Guilherme Leal, Pedro Passos, and Antonio Luiz Seabra, the trio responsible for founding and growing Natura in Brazil, walked through Red Square in Moscow. They were heading towards a nearby business center where they intended to supervise focus group discussions. These discussions aimed to assess whether Natura, the top beauty company in Brazil concerning direct sales, should expand into the Russian market.
Natura has come a long way since its establishment in 1969 as a small store in Sao Paulo, Brazil. Despite the majority (97%) of its revenues still coming from Brazil, Natura has been making impressive progress in expanding internationally. Recently, the company introduced a direct-selling operation in Mexico and is considering entering markets like Venezuela and Colombia soon. Additionally, Natura just opened a flagship store in Paris, known as the fashion capital and home to L’Oreal, the world
...'s largest beauty company. This strategic move showcases Natura's active pursuit of growth opportunities worldwide.
Natura's expansion abroad received diverse evaluations from industry analysts and investment bankers. Some interpreted it as reckless ambition by the company's founders, while others saw it as a meticulously planned growth strategy. Moreover, even among Natura's top executives, there were conflicting views on the best business model or regions for expansion. Potential avenues for growth encompassed venturing into online sales, distributing products in duty-free shops at airports, and establishing retail chains in specific countries.
Until a final decision was made, the executives at Natura were hesitant to increase their international investments. With an estimated $1.5 billion in gross revenues by 2005, Natura had become Brazil's largest domestic cosmetics company. Not only was it renowned as one of the
top brands in Brazil, but it also led in the sustainable use of Brazil's biodiversity. The founders of Natura realized that merely competing against global rivals within their own market was no longer sufficient for their success. In this context, "biodiversity" refers to the wide range of plant life found in Brazil, including ecosystem diversity, species diversity, and genetic diversity. Professor Geoffrey Jones and Senior Researcher Ricardo Reisen de Pinho from the Latin America Research Center prepared this case specifically for class discussion purposes.
Cases are not endorsements, primary data sources, or examples of effective or ineffective management.© 2006, 2007 President and Fellows of Harvard College.To order copies or request permission to reproduce materials, call 1-800-5457685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu.No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.07-029 Natura: Global Beauty Made in Brazil enough.
The rapid consolidation of the global beauty industry was forcing smaller companies to be even more aggressive in developing new product lines and segmenting existing markets while challenging the previously strong borders between mass and prestige sectors.
However , despite encountering well-dressed Russian women walking past them in Red Square , the three founders were unsure about what similarities this country had with their home market that is known for its luxuriant Amazon Forest , warm tropical beaches , and an ethnically and culturally diverse population ."Almost everything was initially beyond our understanding," Leal recalled starting from its Cyrillic alphabet.
the business center,the Brazilians had numerous thoughts running through their minds.
The individuals believed that Natura, being a distinctive company with a growing mission to enhance humanity, may face challenges in achieving its goals due to globalization. They also questioned whether Natura was prepared for international business and if targeting the Russian market could be excessively ambitious. However, despite differences in culture, geography, and time, beauty had consistently brought notable economic and social benefits in the Brazilian market.
Economists agreed that physical attractiveness had a significant impact on various aspects of individuals' lives, such as the ability to attract partners and career opportunities. This attractiveness could be improved with beauty industry products. The beauty industry emerged in the late 19th century as society became more accepting of cosmetics and branding strategies were utilized. By 2004, the global beauty business valued at US$231 billion, with consistent annual growth rates of around 5% since 1999. This industry appeared to be resistant to economic downturns. The growth was driven by the wealthy aging baby boomers and growing middle classes in countries like Brazil. Additionally, there was a potential for future growth among preteen girls, metrosexuals, and seniors (refer to Exhibit 1 for cosmetics and toiletries sales by major markets).
Brazil, the fifth-largest country in terms of area, is renowned for its abundant biodiversity and holds 20% of the planet's biodiversity. The northern part of Brazil, known as the Amazon region, is home to this diverse range of species. As of 2005, Brazil had a population of 180 million people and ranked tenth globally in GDP. The majority (83%) of Brazilians lived in urban areas within its 47 million households.
Additionally, approximately 80% of Brazilians resided within a distance of 350 kilometers from the coast. This diverse population is a result of Native American, Portuguese, African groups who initially inhabited Brazil and European immigrants who arrived later seeking job opportunities.
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