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O Boticário Surpasses McDonald’s to Become Brazil’s Largest Franchise Chain

By: Fernanda Bonifacio
Posted: July 9, 2012, from the August 2012 issue of GCI Magazine.

With revenues of R$5.5 billion and 3,260 stores, 795 of which opened between 2008 and 2011, O Boticário has surpassed McDonald’s to become Brazil’s largest franchise chain. The company is now targeting smaller cities and plans to open another 250 points of sale in 2012. Currently, the company is present in 1,600 cities.

“We’re targeting towns with a minimum population of 30,000 inhabitants,” says Andrea Motta, sales and marketing director of O Boticário.

In 2008, O Boticário executives wondered whether the market would support a large-scale franchise expansion, and considered entering the direct sales market—a strategy later adopted by the company’s Eudora brand. To support O Boticário’s growth, the company created a new design concept for all stores and invested in the diversification of the product mix. In 2011, 430 new products were launched in the market.

According to franchise experts, O Boticário’s main competitors haven’t grown at the same speed. Figures from the Brazilian Association of Franchising (ABF) reveal that retail chains such as L’Ácqua di Fiori and Água de Cheiro account for approximately one-third of the number of stores and one-fifth of the revenues recorded by O Boticário.

Color Sales Increase 15.7%

Accounting for 7.9% of total beauty sales in Brazil, the color cosmetic segment increased 15.7% in 2011, reaching sales of US$3.7 billion, according to Euromonitor International.

The arrival of a greater variety of products designed to suit the tropical climate (products that remain as applied in hot and humid weather) is among the factors that have contributed to the increase in makeup sales, and international brands are stepping up their efforts to take advantage of the opportunity the market offers.

Estée Lauder’s MAC Cosmetics opened 23 stores throughout Brazil over the past decade, and Sephora is planning the launch of five multibrand outlets by the end of the 2012. U.S. nail brand OPI, which entered the Brazilian market in late 2011, has been able to set the price point of a bottle of nail polish at R$35 in approximately 300 points of sale, including online stores and beauty salons.

Another indicator of the vibrance of the color cosmetics segment in the Brazilian market, French company Beauteam, which organizes the MakeUp in Paris and MakeUp in New York trade shows, announced the launch of its first São Paulo edition in 2013, with date and venue to be confirmed.

L’Oréal to Market Kiehl’s Across Brazil

With eight new stores scheduled to open by the end of 2012, L’Oréal is working to spread its Kiehl’s brand across Brazil. Kiehl’s currently has two stores in the country, both of which are located in São Paulo. The expansion plan also includes the opening of new stores through franchise agreements, initially in southeastern Brazil, with potential for expansion to other regions.