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Lancôme Seeks to Manufacture Fragrances in Brazil

Carlos André Montenegro, founder and CEO, Sack’s, will oversee the transaction of Sack’s to Sephora while increasing LVMH’s presence in Brazil.

By: Fernanda Bonifacio
Posted: November 5, 2010, from the November 2010 issue of GCI Magazine.

Lancôme is exploring the potential and opportunities in manufacturing its fragrances in Brazil. The idea is to use one of parent-company L’Oréal’s plants already established in the country to build a production line dedicated to fragrance.

Although the company defines the project as “embryonic,” marketing director Cinthia Marino expects positive findings when Lancôme completes its evaluations. “We are struggling to start producing in Brazil,” said Marino. “But it’s the only way to overcome the heavy tax burden that makes us uncompetitive in the [Brazilian] market.”

According to the Brazilian Institute of Tax Planning, taxes levied on imported perfumes account for 78.43% of the product cost. As for those manufactured in the country, the percentage is 69.13%. Considering other import costs, Marino believes the domestic manufacture of perfumes could lead to a retail price drop of more than 50%.

In 2009, Lancôme carried out a test to determine the potential for the brand in Brazil. The company imported a limited edition of a small bottle size of Hypnôse, which was sold for R$99 or approximately US$58. “In four months, we quadrupled the volume of sales,” said Marino.

Perfumes and fragrances account for 20% of Lancôme’s sales in Brazil. If the project is approved, the country will be the first in Latin America to manufacture Lancôme’s products, which has plants in Europe, Asia and the U.S.

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