Full meeting day in Sao Paulo: Natura, Globo and Bain

Monday started off very early with a bus ride at 7:45am en route to the Natura campus in Cajamar, a municipality that is part of the state of Brazil. Natura is Brazil’s leading manufacturer of cosmetics, fragrances, and personal hygiene products. It focuses on being an eco-friendly and sustainable company. You can sense what the company is about as soon as you step on to their campus. It is surrounded by beautiful greenery and its design is based on feng shui principles.

Besides its décor, the company offers employees a wide variety of services including a large child day care facility, a nice cafeteria, and even entertainment and sports facilities. These are just some of the many benefits the company provides for its employees. It even has exercise and stretching areas outside the manufacturing and shipping facilities for employees to use during their breaks.  After the tour, I don’t think many of us would have minded working in the comfort provided at Natura!

Yet, the most interesting fact about Natura is that, unlike typical CPG companies that we know, it uses a direct sales model. Its sales representatives are called consultants. It sells  products all over Latin America and even in France, where Natura just opened a store (the only actual retail store!).  The direct sales model works well in Brazil because it gives access to products to people all over the country, even in the most remote areas and it gives opportunities for many people with few resources to run, in essence, their own business.  A key understanding of its customers through communication with its consultants is one of the drivers of its product development and continued success. In São Paulo Natura is trying out some concept stores where customers can try products and be directed to the nearest consultant to purchase the product. In addition, Natura also has branded trucks that provide similar product displays and can travel around the country.

One of the students in our tour summarized well one of the most important reasons for which Natura has been successful, especially in Brazil. Lorie Yin says:  “I am amazed that they fully embrace the bio-diversity of their country and that they are passionate about connecting the entire country and bringing its beauty and nature to all of its customers”.

We had a chance to try out many of their products and were disappointed that we could not buy any of them on the spot. Impressed with the quality of the products we were eager to ask if the company was considering entering the US. Sadly, it is not the right time yet as it would be too costly for them in terms of advertising to be able to acquire any share of the beauty and cosmetics market in the US. Hopefully it can come to a town near us soon!

After a nice morning at Natura, we were ready for a nice big lunch at South Place’s Steak, a typical churrascaria. A Brazilian churrascaria is basically a barbeque steakhouse. The style used to cook the different types of meat is a traditional South American rotisserie style. This type of traditional rodízio locales have a large all you can eat salad bar and passadores or waiters that bring different types of meat (including pork, beef, chicken, and lamb) to the table. There was something for everyone and the choices were endless, including a delicious dessert cart! Yet, the highlight of the meal for many of us was chatting with João Loes, an independent reporter for Istoé ((www.istoe.com.br/). João is a weekly magazine that has whole sales at around 450,000 copies a week, on average. He is a general interest reporter with a focus on architecture, urbanism, education, sports, religion, and history, so we peppered him with questions that ranged from how journalism and media worked in Rio to the challenges ahead for Brazil’s world cup.

Some of the interesting facts we learned included the emergence of Brazil’s Class C. In Brazil, social classes are commonly denominated from letters A to E. Upon more research, I found that Class C has an average monthly gross income above 2,040 BRL. This class has been rising in economic power and products like an X-box or even cars which were previously out of reach for them, are much more accessible now. He has seen this class rise very quickly and it is very telling of how much better some sectors of the society are doing as the country grows. However, not all is that rosy in Brazil. João is very skeptical about Brazil being able to get ready for the World Cup in time. Many of the contracts for the infrastructure development necessary for the preparations have yet to be fully confirmed and signed. And the country is just over two years away from the event! Many of the reasons why Brazil is not moving forward on infrastructure development are also telling of the country’s challenges as it tries to continue its past fast paced growth rates. These reasons include poor traction in many key reforms like those of labor, corruption throughout all the levels of government, and poor education and skilled workers.

However, he was not the only one skeptical of Brazil’s future. Our next stop was at Globo, the giant media conglomerate in Brazil, where we got to meet with the famous Brazilian journalist William Waack. He is the host of a late night news guest show called Jornal da Globo, and he is known for his candid and at times controversial reporting style. A brief “googling” of his name will pop up several “scandalous” stories including some on-air slips of the tongue, Wikileaks involvement, and a “Big Brother Brazil” story that started with a tweeted picture. Indeed, he was as candid and open in our meeting.

Globo Headquarters

Before our meeting with him, we took a brief tour of the Globo facilities including views of morning TV show studios and the news correspondence studios.

Spectacular view from the Main Studio used for news reporting

Globo is the fourth-largest public TV commercial network in the world and one of the largest producer of soap operas. It reaches 99.5% of the potential viewers and basically the entire Brazilian population due to the many network affiliates it has.

As William told us, this creates a unique situation in Brazil because at any given time, everyone in the country is basically watching the same thing. TV is the outlet that reaches the most people in the country; and more than in any other part of the world. It is also a public company and not controlled in any way by the government. In fact, because Globo has such a high reach of the Brazilian population, there is not that much political pressure as politicians need Globo, not the other way around.  Globo essentially becomes “the voice of the masses” but not through journalism, it happens through soap operas. He told us that in Brazil, soap operas define a lot of the culture and social trends in the country. Not only are they well written, but they have an emotional appeal that continues to draw audiences every night. It “strikes a nerve, culturally speaking”. Soap operas are much more progressive in social issues than any journalist is in Brazil.

Also, because Globo has such reach, it is a major player in the World Cup event preparations. However, Mr. Waack is skeptical of these preparations because he thinks it will be too difficult to organize the country in time for the event, mostly due to the high degree of corruption involved in government affairs. He also thinks it is not worth it because if you do a simply cost/benefit analysis, the costs of its development are too much of a burden. For example, a city like Rio would basically have to be on Holiday for the entirety of the event in order for the traffic to flow. The hangover effect after the events, whether the World Cup or the Olympics, will be too great to justify the expenditure.

It is not common to hear grim perspectives on Brazil, which is why Mr. Waack’s comments were interesting and though provoking for many of us. For him, the country has serious problems to overcome in its future and he doesn’t believe the current administration is addressing them properly. In his opinion, corruption has been institutionalized in Brazil and as such, it is very difficult to tackle and overcome. It is part of some people’s mentalities. He believes education is Brazil’s Achilles heel. Poor education levels make Brazil a bad labor resource for international companies. It is hard for the country to compete internationally in any industry but commodities and he does not believe you can build and sustain a country purely on commodities.

Our final meeting of the day was at Bain & Co with Stefano Bridelli, Partner and one of the founders of the São Paulo and Brazil office.

Stefano is a proud CBS alumn who interestingly enough got his offer at Bain from Mitt Romney, one of the Republican primary candidates.  After spending time in the US, he started the office in Brazil which has since grown to become the biggest BRIC Bain office. He shared with us some very interesting facts on the Brazilian business culture which he has come to understand thoroughly after growing the office and living here for over 10 years. His insights were incredibly interesting to us and will certainly become useful if and when we have the opportunity to do business in Brazil.

He did not have much trouble assimilating to the Brazilian culture because Brazilians are very welcoming people who try to help you integrate into their culture. However, it is difficult to transact with people beyond the C-level executives without knowing Portuguese. The Brazilian friendliness also translates into much more social contact than is usually accepted in American or European companies. For this very reason, Brazilians are very careful about their hygiene and appearance. (For example, a fun fact is that Brazilians brush their teeth, on average, over 3 times a day! It is a little under 2 times in America.) Brazilians are also very family-oriented people which, in Stefano’s opinion, is a value that brings connectivity and stability to the way people do business. It provides the protection and self-assurance that most economic systems find hard to provide.

Given Bain’s private equity background, he also shared the reasons why PE interest in Brazil grew so much in the past 3 years.  Compared to 14 years ago, there are now more assets to buy in market, more businesses worth over 1bn, a capital market to facilitate buying and selling, and lower interest rates.

Finally, after a busy day of meetings, we wrapped up the night at Original, a boteco, with great drinks and local food.

Cristina Benitez ’12

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