Business lessons from Theo's Adventure Capitalists: Brazil

 

Theo in Brazil
"A weak pound and sluggish domestic market means now is the right time for British businesses to go abroad," Theo Paphitis explains at we join him for the last episode of this super-useful series on expanding into emerging economies. But Brazil, it turns out, is not so emerging after all. In fact, it's the 10th largest economy in the world.
The thing that really makes Brazil an exciting place to do business is that it's an incredibly young market. The average age of a Brazilian is 24, and every year a new fashion-savvy, cash-splurging generation flood into shops ready to buy. Brazilians are also internet fiends. Access to the internet is better than in many parts of Europe and North America, a collective of formidable Brazilian business magnates tell us during the show, and the people are 'totally committed to what's happening - they're very young and very creative'.
Brazil also has ridiculously plentiful natural resources - an area the size on England is given over just to grow sugar cane! And business centre Sao Paulo is the biggest city in the southern hemisphere, with a population of 20m.
Which all sounds pretty rosy for the two businesses featured in last night's programme - a make-up brand for darker skins and a website selling crafts on behalf of impoverished artisans across the globe. And, indeed, for businesses like yours, if you're looking to grow.
(Cadbury were also in the first half of the show but the hostile takeover bid by Kraft half-way through filming put a bit of a stopper in anything useful there.)
Sleek Makeup: cool young make-up brand specialising in darker skins
Sleek seem pretty well set up to make it in Brazil. Marketing head Taniqua explains they wanted to take the brand international, having already got into 168 Superdrug branches in the UK. They decided on Brazil because it combines the best match of ethnicity (Brazil is a melting pot of European, native South American, African and Japanese decendency) and average income.
Brazil is also the world's third largest make-up market, and Brazilians have a shameless obsession with the way they look. It's all bum and boob implants and hair extensions - and plenty of make-up. "On paper, this looks foolproof," Theo smiles, but with the slight reservation of someone who's traded in more than 20 countries.
And then, of course, we hit obstacle number one. Because no shops have the cosmetic display stands we have here in the UK, where customers are free to test the makeup, and the visual display serves as enticing marketing for casual passers-by. Brazilians buy make-up from door-to-door sales specialists.
Theo says this is a standard problem businesses encounter when they go abroad: "They find out the market works in a different way. That means you can attempt to change the market, or adapt your product to suit it."
Taniqua goes for the first option - which is, Theo points out with eyebrows more than a little raised, 'the hardest thing to do!' She wants supermarkets to introduce the display stands - and amazingly, she triumphs where many a superbrand (Revlon, L'Oreal) have fallen before her, because superchain Carrefour are about to launch the perfect new set-up for this, and they're bowled over by her professional presentation and proposals.
So she's got a major supermarket onboard - everything's peachy, right? Nu-uh. As Theo keeps trying to hint, Taniqua is missing the most vital ingredient of doing business overseas: a distributor. That's your person or company on the ground who manages everything in the country on your behalf: sales, marketing, distribution networks, contracts on the ground. And good distributors are expensive. Even when Taniqua dangle the prospect of the major supermarket contract to try to lure one in, he says that money is the only thing that will make it happen. He also says Sleek needs a massive marketing budget to get this off the ground, and he won't work with her until that's sorted.
Luckily, Taniqua learns her lesson. Five months later when we meet her again, she's upped her proposed marketing budget from 5% of turnover to 19% ('much more realistic', Theo nods) and has just secured a deal with a distributor.
Theo looks all avuncular and proud. Heart-warming stuff - underpinned by some key business lessons: however good things are looking, it won't happen abroad until you have a good distributor and you take their advice on board.
Dreamaid: an internet start-up selling crafts made internationally to richer people around the world
Peter has spent about £60,000 on Dreamaid so far, but reckons he'll be earning $600,000 a month within three years. And for any of you who've ever seen Dragons' Den, you'll know that sales forecasts like that are a fateful portent of things to come.
But despite the hyper-inflated figures, things get off to a fairly good start. Peter drifts around art markets and the internet-savvy Brazilian craftsmen seem keen to get their stuff onto the site. And unsurprisingly so, as Peter lets them upload their products for free, only charging a 10% commission when a sale is made.
The trouble is, Theo points out, it's not about attracting people selling wares onto the site - it's about getting buyers to find them. And online, that's harder than ever. Unless you've got a 'very, very special' product, Theo warns, it's an absolute nightmare trying to get visitors to your website. "Dreamaid's success balances on one thing and one thing only: exposure."
And at the moment, Peter's only getting 60 visits to the site a day. He's spending £300 on PPC, which he thinks is enough, but we find out the US website he based his financials and plan on is spending a whopping $250,000 per month.
We fast-forward five months and feel the full spirit-crushing implications of these numbers. Dreamaid has hosted only £1,000 worth of sales - leaving Peter with just £100 back from a £60,000 investment.
It's pretty devastating news for a website with admirable intentions at heart and a seemingly very nice guy driving it. But online, Theo says, seriously heavy investment in PPC and other types of online marketing a just a basic requirement. If you don't have the resources to do that, chances are, you ain't going to make it.
A hard truth, but one better learnt by watching in a TV programme than finding out for yourself.

Brazil also has ridiculously plentiful natural resources - an area the size on England is given over just to grow sugar cane! And business centre Sao Paulo is the biggest city in the southern hemisphere, with a population of 20m.

Which all sounds pretty rosy for the two businesses featured in last night's programme - a make-up brand for darker skins and a website selling crafts on behalf of impoverished artisans across the globe. And, indeed, for businesses like yours, if you're looking to grow.

(Cadbury were also in the first half of the show but the hostile takeover bid by Kraft half-way through filming put a bit of a stopper in anything useful there.)

Sleek Makeup: cool young make-up brand specialising in darker skins

Sleek seem pretty well set up to make it in Brazil. Marketing head Taniqua explains they wanted to take the brand international, having already got into 168 Superdrug branches in the UK. They decided on Brazil because it combines the best match of ethnicity (Brazil is a melting pot of European, native South American, African and Japanese decendency) and average income.

Brazil is also the world's third largest make-up market, and Brazilians have a shameless obsession with the way they look. It's all bum and boob implants and hair extensions - and plenty of make-up. "On paper, this looks foolproof," Theo smiles, but with the slight reservation of someone who's traded in more than 20 countries.

And then, of course, we hit obstacle number one. Because no shops have the cosmetic display stands we have here in the UK, where customers are free to test the makeup, and the visual display serves as enticing marketing for casual passers-by. Brazilians buy make-up from door-to-door sales specialists.

Theo says this is a standard problem businesses encounter when they go abroad: "They find out the market works in a different way. That means you can attempt to change the market, or adapt your product to suit it."

Taniqua goes for the first option - which is, Theo points out with eyebrows more than a little raised, 'the hardest thing to do!' She wants supermarkets to introduce the display stands - and amazingly, she triumphs where many a superbrand (Revlon, L'Oreal) have fallen before her, because superchain Carrefour are about to launch the perfect new set-up for this, and they're bowled over by her professional presentation and proposals.

So she's got a major supermarket onboard - everything's peachy, right? Nu-uh. As Theo keeps trying to hint, Taniqua is missing the most vital ingredient of doing business overseas: a distributor. That's your person or company on the ground who manages everything in the country on your behalf: sales, marketing, distribution networks, contracts on the ground. And good distributors are expensive. Even when Taniqua dangle the prospect of the major supermarket contract to try to lure one in, he says that money is the only thing that will make it happen. He also says Sleek needs a massive marketing budget to get this off the ground, and he won't work with her until that's sorted.

Luckily, Taniqua learns her lesson. Five months later when we meet her again, she's upped her proposed marketing budget from 5% of turnover to 19% ('much more realistic', Theo nods) and has just secured a deal with a distributor.

Theo looks all avuncular and proud. Heart-warming stuff - underpinned by some key business lessons: however good things are looking, it won't happen abroad until you have a good distributor and you take their advice on board.

Dreamaid: an internet start-up selling crafts made internationally to richer people around the world

Peter has spent about £60,000 on Dreamaid so far, but reckons he'll be earning $600,000 a month within three years. And for any of you who've ever seen Dragons' Den, you'll know that sales forecasts like that are a fateful portent of things to come.

But despite the hyper-inflated figures, things get off to a fairly good start. Peter drifts around art markets and the internet-savvy Brazilian craftsmen seem keen to get their stuff onto the site. And unsurprisingly so, as Peter lets them upload their products for free, only charging a 10% commission when a sale is made.

The trouble is, Theo points out, it's not about attracting people selling wares onto the site - it's about getting buyers to find them. And online, that's harder than ever. Unless you've got a 'very, very special' product, Theo warns, it's an absolute nightmare trying to get visitors to your website. "Dreamaid's success balances on one thing and one thing only: exposure."

And at the moment, Peter's only getting 60 visits to the site a day. He's spending £300 on PPC, which he thinks is enough, but we find out the US website he based his financials and plan on is spending a whopping $250,000 per month.

We fast-forward five months and feel the full spirit-crushing implications of these numbers. Dreamaid has hosted only £1,000 worth of sales - leaving Peter with just £100 back from a £60,000 investment.

It's pretty devastating news for a website with admirable intentions at heart and a seemingly very nice guy driving it. But online, Theo says, seriously heavy investment in PPC and other types of online marketing a just a basic requirement. If you don't have the resources to do that, chances are, you ain't going to make it.

A hard truth, but one better learnt by watching in a TV programme than finding out for yourself.

Watch Theo's Adventure Capitalists on iPlayer


 

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