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Lancôme Seeks to Manufacture Fragrances in Brazil

Fernanda Bonifacio
Inside 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.

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.

P&G Green Effort Benefits from Brazilian Partnership

P&G announced it will start using a renewable, bio-derived plastic in packaging for Pantene, CoverGirl and Max Factor products worldwide. The announcement was made at a press conference that included Brazilian supermodel Gisele Bündchen, who is the Pantene endorser in Brazil.

Produced by Brazilian petrochemical Braskem, the sugarcane-based resin can, according to a press announcement, remove up to 2.5 tons of carbon from the atmosphere for every ton of item manufactured. P&G’s products will receive the “I’m Green” label, indicating their sustainable origin. Braskem also has entered into partnerships with other companies—including Natura, Johnson & Johnson and Shiseido.

According to P&G, the global pilot project will take place over the next two years, and the first products will be available on the market in 2011. “The partnership will strengthen Procter & Gamble’s initiatives to promote sustainable development,” said Gabriela Onofre, director of corporate affairs, P&G Brasil. She explained Pantene will be the project’s flagship due to its high growth rates, which have reached 40% on an annual basis.

With LVMH Acquisition of Sack’s, Sephora Seeks Aggressive Growth

With the July 2010 purchase of 70% of Sack’s, an online retailer of fragrances and beauty products and one of the leading companies in Brazil’s specialty beauty distribution channel, LVMH’s continued expansion in the Brazilian market will include the opening of new stores and the eventual manufacturing of Sephora products in the country.

According to Carlos André Montenegro, founder and CEO of Sack’s, LVMH first made acquisition inquiries in July 2009, and negotiations began in January 2010. “Sephora has been probing the Brazilian market for 10 years,” he said. “In [conjunction], LVMH’s [success] in Brazil has always followed our growth. [LVMH brand] Dior is Sack’s champion brand in sales.”

The value of the transaction is rumored to be worth US$120–200 million, but Montenegro wouldn’t confirm the figures. He said the company hopes to have the first Sephora stores open in Brazil within 18 months. “We intend to slowly change our name from Sack’s to Sephora, and obviously increase our portfolio of LVMH product.”

Amway Forecasts Doubling Sales in Brazil

Amway’s Brazilian subsidiary plans to grow 100% by the end of 2010 and up to 200% by 2015. According to marketing director Davi Damazio, the company invested US$5 million in Brazil over the past two years. “In early 2010, we recorded a total of 50,000 consultants, with the southeastern region accounting for 50% of sales,” he said. “By the end of the year, our goal is to reach 125,000 consultants.”

To facilitate brand expansion, Amway has invested more than US$500,000 in the opening of its first Experience Center in São Paulo. The space is dedicated to serving and educating both resellers and customers, who can try and buy cosmetics, vitamin supplements and household products at the center. “Up until then, our stores were equipped to exclusively serve consultants. Now [the center] also allows end customers to get to know our products better,” said Damazio.

Meanwhile, the franchise network O Boticário prepares to take its first steps toward the direct sales channel. Created over the past 18 months, its pilot direct sales project will be primarily deployed in two Brazilian cities. The move aims to boost sales of 915 franchisees by offering them a new channel for selling O Boticário products.

Natura to Begin Manufacturing Outside Brazil

Natura plans to elevate its presence in other South American countries by manufacturing outside of Brazil. According to vice president of financial and legal affairs Roberto Pedote, Natura’s cosmetics will be produced in at least one of the three countries where it has consolidated operations—Argentina, Chile and Peru. Together, these countries recorded growth of 122.7% in net profit in the second quarter 2010, totaling US$1.3 million.

“We are not planning to build plants in this first stage but to partner with local producers,” said Pedote, who also noted that the manufacturing pace should intensify and, by the end of 2011, the three countries should have developed production structures.

Natura’s operations in the first half of the year accounted a net profit of US$195 million, with an increase of 8.5% over 2009. Pedote explained the results were primarily due to new launches.

Reckitt Benckiser Debuts in Brazil’s Beauty Market

Reckitt Benckiser will debut in the Brazilian market with global brand Dettol. Accounting for one-third of the company’s growth in 2009, Dettol will begin marketing bar soaps, liquid soaps and hand sanitizers nationwide. At the outset, products will be imported from China, but they are expected to be manufactured in Brazil soon.

The brand will compete against Colgate-Palmolive’s Protex for the leadership of the antibacterial market—a category that accounts for 12% of total soap sales. “We believe that, in the next five years, this segment will double in size and reach a market share of 24%,” said Bruna Fausto, product manager, Dettol. The brand will also be marketed in Colombia, Venezuela, Peru, Ecuador and Costa Rica in 2010.

Fernanda Bonifacio is a Brazilian journalist who focuses on the beauty industry, and has been published in the U.S. and Europe. During 2002–2008, she represented ABIHPEC and its member companies globally.

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