MEXICO CITY — Driven by a challenging economic environment and heightened competition, Brazilian beauty brands are rushing to win new customers abroad, so much so that exports are forecast to roughly double this year, according to industry executives.
“Brands have started to figure out they can be competitive and make a lot more margin elsewhere,” said Bruno Cavour, head of international expansion at Grupo Boticario, one of Brazil’s largest beauty players.
Helping international expansion is a weak real, trading at about 5 per U.S. dollar compared to a 3-to-1 ratio a decade ago, making Brazilian goods more attractive for foreign buyers.
“There is an obvious exchange rate benefit that gives us a bit more margin to play with,” said Cavour, adding that Brazilian labels have also become more sophisticated, improving product quality and management in recent years.
Indeed, younger and better educated entrepreneurs are running more nimble export franchises, helping bolster international shipments, especially to markets in Europe and the Middle East, where there is a huge push.
“If you think about Brazilian entrepreneurs 30 years ago, a lot of them didn’t speak English or travel outside Brazil, but the new generation is much braver and globalized,” Cavour said.
The left-wing government of Luiz Inácio Lula da Silva, which won reelection in 2022, is also helping brands dive into the global arena by sponsoring their participation in international beauty fairs.
Beauty Care Brazil, as the state’s international expansion project is called, took 62 companies to the Beautyworld Middle East 2023 fair last October, helping brands target new customers in the United Arab Emirates (UAE) and in Middle East and North African (MENA) nations.
The UAE is Brazil’s number-four market, with leading categories including hair care, skin care and tanning.
“In the last edition of the fair, 2,383 business meetings were held, totaling $5.7 million of international sales,” said Gueisa Silveiro, who heads the initiative for trade lobby Abhipec, which runs Beauty Care Brazil in partnership with export agency Apex Brasil. Silveiro said another $50 million in sales are expected over the next 12 months.
Cavour said Brazilian hair care products have become a sensation in the Middle East.
“In the Middle East, hair is something everyone talks about and the [Brazilian] level of formulation, ingredients and quality of products is well recognized as being very advanced.”
He added body care is also doing well.
The group’s flagship brand O Boticario markets body products (notably under its Nativa Spa label) that use Kinoa oil as a main ingredient, which has five times more hydration than the more traditional oat-based formulas, Cavour claimed.
O Boticario is rolling out these products in the U.S. and they are already available in Dubai, Colombia and Portugal, the firm’s biggest market.
The London-based executive said the label also wants to market its fragrances in the UAE and Saudi Arabia.
Overall, O Boticario wants to open 20 stores this year compared to 10 in 2023, primarily in Latin America including Colombia, Bolivia and Paraguay.
“In the past four years we have grown 40 percent annually,” Cavour said, though he noted Grupo Boticario’s international business is still very small.
Another brand engaged in foreign expansion is masstige hair care label Lola Cosmetics.
This year, it plans to enter Canada and bolster its presence in the U.S. where it is targeting the country’s large Hispanic community after initially marketing to Brazilians.
It is also set to open new doors in Mexico and enter Guatemala, Honduras, El Salvador, Costa Rica and Panama, as well as dive into Colombia and Bolivia.
In Asia, the firm is seeking distributors to expand in South Korea and Thailand.
“We are growing 100 percent internationally,” said Lola’s global boss Vaclav Soukup Filho. “Right now, exports are 20 percent of revenues, but we want to take that to 30 percent this year and 50 percent in five years to around 500 million reals [$103 million].”
Soukup said Lola has a strong presence in Europe, notably Portugal and Spain. It makes a wide variety of hair care products featuring well-known Brazilian ingredients such as keratin.
Lola, which also sells body care in Brazilian concept stores, will grow 40 percent (both from local and foreign markets) this year to around 420 million reals, Soukup said.
In assessing Brazil’s local, $50 billion market, Soukup said it could gain around 8 percent this year, up from 6 percent in 2023, despite an economic slowdown that’s dampening consumption.
Brazil’s GDP is expected to grow by 3 percent in 2023 and slow to 1.6 percent in 2024, according to some economists.
But Soukup said there are a host of measures to lift consumption, especially from the country’s vast low-income consumer population, that will bolster sales.
In fact, Brasilia recently introduced a debt-relief program called Desenrola to help Brazilians renegotiate their debts.
“Despite the economic challenges, the government is launching key incentives to increase consumption in the base of the income pyramid,” Soukup said. These includes ways to access cheaper credit and pay in up to 10 installments, he added.
For now, however, these incentives are helping sales grow, at least on a volume basis, offsetting losses from more pressured masstige and premium brands.
Still, Latin America’s largest beauty country faces big challenges, notably a double-taxation regime and huge competition from independent brands that is challenging the largest players Natura, Boticario and Avon.
As brands look to win new customers, a price war has ensued, with many steepening discounts and expanding online where new players such as Epocacosmeticos.com and Beleza Na Web are selling shampoo or skin care for $1 to $2 versus $5 to $10 in the past.
As emerging players grab market share, the leading labels are watching closely and could eventually gobble them up.
O Boticario did this by snapping up Truss and Vault last year and indie label Doctor Jones before that, said Cavour, who added the group remains open to acquisitions.
“The main industry challenges have nothing to do with the government [i.e., regulations] but with more competition from a proliferation of small brands,” he said. “You have more third-party manufacturing capacity enabling them to exist online to distribute their products. They don’t need to have their own stores or manufacturing facilities anymore. They can grow their brands independently.”