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After opening its first Brazilian retail brick-and-mortar in July 2012, Sephora is aiming to open an additional 39 stores in the country over the next five years.
São Paulo’s JK Iguatemi Mall (home to the first Van Cleef & Arpels, Lanvin and Topshop stores in Latin America) was chosen as the site for the first location, and near-term plans include the opening of two more locations in São Paulo and another in Rio de Janeiro—all in shopping malls.
By 2017, the LVMH group, which owns Sephora, expects Brazil to be among the brand’s top 10 markets. “We decided to invest in Brazil four years ago,” said Christopher de Lapuente, global president and CEO, Sephora. “And in 2010, we took the first steps to enter the market. Our goal is to expand sales in the country to offset the downturn experienced in most [of Sephora’s] traditional markets.”
The brand does not intend to start manufacturing in Brazil as yet, and the products will continue to be imported from France and the U.S. Brazilian import taxes for cosmetics (18–35%), as well as currency fluctuation, have resulted in significantly higher prices than those in the U.S., but according to Lapuente, the Brazilian consumer is willing to invest in high-quality products. He has not commented on the possibility of expanding other LVMH brands in Brazil, but the group also currently owns 70% of Brazil-based online beauty retailer Sack’s (see “LVMH to Acquire Leading Brazilian Online Specialty Beauty Retailer.”)
Data from the Brazilian Association of Cosmetics (ABIHPEC) showed the Brazilian beauty market recorded sales of R$15.4 billion in the first half of 2012, an increase of 10.3% over the same period last year. The market is predicted to grow about another 2% by the end of 2012, ending 12% up.
According to João Carlos Basilio, president of ABIHPEC, the industry’s deficit should increase to US$180 million. In 2011, imports exceeded exports by US$126 million. “Imported cosmetics are increasingly growing in popularity and the domestic industry struggles to offer competitive products,” said Basilio. The adverse trade balance is not a concern, though. “All multinationals are investing in Brazil, and they need to consolidate their operations here before they start manufacturing locally,” he said.
Basilio believes better income distribution is one of the driving factors for the success of the Brazilian beauty market. “Cosmetic sales represented 1.7% of GDP in 2011 and are expected to reach 2% this year,” he noted.