Natura’s financial profits for the second and third quarter of 2013 clearly show the importance of its international operation as an engine of growth for the company.
Natura’s growth in sales in Brazil are slower than the growth of the national beauty industry. The company has net sales of over 5 billion reais and a large market share in the local market – 13.5% according to Euromonitor data, but one which exceeds 30% according to the company when considering only the categories of fragrance, makeup and skincare, making advances and major quick gains harder to achieve. Overseas, especially in the South American markets such as Argentina and Chile where the company has been operating for the longest time, the years of investment taken to build a truly robust operation are more than bearing fruit. At the moment these are the business operations pulling in good rates of growth for the company.
Generating around 13% of revenue, Natura’s international operation must achieve annual net sales of around R$ 1 billion. If it were a ‘letter-box’ or front subsidy company, it would already be among the biggest in the country.
These results are even more emblematic when we bear in mind that there are few Brazilian consumer goods companies which risk investing to create solid and consistent business beyond our borders.
I believe Natura’s major strength was its long-term investment in the structuring of its business. This allowed it to control its own business, having direct contact with consultants, understanding consumers and the local market in-depth, even when there was no transaction or outsourcing of production in those countries.
Another key aspect, at least in my opinion (and still rare in Brazilian consumer goods companies), was the willingness to sustain the high level of investment required for a long period of time. Natura seemed to be more concerned with establishing a solid operation to sustain the company’s operations in the future – something which is starting to happen now. Even at time when the publicly held company was pressed to deliver better results, Natura opted to sustain investment, rather than simply slow down or cut investment in its international operations to improve the bottom line of the company’s results.
The strength of international operations is an asset, a competitive advantage for Natura compared to other companies in the beauty market in Brazil. The strength of the national beauty market has in recent years attracted a multitude of companies and quality brands – with different market positioning and distribution channels, all wanting to grab a slice of the market. With the consumer having access to a much larger number of options, it is natural to assume that these new brands would snatch a significant portion of sales that in the recent past would have belonged to Natura or any of the traditional leaders in Brazil’s beauty market.
Aûani Cusma de Paula é o Editor da Revista Atualidade Cosmética.