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Ian Harkavy International Business 200 GumYum, Inc.

Final Brazil

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Project I completed in college regarding a hypothetical company trying to expand internationally.

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Page 1: Final Brazil

Ian Harkavy

International Business 200

GumYum, Inc.

Page 2: Final Brazil

Background Situation Analysis Strategic Advantages; Economic and Cultural Factors

Market analysis Market Size; Market Potential; and Competition

Potential Entry Strategy Implementation plan Brazilian Preferences Product, Place, Price, Promotion

Breakeven and S.W.O.T. analysis Future outlook

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Largest country in South America

Mostly tropical climate, though

temperate in the South Leading producer of agricultural

products Recurring droughts in the

Northeast with occasional floods and frost in the South

Population: 203, 429, 773

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Multiple borders 7,491 miles of coastline

8,233 square miles of

renewable water resources 1.134% population growth

Low cost of production

Competitive advantage for

sugar production

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Steadily improving macroeconomic factors by building up foreign reserves

GDP (2010): $2.194 trillion GDP growth rate (2010): 7.5% GDP per capita: $10,900

Labor force of 103.6 million 7% unemployment rate

26% of population below poverty line $199.7 billion exports $187.7 billion imports 1.77 Brazilian Reals (BRL)= 1 USD

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Languages: Portuguese

88.6% literacy rate 87% of total

population is urbanized

67% of population

between the ages of 15-64

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Primary market: males and females between the ages of 13-50

Food retailing accounts for around 30% of total retail sales, approaching $50 billion in Brazil alone

Population of over 200 million Poorest 20% of Brazilians account for only 2% of income Wealthiest 2.5% earn over 30% of all income

Brazil is the world’s third largest market for sweets

Confectionary value sales have risen 46% between 2004-2009

Gum sales: 2008- $1,286,000,000 2009- $1,207,000,000 2010- $1,460,000,000

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Current economic stability and lower inflation

Surging sales among poorest 50% of population

Benefits from free trade agreements

Huge potential for

growth and variation to appeal to many customers

2008-2013

2008 2009 2010 2011 2012 2013

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Hershey

Nestle Brasil (10% market share) Especialidades Mentex, Nestle Classic, Alpino,

Chikito, Galak, Nescau, Seducao

Kopenhagen

Cadbury Adams (74.9% market share) Trident, Ping Pong Ploc, Clorets, Plets Leader in the gum industry

Arcor Group Over 50 brands across product categories in

Brazil Sambapito, Big Big, Poosh, Samba, Blow Up

and Tortuguita

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Point-of-purchase merchandising

Awareness of health-conscious consumer preferences

Mass production possible in the gum industry

Santos Port

Introduce new flavors into the core flavors market “Burst and fade” effect Ex: Pineapple, banana

Majority of growth in the Brazilian market is due to the increase of sales of sugar-free chewing gum One of the fastest growing subsectors in the whole confectionary industry Consumers are heavily influenced by the benefits to dental health that sugar-free gum

can provide A growing number of products exploit this considerably

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Contract with independent distributors and wholesalers to handle logistics and supply

Electronic-data-interchange system

Use transportation company with the longest and strongest presence in each region Lower costs and greater speed More sophisticated control of distribution

Maintain the highest green and eco-friendly

standards

Have salespeople work in tandem with the distributors worldwide

Colón port of Panama

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Geocentric staffing approach Eliminates cultural barriers Builds a strong, unified culture Uses HR efficiently

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Make it last long with full flavor to remain competitive in the market

Wrapper games Eco-friendly wrapper and

packaging Offer different flavors and

sizes Fruity and minty varieties Whitening and cavity

protection Calorie counters

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Free samples

Bonus packs Rebate promotions

Advertising: Sporting events Magazines Commercials Billboards

Celebrity endorsements (Gisele Bundchen, Kaka)

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Partner with Wal-Marts and other large retailers/grocery stores nationwide to sell at registers

Gas stations and mini-marts

Newspaper kiosks

Padarias (hybrid bakeries) Centralize production in major

cities Salvador Sao Paulo Rio de Janeiro Brasilia

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Convert Brazilian reals to US dollars 1 USD = 1.5630 BRL 1 BRL = 0.6398 USD

$0.99 pack of gum = 1.55 BRL

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Packaging to combat the hot climate

Majority of growth in the Brazilian market is due to the increase of sales of sugar-free chewing gum One of the fastest growing subsectors in the whole confectionary industry Consumers are heavily influenced by the benefits to dental health that sugar-

free gum can provide A growing number of products exploit this considerably

Curb your appetite by chewing gum

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≈ $6,000,000 in capital for plant

Cost of labor per year for 500 employees: 500 x $8,230 (GDP per capita) ≈

$4,115,000

Cost per pack of gum ≈ $0.03

Cost to export to the rest of South America and/or Central America: $860 per pallet (7,500 individual packs or 625 cases containing 12 packs each) ≈ $0.11 per pack for shipping, $1.32 per

case Sell pack of gum for the equivalence of

$0.99 worldwide Mass order quantity discounts Intra-national shipping discounts

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YEAR 1 Estimated market share = 2%

Sales: 10.27M at $0.99/unit 10,167,300 Fixed Cost Plant: $6M Operation: $0.1M Labor: $4.115M Variable Cost Package: $0.03/unit Shipping: $0.11/unit Total Cost (11,652,800) Net Income before Tax (1,485,500)

YEAR 2 Estimated market share = 5%

Sales: 25.67M at $0.99/unit 25,413,300 Fixed Cost Depr: $0.6M Operation: $0.1M Labor: $4.115M Variable Cost Package: $0.03/unit Shipping: $0.11/unit Total Cost (8,408,800) Net Income before Tax 17,004,500

We will roughly break even on year 2

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Strengths Weaknesses

Opportunities Threats

•Imports and exports are booming as record numbers of exporters are gaining EU licenses

•Brazil’s huge population offers substantial return potential

•Brazil’s large market makes it an attractive target for international retailers

•The convenience store formats are set to experience rapid growth

•Well-established and reputable competition already in place •Income inequality, with consumption patterns varying significantly according to salary •Regional cultural variations limit the extent to which producers can rely on a single marketing strategy for the entire Brazilian market

•Trade officials are encouraging exports to countries other than the US , resulting in significantly higher total export volumes

•Brazil has more unused commercially viable land than any other country in the world, potential for incumbent as well as new producers

•Economic stability cannot be guaranteed over the longer term

•High interest rates place constraints on company investment plans

•High inflation would have severe consequences on this market, because price-stretched consumers would cut back on non-essential purchases

•Rising production costs

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The Brazilian gum confectionary market grew by $17.3 million in 2009, to reach a value of $508.3 million

Between 2010-2015, value sales are forecast to increase by a further 41% Gradual trend towards the purchase of premium confectionary

products, particularly among Brazil’s growing middle-class population

By 2015, the market is forecasted to reach a value of $683.5 million, an increase of 25.8%

Between 2005-2009, per capita food consumption increased by 49% In the next 5 years, it is expected to grow by almost 54%

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http://www.alibaba.com/countrysearch/BR/gum.html

http://www.datamonitor.com/store/Product/gum_in_the_bric_brazil_russia_india_china_countries_market_overview_and_forecasts_to_2014?productid=DBCM7234

http://www.21food.com/product/search_keys-Chewing+Gum_c-Brazil_cat-101503.html

http://store.mintel.com/gum-confectionery-in-brazil-2010-market-sizes.html

http://www.marketresearch.com/product/display.asp?productid=2850847

https://www.cia.gov/library/publications/the-world-factbook/geos/br.html

http://www.obamonteverde.com.br/

http://www.brazil-factoid.com/doing-business-in-brazil.html

http://www.brazil-factoid.com/sao-paolo-contribution-to-brazils-design-as-an-emerging-superpower.html

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