Brazil is one of the fastest growing economies in the world and has been having an annual GDP growth rate of 5%. It is the world’s eighth largest economy and has the ninth largest purchasing power parity. Brazil is the largest economy in South America, which has reasonable free market for trading.
Brazil has approximately imported 6.5 million cases of wine per annum (12 bottles of 750 ml each) over the last three years; this figure represents US$196 million on the FOB annual import reports on average. The Watershed Premium Wines Company is located in Western Australia, south of Margaret River. The company and the area is well-known for the production and exporting of world-class wines and can be considered as one of the major successes of the wine industry of Australia.
2.1. Business Environment:
Economic Conditions of Brazil|
GDP:| $1.574 trillion|
GDP per Capita:| $2.013 trillion|
GDP Growth:| -0.2%|
CAD:| $43.8 billion|
Level of FDI:| $319.9 billion|
Breakdown of Industries:| |
Services| 66.8% of GDP|
Industrial| 29.7% of GDP|
Agriculture| 3.5% of GDP|
Source: CIA Factbook statistics as of 2009
Brazil has a very large agricultural, mining, manufacturing and servicing sector which heavily contributes to the GDP of Brazil’s economy. As Brazil is the biggest economy in South America, it is expanding its borders to the world trade markets. Even with the Global Financial Crisis Brazil is the first country to be seen as their markets recovering in South America, with having a GDP growth returned to positive in the second quarter, 2009.and the Central Bank expects growth of 5% for 2010, this could be seen as a great opportunity for Watershed Premium Wines to invest in.,
There are many similarities between Brazil and Australia given the export opportunities. As Brazil is the primary Latin American economy and soon to be a global power, Australian Wine businesses could take advantages of the fact that Brazilians on the general basis would rather spend then save their money, this evidence has been shown through the large development of shopping malls, outlets, supermarkets and convenience stores. Even on a wide range of restaurants, coffee shops, fitness centres, cinemas and cafes.
Also there has been a significant rise to the middle class, with a growth rate of more than 8% of people per annum, using mobile phones. With this growing middle class Brazil’s presents opportunities across the board for Australia’s retailers, from food and beverage, cosmetics and clothing to some of our more premium products, notably gourmet food and wine. Brazil over the last three years has imported approximately 6.5 million cases of win per annum (12 bottles of 750ml each), this figure represents US$196 million on the FOB annual imports report, with this taken into consideration we can see why it could be beneficial to Watershed Premium Wines to enter this market. Consumption of wine however has been at a stable rate of 1.8L for years, even with a population of 190 million approx., it still offers room for Watershed Premium Wines to distribute Brazil and change the consumers drinking preferences. Even retail chains in Brazil have seen a more interest in Brazilians purchasing Australian wineries directly, cutting out the importers and distributors, this could significantly reduce the retail price of wines allowing to reach a much more broader market for Watershed Premium Wines.
Yet there are negative factors which can be damming to Wine Company industries entering the market such as Watershed, the tax burden of wines is 27% and the sales tax is 25% which is the same for domestic and international products, which is applied cumulatively. Due to this factor many Brazilians would view the item wine as a luxury item. The competitive environment has had a negative...