmetics Details of Eye products of Dezller Matt-finish Eyeliner. A rich black liner with soft and smooth application. Waterproof and long-stay. Enriched with Aloe vera extract. Remove with Eyetex Dazller Lip and Eye makeup Remover. Blue, Green, Copper, Bronze and Silver. For Precision and finesse.
  53. 53. P a g e 52 | 94 New easy-to-carry packaging Velvety black eyeliner with superior application. Water-resistant Mascara. For thicker, softer lashes with more curl. Special Gel formulation. Give your Lashes a longer look. Easy nad quick application. Thicker luxuriant Lashes. Apply base coat marked as 1. Follow with top coat marked as 2. Eyetex Dazller combo pack. Mascara + Waterproof Eyeliner. Superior applicators.
  54. 54. P a g e 53 | 94 Soft feel and perfect colour. Rich texture and colour. Remove with Eyetex Dazller Eye and Lip makeup Remover. 4 in 1 : 3 sets of 4 shades each. Stick Eye shadow : Single colour. In conveninent package. Remove with Eyetex Dazller Eye and Lip makeup Remover. 2.2. Details of Nail cosmetics products of Dezlller Company Shine, smooth application with uniform colour. Formaldehyde-free, Toluene free, DBP free. Available in 2 Sizes 6.5ml and 12ml.
  55. 55. P a g e 54 | 94 Rich Shine, smooth application and silky feel with uniform colour. Remove with Eyetex Dazller Nail Enamel Remover. Toluene-free remover containing non-staining pigments will remove nail polish without drying out the nail or the surrounding skin. 2.3. Detail of Dezller Lips products : Creamy moisturizing nourishing lipstick. Elegant shine and colour. Contains Biovera oil, Almond oil, Wheatgerm oil, Avocado oil, jojoba oil, Vitamins A, C, & E, Sunscreen. Radiant shine, rich colour and texture smoothy and silky application.
  56. 56. P a g e 55 | 94 Creamy moisturizing nourishing lipstick. Elegant shine and colour. Creamy moisturizing nourishing lipstick. Elegant shine and colour. Colour-rich with high-gloss. Remove with Eyetex Dazller Eye and Lip Makeup Remover. Gentle make-up remover. Taking remover on fingertips, apply over makeup and wait for a few minutes. Gently wipe off using soft cloth. Clean face with mild soap water. Face cosmetics products of Dezller
  57. 57. P a g e 56 | 94 Detail of Face cosmetics products of Dezller. Excellent spreading and coverage. Matte and even look. Use in combination with Eyetex Dazller compact powder or Eyetex Dazller Face powder. Remove with Eyetex Dazller Eye and Lip makeup remover. Matte and non-oily look. Soft application. Use over Eyetex Dazller Moisturizing Liquid Makeup. Remove with Eyetex Dazller Eye and Lip makeup remover. Contains Sunscreen. Gives non-oily, even finish. Use over Eyetex Dazller Moisturizing Liquid Makeup.
  58. 58. P a g e 57 | 94 Refreshing Talc. Lingering Fragrances. 4 Variants available. Formulated with 9 Herbal Powders Antiihair fall. Prevent scalp dryness. Shikakai - Cleanser and Dandruff control. Fenugreek, Green gram - conditions and nourishes. Karisalai, Gooseberry - prevents greying. Natural Cleanser. Gentle and eco-friendly. 5 Variants - Papaya, Herbal, Cucumber, Orange and Lemon.
  59. 59. P a g e 58 | 94 Exfoliating face scrub with walnut and Apricot shell powders. Removes dead skin cells. Contains Natural Oil and Antioxidants. Protecting and Nourishing ingrediants. 2 Variants available - Strawbery and Chocolate. SPF15, PA +++ Acts against UVA and UVB related Skin damage. For all Skin types. Moisturization and Nourishment from Aloe vera and Avocado. Available in 2 sizes - 100ml and 25ml. Removes Dust and Make up. For all Skin Types. Enhanced with Centella and Cucumber. Available in 2 sizes - 100ml and 25ml.
  60. 60. P a g e 59 | 94 2.3. SWOT Analysis of Dezller Cosmetics D e z l l e r C o s m e t i c s Category Personal Care Brands Sector FMCG Tagline/ Slogan Convert women in beautiful women USP Products verity is the main USP of this company because STP Segment Regular cosmetics buyers, housewives, people having less knowledge about various cosmetic brands and their differences but purchasing power to buy the products Target Group Housewives interested in cosmetics buying in the comforts of their home ready to spend money Positioning Easily available good quality products near your doorstep, regular innovation in products, exclusive products not available in the market SWOT Analysis Strength 1. Differentiated business model to emerge as a prominent player 2. Steady revenue growth 3. Leading position gives power to attract new customers 4. Support sales activities by understanding customers' businesses better
  61. 61. P a g e 60 | 94 Weakness 1.Declining North American operations 2.Low market share as compared to bigger brands Opportunity 1.Restructuring initiatives for effectivenesss of the organisation 2.Enter emerging markets 3.Re branding strategy to drive consumer demands Threats 1.Strong competition 2.Competitive advertising and distribution network of competitors
  62. 62. P a g e 61 | 94 2.4. Competitors of Dezller 1. Hindustan Unilever Hindustan Unilever Limited (HUL) is an Indian consumer goods company based in Mumbai, Maharashtra. It is owned by Anglo-Dutch company Unilever which owns a 67% controlling share in HUL as of March 2015 and is the holding company of HUL. HUL's products include foods, beverages, cleaning agents, personal care products and water purifiers. HUL was established in 1933 as Lever Brothers and, in 1956, became known as Hindustan Lever Limited, as a result of a merger between Lever Brothers, Hindustan Vanaspati Mfg. Co. Ltd. and United Traders Ltd. It is headquartered in Mumbai, India and employs over 16,000 workers, whilst also indirectly helping to facilitate the employment of over 65,000 people. The company was renamed in June 2007 as "Hindustan Unilever Limited". Hindustan Unilever's distribution covers over 2 million retail outlets across India directly and its products are available in over 6.4 million outlets in the country. As per Nielsen market research data, two out of three Indians use HUL products.
  63. 63. P a g e 62 | 94 2. Procter & Gamble (P&G). P&G is one of the largest and amongst the fastest growing consumer goods companies in India. Established in 1964, P&G India now serves over 650 million consumers across India. Its presence pans across the Beauty & Grooming segment, the Household Care segment as well as the Health & Well Being segment, with trusted brands that are household names across India. These include Vicks, Ariel, Tide, Whisper, Olay, Gillette, Ambipur, Pampers, Pantene, Oral-B, Head & Shoulders, Wella and Duracell. Superior product propositions and technological innovations have enabled P&G to achieve market leadership in a majority of categories it is present in. P&G India is committed to sustainable growth in India, and is currently invested in the country via its five plants and over nine contract manufacturing sites, as well as through the 26,000 jobs it creates directly and indirectly. Our sustainability efforts focus on Environmental Protection as well as Social Responsibility to help develop the communities we operate in. P&G operates under three entities in India - two listed entities “Procter & Gamble Hygiene and Health Care Limited” and ‘Gillette India Limited’, as well as one 100% subsidiary of the parent company in the U.S. called ‘Procter & Gamble Home Products’.
  64. 64. P a g e 63 | 94 Natura Brasil is Brazil's number 1 cosmetics manufacturer, and the country's leader in the direct sales sector. Based in Cajamar, São Paulo, the company employs around 7000 staff in seven countries: Brazil, Argentina, Chile, Mexico, Peru, Colombia and France. Sustainable development has been the company's guiding principle since it was founded in 1969. A passion for customer relations led the company to adopt direct sales as its main commercial strategy. At present, more than 1,421,000 Consultants - including 1,175,000 in Brazil and around 246,000 abroad - promote the company's values and products to consumers. Innovation is at the heart of Natura Brasil's sustainable development policy. Last year, the company spent61.5 million euros on product development, launching 164 products and achieving an innovation index(the percentage of revenue from products launched in the last two years) of 64.8%. 3. Nature
  65. 65. P a g e 64 | 94 Chapter: 3 Competitors Analysis
  66. 66. P a g e 65 | 94 3.1. Unilever Introduction of Unilever With more than 400 brands focused on health and wellbeing, no company touches so many people’s lives in so many different ways. Our portfolio ranges from nutritionally balanced foods to indulgent ice creams, affordable soaps, luxurious shampoos and everyday household care products. We produce world-leading brands including Lipton, Knorr, Dove, Axe, Hellmann’s and Omo, alongside trusted local names such as Blue Band, Pureit and Suave. Responsible business For us, sustainability is integral to how we do business. With 7 billion people on our planet, the earth’s resources can be strained. This means sustainable growth is the only acceptable model of growth for our business. The Unilever Sustainable Living Plan sets out to decouple our growth from our environmental impact, while at the same time increasing our positive social impact. Our Plan has three big goals that by 2020 will enable us to:  Help more than a billion people to improve their health and well-being.  Halve the environmental footprint of our products.  Source 100% of our agricultural raw materials sustainably and enhance the livelihoods of people across our value chain.  To embed sustainability into every stage of the life cycle of our products, we’re working with our suppliers to support responsible approaches to agriculture. We’re also learning from NGOs and other organisations, recognising that building a truly sustainable business is not something we can do without expert advice.
  67. 67. P a g e 66 | 94 At the heart of our business is our purpose – to make sustainable living commonplace. Companies are increasingly realising the role that purpose can play and Unilever along with many others has signed up to the Blueprint for Better Business initiative, which helps business develop their purpose and embed it within the organisation, as well as move the conversation of the business sector as a whole. We believe that as a business we have a responsibility to our consumers and to the communities in which we have a presence. Around the world we invest in local economies and develop people’s skills inside and outside of Unilever. And through our business and brands, we run a range of programmes to promote hygiene, nutrition, empowerment and environmental awareness. Impact & innovation We realise innovation is key to our progress, and through cutting-edge science we’re constantly enhancing our brands, improving their nutritional properties, taste, fragrance, or functionality. We invest around €1 billion every year in research and development, and have established laboratories around the world where our scientists explore new thinking and techniques, applying their expertise to our products. Consumer research plays a vital role in this process. Our unrivalled global reach allows us to get closer to consumers in local markets, ensuring we understand their diverse needs and priorities. About our brands From long-established names like Lifebuoy, Sunlight and Pond’s to new innovations such as the Pureit affordable water purifier, our range of brands is as diverse as our worldwide consumer base. Unilever has more than 400 brands, 14 of which generate sales in excess of €1 billion a year. Many of these brands have long-standing, strong social missions, including Lifebuoy’s drive to promote hygiene through handwashing with soap, and Dove’s campaign for real beauty. Business facts & figures  Our turnover was €48.4 billion in 2014  Emerging markets now account for 57% of our business  We have 13 brands with sales of more than €1 billion a year  More than 172,000 people work for Unilever  We are the number 1 fast-moving consumer goods employer of choice among students in 26 countries
  68. 68. P a g e 67 | 94  43% of our managers are women  Around 397 million people reached by end 2014 through our programmes on handwashing, safe drinking water, sanitation, oral health and self-esteem We have reduced our waste impact by around 11% since 2010 Introduction of Unilever in Brazil WITH BRANDS AND PRODUCTS ARE PRESENT IN ALL BRAZILIAN HOMES, UNILEVER IS ONE OF THE LEADING COMPANIES OF THE COUNTRY'S CONSUMER GOODS INDUSTRY This for 85 years in the lives of Brazilians, Unilever is an Anglo-Dutch company that produces consumer goods in 190 countries in the categories of personal care, food, cleaning, refreshment (soy beverages and ice cream) and food away from home. Today, the domestic market is attended by 700 products from 25 brands - including established names like Omo, Comfort, Cute, Silk, Lux, Dove, AdeS, Close Up and Rexona. We reach 100% of Brazilian homes over a year and recorded the consumption of 200 company's products by the second in the country, with leadership in segments such as powdered detergents, deodorants and ice cream. In total, around 13,000 employees work at Unilever Brazil. In addition to the headquarters in São Paulo (SP), we have nine factories in four states - São Paulo, Minas Gerais, Pernambuco and Goias. - And more than 20 distribution centers in the Northeast, Midwest, Southeast and South Over 90% of our local production is for the domestic market. In recent years, we have strengthened our commitment to sustainable development through management practices, communication and business aligned to the Unilever Sustainable Living Plan - designed globally and disseminated among subsidiaries (read more here). This commitment is reflected in actions ranging from the direct activities to our value chain, involving customers, suppliers, consumers, governments and communities. Our vision expresses the desire to influence the transformation of the mode of life; for this we have as priorities the reduction of environmental impact, promoting health, hygiene, consumer awareness and well-being and responsible business growth, so that it is able to positively impact the Brazilian society. 9 factories in four states (SP, MG, GO and PE) »» 200 products consumed per second »» 86% of households impacted by our products per month (and 100% per year)
  69. 69. P a g e 68 | 94 »» More than 13 thousand employees » "About 6 thousand suppliers  We work to create a better future every day.  We help people feel good, look good and get more out of life with brands and services that are good for them and for others.  We will inspire people to take small everyday actions that , together, can make a big difference to the world.  We will develop new ways of doing business that will allow us to double the size of our company while we reduce our environmental impact. OUR VISION WE WANT TO BE A COMPANY CAPABLE OF DELIVERING TO CONSUMERS PRODUCTS THAT PROMOTE THE IMPROVEMENT OF LIVING STANDARDS Business Model of Unilever in Brazil Our business model bet on the combination of innovative products and strong brands. In the last two years we have invested in the renovation of 70% of the portfolio Operating model in Brazil seeks to combine investments in innovation, leadership, maintenance and growth in new markets and categories Second largest company worldwide operation, R $ 15.3 billion in gross sales in 2013, Unilever Brazil has an essential role to the performance of global business and to comply with the Sustainability Plan goals. Our growth strategy includes both more responsible and efficient activities as investment in satisfaction of customers and consumers, focusing on innovation, on the strength of the brands and new markets, in line with the transformation of Brazilian society. One of the recently valued segments is the concentrated liquid cleaners, strong trend in many countries. Since the launch of concentrates of Omo line in 2010, Unilever Brazil won 50% of the domestic liquid market, supported also by the brands Cute, Comfort and Surf. In addition to the competitive advantage in price and use of raw materials - due to the reduction of water consumption and packaging - this type of product significantly reduces the impact on logistics and the generation of post-consumer waste The company's business model considers both maintaining leadership in segments earned, such as washing powder and soy beverages, as growth in other categories. In hair care products, for example, Unilever has great opportunities to grow in the domestic market - for this, the bet is central to innovation, through brands like TRESemmé and silk. Between 2011 and 2012, we invested in the renovation of 70% of the portfolio of the four major categories, following global guidelines.
  70. 70. P a g e 69 | 94 Another strategic focus is on regions of the country who have gone through processes of economic development, with the output of thousands of Brazilians out of poverty line and the expansion of the local consumer market. In recent years, we recorded progress in specific categories, and we have goals for the future, aligned with the business plan and our sustainability strategy. Business strategy of Unilever in Brazil OUR PURPOSE IS TO MAKE SUSTAINABLE LIVING COMMONPLACE We work to create a better future every day, with brands and services that help people feel good, look good and get more out of life.
  71. 71. P a g e 70 | 94 Unilever’s exposure The below graphic shows that Unilever gets over 57% of its revenue from emerging markets. The key emerging markets in order of sales are Brazil, India, Poland, China and South Africa and together they make up around a quarter of Unilever’s revenue Since May we have seen the Brazilian real, the Indian rupee and the South African rand weaken against Western currencies. However, the Chinese yuan has held up along with the Polish zloty and economic growth in China has started to improve.
  72. 72. P a g e 71 | 94 Marketing mix Product  Vivar, Brazilian term for Life.  Viver would be formulated and available in both Detergent and Laundry Soap granting access to two growing markets with one branding strategy.  The primary benefits of Viver will be in line with Attributes that are most important to NE consumers.  Cleanliness, whitening, Productivity  Smell, softness  Ability to remove stains  With this in mind Unilever’s formula for Viver will be priced half way between Minerva and Campiero. To avoid cannibalisation of Minerva, Viver would omit lesser demanded attributes such as Dissolving Power and Harm to Colours which will be decreased to an acceptable level. The strategic map would look as follows:
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