NATURA COSMETICS:
From Brazil to United States

INTRODUCTION TO THE COUNTRIES:
BRAZIL AND UNITED STATES

Brazil, one of the fastest growing emerging markets in the world is the “country of the moment” as many called. Low cost manufacturing, develop infrastructure, government incentives, and increase of income levels has set Brazil as hot stop for investor and a secure place for international expansions. Not only a hot stop for investor, but also a homeland of many entrepreneurs going out of the national barriers and growing internationally in a remarkable way. With rising of wages, a stability of inflation, Brazilian population is getting richer. In the last couple years, that was increase of the wealth population and a significant improvement of the middle and low class purchase power, resulting in growing of the country and putting new challenges for local business thinking of going to other countries. Not surprising, Brazilians are spending more in many different market segments, one of them cosmetics, fragrances, and personal hygiene. In 2010, with an impressive 12% growing of the cosmetic market, Brazil became the second largest consumer of cosmetics in the world just behind United States. According the ABIHPEC, Brazilian Association of cosmetics, fragrances, and personal hygiene, the market of these products has grown substantially over the past 15 years. Exports grew 17.8% in 2010, reaching $ 693 million, versus $ 588 million in 2009. Imports of these products to Brazil also increased, reaching U.S. $ 696 million from $ 456 million in 2009 (increase of 52.6%). In 2010 the sector accounted for 4.282 million job opportunities, maintaining an average growth of 9.3% per year. This scenario represents a great opportunity for companies such as Natura to explore new markets and expand its business. To succeed internationally, companies must have a well-defined strategy and a clear description of objectives that they wish to achieve worldwide. That’s being said, Natura’s international expansion focus on promoting the company social responsibility as it gains gradually potential markets. The company has already spread out through South America and now studies the United State market – world largest consumer of cosmetics. As know, United States is the world biggest economy, and place of uncountable companies with a strong consumer market and home of the best organizations in the world. Facing that, it’s not surprising that enter into American market is at the same time challenging and thrilling specially for companies coming from developing countries such as Brazil. Gaining a share of American market is more than status is proving that other countries can succeed as well; it’s a way to reach the world. For Natura, enter into American market is opportunity to share values that goes beyond cultural barriers. Natura’s philosophy of “well-being-well” and sustainable development fit perfectly to the American and global trend of “green thinking.” United States is today the largest consumer of cosmetics in the world. A market dominated by France products of supposed high reputation but also targeted of many ethical issues. Consumers are more than ever worried about social consequences and effect of cosmetics on individuals’ health and even on the environment. The industry seems to be responding for demand of natural products but still a gap to meet. Understanding this moment, and having all the lights focusing on Brazilian economy and rainforests, Natura seems to have an advantage here.
NATURA

Born in Brazil approximately forty years ago, Natura Cosmetics became the industry leader in cosmetics, fragrances, and personal hygiene in the Brazilian emerging market, with its brand spread throughout Latin America and recently France. Part of its success is based on the company’s concern with the environment providing products to promote individual’s “well-being-well” and centered on two main bases: ethical relationship with stakeholders, and business goals compatible with sustainable development. Natura international expansion began in 1982 when it first arrived in Chile, after six years also expanded to Bolivia, after those, it did not take long to penetrate Venezuela, Argentina, Peru, Colombia, and Mexico. After experiencing good results internationally and enthusiastic acceptance, in 2005 the company took an important step over international market and opens a shop in Paris - the world capital of cosmetic products. That was only possible because the company has core competency, which differentiates the company on new markets. Natura is definitely perceived as an eco-friendly company and not just some company embracing trends but taking the opportunity that the “green” movement is giving. Natura’s products are extracted by local communities directly from the Amazon rainforest in a sustainable way that promotes a sustainable development model. Natura’s mission statement is to create and sale products and services that promotes individuals “well-being-well”. That means “well-being” defined as a confortable condition of existence; a good health relationship between soul and body; and “being-well” a state of empathy with other individuals and the nature surrounded (Natura Cosmeticos S.A). Its founder and chair Antonio Luiz da Cunha Seabra, build a strong corporate culture influenced by his own values and principles. For Seabra, the nature influences in people’s life is so intense that one have to act in the way to preserve the environment surrounded to preserve the own soul. “We must therefore mobilize society to build an agenda of transformation” (Seabra). According to Seabra, cosmetics were so associated with superficiality that most people did not realize the power of these products to transform personality by reestablishing self-esteem. (Natura Cosmeticos S.A.) When consumers buy product from Natura, they have the right to be informed about the impact of their choices. That is why its products packaging bears an environmental table containing data about the plant origin of the ingredients and the raw material certification percentage, as well as the quantity of recycled and recyclable material, by this way, Natura hopes to raise awareness around Brazil’s environmental heritage and promoting quality of life in the communities that cultivate or extract those ingredients (Natura Cosmeticos S.A.). To Natura, the respect goes beyond employees, investors, and customers, expands to suppliers and the mostly important – respect to the nature. All these qualities and significant number on Latin American market motivated the company to study the expansion into the United States.

ENTRY MODES

Selecting an entry mode is an important step to succeed internationally. Chosen between exporting, importing, and countertrade, contractual or investment mode according Wild & Wild, depends on several factors, such as experience in the market, amount of control managers desire, and potential size of the market. The decision is mostly times based on research and development of an international strategy. Thus, when the focus market is a developed country, the availability of data is favorable to new investor. Additionally, some steps must be followed to ensure enough information to venture into a new market, these involved analysis of potential markets, legal and governmental policies, and funding the investment. Many organizations when decide to explore internationally selects to export through intermediaries as a safety alternative before dive into a new market, yet this change represents a significant transformation for the organization. Consequently, the evaluation of the direction of the business should give strong support to further changes of the international strategy. Exporting through trading companies, international distributors and agents is valuable because it allows organizations to act internationally without making large investments and at the same time, opens up the possibility of accumulating expertise necessary for international expansion strategies more complex. In fact, that was the strategy adopted by Natura when enter Chile market in 1982. After consolidation on the Latin American market, Natura in its strategy of international insertion implemented a new operating model in Europe, with the inauguration a store located in Paris. Casa Natura Brazil is boutique space where consumers can find products extracted from Brazil’s biodiversity and have contact with aspects of Brazilian culture and customs. The idea is been well received and the same strategy should be implemented in the United States. At this stage, the company is involved more directly in foreign markets, developing an international marketing strategy complete and differentiated from those used in the domestic market. The share of foreign sales becomes relevant in relation to domestic sales and export area acquires greater influence on the decisions of R&D, production and purchasing. Another trend is the implementation of units of sales and distribution in major foreign markets, making it more effective the internationalization of business. The management of overseas subsidiaries requires greater adaptation to local standards and business practices, which implies a significant increase in knowledge of these markets.

OPPORTUNITIES AND CHALLENGES Natura differentiates itself by its ability to bring a different consciousness to the consumer through the cosmetology, the holistic appreciation of beauty. Natura sells more than products; it sells a model of integration of beauty and nature, which leads consumers to think about the values and mission of Natura. In the United States the company has strong competitors such as L Occitane, Aveda, Body Shop, Origin (Estee Lauder) and several others who are consolidated on the market. To respond to this differentiated new market, Natura must assume a different strategy and a different sales system by those practiced in Brazil for positioning the brand and its products. Considering the position of Natura in the Brazilian market and business success, it needed a strong international projection, since there is already a lot of talk about Natura brand in the cosmetic market. The strategic vision of Natura in choosing United States should be based on the fact that this market is more competitive, with consumers demanding more and once succeeding there, it would be easier to enter other big markets around the world. By analyzing the marketing mix, it clear that Natura has to adapt all of its marketing mix to enter the American market, making adjustments in the product, price, and promotion and in the form of distribution. Additionally, the brand "Brazil" has been highly valued in the world, bringing the Natura visibility in the media, thus building good brand credibility. When evaluating on the international expansion strategy of Natura, one can conclude that the entry mode that should be adopted, as a first step on the American market, is the system of export to an own affiliate. In this particular case, the Natura store outside of Brazil should receive the products ready to be arranged in the store. This way the company engages more directly with consumers and gaining knowledge of the new market. Past experiences of Natura abroad shows a growth curve that starts very small, until it becomes large enough to bring financial results. Moreover, the risk is low while it is important to the tag. If the company starts small, the cost of the project is also small. It is estimated that even with a lot of dedication to the international area, it will take in the next 10 years to be important as a revenue source, since it is necessary to create new corporate structures and strengthen existing ones, to give support, efficiency and higher speed the expansion of operations in Brazil and abroad.

REFERENCES

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Wild J. John, and Kenneth L. Wild. International Business: The Challenges of Globalization. 6th ed. New Jersey: Pearson, 2012.