This past winter holiday I had the privilege of travelling to Rio de Janeiro. A city known for the celebrated Christ the Redeemer statue, Carnaval, wild New Year’s fireworks displays, Havaianas flip flops, flamboyant beachgoers and caipirinhas — to which you can now add the 2014 FIFA World Cup and 2016 Summer Olympics. With everything Rio has to offer, this emerging market is becoming a catalyst for attracting business and cementing South America’s importance in global commerce. While so many marketers are still focusing on India and China, there are boundless opportunities for brands to expand in Brazil.
As I was exploring gourmet eats in Leblon, trendy storefronts in Ipanema, beaches of Copacabana and hilltops of Santa Teresa, I couldn’t stop thinking how the city is a coming-of-age Bohemian metropolis. The city buzzes with urban energy and creative talent. Rio is diverse. Influences from various cultures can be seen through the city’s music, art and food. Rio’s residents encompass a varied demographic from the world’s richest to the favelas (unsanctioned shantytowns) crowding the hilltops.
The favelas, which were “no-go” zones due to drug gang violence, are now part of the “pacification” program to help make the city safe for the World Cup and Olympics. In fact, this past New Year’s Eve 2013, some of the city’s trendiest parties were in favelas—and with a high price tag. A significant proportion of favela residents are budding entrepreneurs with small businesses, showing that there is a new empowered middle class growing. Brazil is in a stage of economic transformation and this is a market brands can’t afford to ignore.
Brazil is now the world’s sixth largest economy. According to a 2012 NewMedia TrendWatch report, Brazil is the world’s fifth-biggest online market with 88.4 million people reported to have access to the Internet and a large proportion of people actively accessing the Internet. An open and expressive culture, Brazilians also actively engage in digital and social media such as Facebook, YouTube, Twitter, Tumblr and LinkedIn. In fact, for Facebook, Brazil is one of the fastest growing markets. Mobile phones are also a key accessory with many young Brazilians using multiple SIM (Subscriber Identity Module) cards, rivaling highest world’s usage in Italy.
With a fast-growing middle class demanding better-quality products, commerce is surging upward. Many major fashion brands like Coach, Tiffany and Kate Spade are opening up stores in Rio de Janeiro and Sao Paulo. Fashion weeks in these cities are on par with some of the world’s premier fashion events in New York, Paris, Milan and London. A nation filled with entrepreneurs, creativity and innovation, has led to many local Brazilian brands like Havaianas to flourish on a global stage.
Foreign investment has jumped and economists believe that Brazil is headed for a rebound, supported by lower interest rates and government tax incentives. There have also been recent discoveries of large offshore oil deposits near Rio de Janeiro by energy giant Petrobras, which could make Brazil one of the world’s biggest oil producers.
For foreign brands, all of this means they shouldn’t be shy about planning ahead to not miss out on this opportunity. Back 20-40 years ago, French grocery giants like Carrefour and Casino and America’s Walmart first entered Brazil and now account for about a third of grocery sales in the nation. On the flipside, British grocer Tesco opted out and missed the opportunity as Brazilian grocery market became fairly sophisticated.
This is exactly what some Asian tech brands are paying attention to. Aggressively moving into Brazil to take advantage of this emerging market enables these brands to be one step ahead of U.S. companies like HP and Google. According to WSJ.com, Chinese brand Lenovo, the world’s #2 PC vendor, expects more than 20% of the next half-billion PC buyers to be in Brazil. Lenovo is in the process of establishing operations in Brazil which means they will assemble, design and source more of the products locally to reduce taxes and compete better with local PC vendors. Similarly, South Korea’s Samsung Electronics, made a push into Brazil’s market and has now become one of the top PC vendors and top smartphone vendor in the country.
Of course, there are hurdles to entering a new market. Brands like Apple, Home Depot and IKEA haven’t opened retail locations in Brazil just yet, and it’s unknown whether there is a plan to do so. It’s possible that inconsistencies in business model, pricing strategy and various logistical factors could be the cause.
To successfully establish themselves in Brazil, brands need to immerse themselves in the local habits to avoid the one-size-fits-all approach. In context of Latin American countries, Brazil has its own distinct culture and some marketers may fail to recognize this. Apart from Portuguese, not Spanish, being the national language, there is also more African, Japanese and Italian influence. Brazilians do not consume popular Hispanic culture like television and music that dominate the rest of Latin America. Different local customs may trigger unexpected buying behaviors and ways of doing business. So, while an attractive opportunity, companies need to proceed with caution.
Building a global brand strategy begins with research. Conducting extensive brand research is an absolute must to help uncover key insights about local culture, analyze the market and understand what resources your brand has for international expansion.
Despite some of Brazil’s growing pains, there is tremendous economic opportunity. The road ahead appears to be prosperous and this colorful nation should be on everyone’s radar.