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Theo's Adventure Capitalists – 3. Brazil

In this, the last programme in the series, Theo Paphitis introduces three British companies selling; make-up, chocolate and arts and crafts via the Internet. They are all looking to do business in Brazil.

Sleek is a cosmetics company based in East London and they specialize in make-up for darker skins. Success over the last couple of years has come about from accessing the High Street through one of the country's leading pharmacy chains; Sleek wish to re-create this success in Brazil.

The second company is the 200 year-old global conglomerate Cadburys who wish to sell chocolate in Brazil. The problem is that Kraft and Nestle already have a 90% share of the market with Toblerone and Kit-Kat for example.

The third company is an Internet start-up. Peter Macateer started Dreamaid after visiting some of the poorest countries in the World. Individual craftsman can load details of their products online for free. Anything they sell from the site Dreamaid take a 10% commission. The numbers sound fantastic, but Theo says if something sounds too good to be true, then it usually is. He is worried.


The British Consul Dinner

Theo has arranged dinner at the official residence of the British Consul, General Martin Raven, "our man in San Paola", in charge of Trade. Joined by top people from the Banking, Retail and Financial sectors this is a wonderful opportunity to get some inside business tips about doing business in Brazil. The Chairman of HSBC in Brazil explains that business is about relationships, everyone expects to be treated the same. The relationship comes before doing business. Retail Consultant Marcos Gouvea de Souza further explains that it is a very young market with an average age of 24, increasing by 3% per annum.

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Sleek

The make-up market in Brazil is worth a billion dollars a year. Tanika and her colleague Melika explore the local supermarkets and learn that make-up products are sold from simple display racks in blister packs with no opportunity to display or demonstrate products.. This is because most cosmetics are sold door to door. Thus you need to change the market or adapt.

Tanika arranges a meeting with retail guru and cosmetic specialist Manuel Simoy and learns that top cosmetic brands like Revlon and Loreal have previously failed to establish their businesses in Brazil. Theo doesn't think the girls have listened to what Manuel was trying to tell them. However Sleek are determined and are successful in a pitch to the Carrefore supermarkets buyer. The last crucial piece is to find a distributor. You need someone on the ground to drive the brand, says Tanika. Jacob Nir, a major distributor, says that you need to invest heavily in a brand. Without that you will fail. She is allocating 5% out of the 40% distributor's cut. Not enough says Theo.

Upon return to the UK Theo wants to ask the question, were Sleek prepared to up the marketing spend? The answer was yes, they had upped it to 19% and signed a distributor contract the previous week. Theo was delighted.

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Dreamaid

Although the artisans have no problem with the 10% commission to sell on Dreamaid's website Theo doesn't think it's that simple. There are millions of websites out there and you need something special to separate you from the crowd.

Although signs are good for the Internet business Theo believes finding a way to get visitors to the site is paramount. At present Dreamaid is only spending £300 per month on click per view.

Back in the UK Peter of Dreamaid has some good news and some bad news for Theo. The site now has about 5,000 hits per month, but they have only sold about a £1000 of goods on which they have made 10%. That was the good news.

Peter now realizes that the marketing expenditure associated with his sort of site is more than he can afford. After an investment so far of close on half a million pounds he thinks it's time to stop.

This appears to almost bring tears to Theo's eyes. He explains that this is a classic case of someone coming up with an idea, thinking it's a good idea, doing lots of research but not reading the research properly. He says that when you have competition that is spending absolute fortunes in telling people that they exist and to get people to visit the site, you need to take that on board. Unfortunately, he says, Peter doesn't have those resources. Theo stresses, it is a basic requirement when launching a new business, especially on the Web, you must have the resources to market your product.

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Cadbury

For Cadbury the problem is different. Only 15% of sales are through supermarkets, the rest are through over a million small stores. Theo asks how you break into such a market? The answer is to dig deep and put your hands in your pockets. Cadbury recently bought an existing company in Brazil for 4.2 Million dollars. Theo visits the factory, but no chocolate. He asks why. It turns out Cadbury might be able to buy a chocolate company. But at this point filming was halted as Cadbury became the focus of a hostile takeover bid from Kraft. Cadbury have since been eaten up by a bigger fish; Kraft succeeded in their hostile takeover bid.


Theo's final thoughts

In the case of Cadbury, there's always someone bigger than you.

With the other two businesses he concludes the message is clear. You must invest heavily in marketing and PR if you are to succeed in any business.

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