The Internationalization of Natura

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Next step in the internationalization of Natura
• Natura was a well recognized personal and cosmetic brand (native brand of Brazil)
• Have high brand loyalty and retention rate in cosmetic industry • It is premium, high-margin sold to middle and upper class segment • Internationalization in Latin America was not as successful as expected

Natura Operation and Philosophy
• Natura is driven under concept of well-being
• Promote the harmonious and pleasant relationship of individual with him/her body, with others and with nature • Use direct sales force
• Company believe in its natural ingredients from Brazil biodiversity • 177 million units sold in Brazil and abroad in 2004 (33.5% increased on 2003) and cumulative growth over previous 3 years was 117%

Cosmetics Market
• Cosmetic and personal care products industry has grown significantly since 1998 when a wave of acquisitions began leading to global organization. • Ten largest companies controlled 54% of the market (Exhibit 1) • The strategic priority for most players was to develop and promote global mega brands, ex. Olay of P&G and Nivea of Beiersdorf to expand market share through acquisition and joint venture. R&D is the key. • Industry is divided based on sales channel and price which are 1) premium brand sold in dept.store and specialized boutiques; 2) the mass-market brands sold in drug stores and supermarkets; 3) the direct sales brands targeted the low-end, mass customer, sold door-to-door

The Premium Sector
• L’Oreal is the largest player
• All players focus on selling products that imply certain status and technological innovation. • Focus on massive marketing investment and promotion to the niche. • Distribute through outlets including perfumeries, dept.store, beauty store.

The Mass-market Sector
• With the rise of globalization, mass-retail market becomes the most important segment in the industry (63% of total cosmetic sales) • This becomes the most accessible channel for foreign companies. • Acquisition is the key for many companies and that lead to fierce competition • Products offer special ingredients and scientific advances, with lower price • Products require huge investment to build brand. Providing high margins to distributors and investing heavily in advertising are two key costs. That’s why many companies prefer to expand through acquisition.

Direct Sales Sector
• Direct sales organizations (DSO) is classified as a separate business model due to their specific marketing, recruitment, and development strategies. • They attract staff by offering a profitable, flexible, and creative working environment. • In cosmetics business, famous DSOs include Avon, Mary Kay, and Amway. • One feature that distinguishes Natura from other DSOs is that it markets premium products.

Brazilian Cosmetics Industry
• Low-price, mass products could be easily found in drugstores and supermarkets, and a few luxury products were sold in specialized stores. • Apart from Avon (entered Brazil and used local production facilities) and Unilever, there is no foreign competition • The import substitution policies (implemented 1970) prohibited high import tariffs but promote domestic production • When Brazil opened market in 1990, a huge amount of foreign competitors entered and many of Brazilian products were disappeared from market. • Most of the local companies were not prepared to keep the level of innovation required to compete. • Brazil market was attractive in the eye of foreigner according to the per capita income and high consumption potential

Natura’s development
• Initial product range focused on skin care
• Drugstores and franchises are the choices to distribute but it was difficult to communicate Natura’s specialized, therapeutic concepts through store assistants or investor. • Distributor was not...
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