|Theo's Adventure Capitalists 3.
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
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.
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
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
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.
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
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
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.
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.
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.