brazil-tea entry strategy

BRAZIL’S ENTRY STRATEGY

OVERVIEW

Country Name – Brazil

Officially known as Federative

Republic of Brazil

Fifth largest country By geography &

Population

Capital – Brasilia

Area – 8500 Sq. Km (in ‘000)

Population - 201,032,714(2013)

Language Spoken – Portuguese

Currency – Real (Brl)

POLITICAL ANALYSIS Government Stability has a huge positive impact on this industry .

Investment Plans upto USD 240 millions

Policy Reformation Also has a huge impact on this industry.

Internal Security is been provided for long term industries.

Foreign Investments are encouraged if they

• Guarantee national development

• Eradicate poverty and marginalization and reduce social and regional inequalities

• Promote the good of all without distinction as to origin, race, sex, color, age and

other forms of discrimination

ECONOMIC ANALYSIS

The Brazilian economy is booming economy.

Inflation rates are volatile. (current rate 5.3%)

The volatile inflation rates make it risky to enter the country’s market.

Per capita income of $12,100 with population of 202 million with a

consumption rate of 1.2kg ppa provides a huge market potential.

With fluctuating inflation rates, it is more difficult to predict price changes,

which creates the danger of our product becoming expensive for consumers to

purchase.

Brazil is world's number one destination where FDI flows in Latin America.

SOCIAL ANALYSIS

Brazilian Population comprises of 67% of middle class population which

provides a huge target market.

People here Devote 14.8 hrs to leisure & personal care which also can be

a huge benefit.

People here easily accept change as a part of life. Converting them from a

coffee consuming nation to Tea consuming nation would not be impossible.

20% of the population is illiterate ,this could be a concern.

TECHNOLOGICAL ANALYSIS

Spending on R&D is stable around 1% GDP

Constant technological progress and advancement.

Technology Transfer

Technological Accessibility

Internet Advancement.• Penetration of Internet for Business Transaction.

Licenses for machinery & equipment are issued if no similar goods

are produced.

Tarrif Duties are high in brazil.

Brazil’s average tariff is three times that of US.

Corruption is a major concern which costs brazil almost $41 billion a

year.

New entrants may be forced to commit bribery to obtain contracts.

TRADE & NON TRADE BARRIERS

MARKET ANALYSIS

INDUSTRY OVERVIEW(BEVERAGES)

Market Size (2010)Market Size (estimated 2014)Market size organic beverages

USD 28.7 billion (growth rate 13%)USD 45 billionUSD 500 million

Household penetration Less than 15 % for organic beverages 85% Others

Main distribution channels Supermarkets and foodservices

Market leaders Coca-Cola, AmBev(Unilever)

Trends Convenience, Indulgence,Health and wellness Local flavors , Imported classics Quality and reliability

Per capita consumptions (TEA) 1.2 KG

Ready to drink & carbonate beverages 22 litres

COMPETITORS

DIRECT COMPETITORS

Lipton tea - Ambev

Matte Leao - Coca Cola

Local distributers

Other important Factors:-

Reach

Presence

Price

COMPETITORS PRICING

Matte Leao - $5.99 (250 gms) equivalent to 14.40 BRL

Lipton tea - $3.99(250 gms) equivalent to 9.60 BRL

Local competitors are not able to sustain in the market due to this kind of

penetration by this companies.

Their prices are considerably high where 50gm cost around 12 BRL.

This is due to improper production facilities and distribution centres and

import duties.

ENTRY STRATEGY IN BRAZIL BY BLUE

FALCONS LTD

BLUE FALCONS

Blue Falcons Inc – Est in 2008.

Diversified products in Tea, Energy Drinks & Beverages.

Head-quarteres – Kolkata, India.

Employee – 4000.

Strong Presence in North East and South of India.

Units – 12 (10 north east & 2 Kerala).

Listed - BSE,NSE (500900/Bluefalconsglobal)

Sector – FMCG

Market Cap – 500cr.

CMP – 80/-

CORE PURPOSE

“To be a well respected beverage company and focus on delivering best in ‘taste’ and health to its customer”

CORE VALUES

Be a trusted brand to our customer

Demonstrate Integrity, Responsibility and Quality in everything we do

Be Blue Falcons

Create a Global brand

Be a company that all stakeholders (customers, shareholders, employees, competitors, society) respect

KEY MISSION

SOCIAL RESPONSIBILITY

Health

Education

Community Development

MARATA

The Group Maratá existed for 50 years, under the leadership of Jose

Augusto Vieira Sergipe

The Group brings quality and innovation to consumers with a continuous

development of new products through the implementation of new

technologies.

food; agribusiness (farming and citrus); disposable; plastic

packaging; construction and exports

Top 100 Industries Coffee associated with ABIC

Holder of ABIC Purity Seal, which certifies the purity of roasted coffee and

ground.

$650 million in valuation.

THE ACQUISITION OF MARATA BY BLUE FALCONS

BLUE FALCONS -MARATA

Acquisition of Marata ltd through leveraged buy-out (LBO), cross-

border acquisition by Blue Falcons inc.

Blue falcons’s strategy of pushing for aggressive growth and

worldwide expansion.

The acquisition of Marata ltd will help Blue Falcons to enter in top 5

valuable brands in the world with the expected combined turnover

worth Rs.4000 - 5000 crore. (The first being Unilever, owner of Brooke

Bond and Lipton).

Blue Falcons

$ 800 mn

Equity 250mn

Debt 550mn

Marata Acquisition

Legal Services & Bank Charges

Marata’s Working Capital requirements

BAJAJ FIN Schroder Ventures

SBI

300mn

100mn 150mn

Blue Falcons

STRUCTURE OF THE DEAL

600mn50mn

150mn

DEBT PAYMENT STRUCTURE

A B C D

Amount 350 Million 250 Million 120 Million 80 Million

Loan Type Long Term Long Term Long Term Revolving

Purpose Funding Acquisition

Funding Acquisition

CAPEX WC Requirements

Year of Maturity 2020 2020 2018 2019

Pay Back Method Semi Annual Installments

2 Installments in 2019-20

2 Installments in 2018-19

Cessation of Credit

Interest rate 11% 11% 11% 11%

BEFORE MERGER

BLUE FALCONS Inc MARATA

Turnover $600million $417 million

operating profit $88 million $42.6 million

Employees 4000 3500

Tea Estates 26 16

Key Market India&South Asia Brazil,USA

AFTER MERGER

Company Blue Falcons

Revenue $1.5 billion appx.

Operating profit $820 million

Employees 7000 appx.

Market Asia, North&South America

APPROACH BY BLUE FALCON’S IN BRAZIL THROUGH TANINO BRAND

Your thirst. Your Quench Your Kick

STRATEGY

Focusing on Core Competencies i.e Beverages

Divesting all the other Food products of Marata Group.

Focusing on providing a best quality product.

Positioning the Brand as their own product because it is been produced in

brazil.

To be present in all over the states of brasil.

To be a youth oriented brand.

BUSINESS MODEL • Plantations• Manufacturing Plants Inbound Logistics

• Packaging Machining • Assembly Operations

• Distribution through Walmart Outbound Logistics

• Campaign's, Advertisements, Print Media, Events

Marketing & Sales

• Outlets all over the country Customer Services

STPD ANALYSIS

SEGMENTATION Target audience will include the younger generation ranging from age 18 to 40.

This group is the largest segment at 57% of the total population (202 million).

This identified segment is our best targeted market because they are:

Less set in their ways,

More open to trying new things,

More easily influenced by the media.

These characteristics makes them more susceptible to changing their

preferences from the common soft drinks, juice, and coffee to a new aged

beverage such as iced tea

Customer Based Market Segmentation

Kids

Calorie Conscious

Youth

Tanino Energy Drink(flavored)

Flavored Tea, Iced Tea, Energy Drinks , Carbonates

Herbal tea

Industry Based Market Segmentation

Ice tea & Energy Drinks

Restaurant/Hotels

Retailers

Snacks Retailers

Tea Chains

POSITIONING

“Its All Yours “

“Its all yours” Would be the positioning statement for our product.

Instant Refreshment.

Happiness & Joy

Positioned as their own country brand .

Superior Quality Product.

Experience.

Your Thirst. Your Quench. Your Kick

This would be the positioning statement for Energy Drinks & Carbonates.

Energy drink for athlete's

Fitness enthusiastic

For Non Alcoholic Drinkers

DIFFERENTIATION

Attractive Design

&Packaging.

Experience

Product PromotionPlacePrice

PeopleProcessPhysical Evidence

7 P’S OF MARKETING

PRODUCT PORTFOLIO

Tanino

Tea Iced Tea Energy Drinks

Health conscious Tea

SKU’S Variants CarbonatesFlavors

PRODUCT PORTFOLIO

Adaptation to local taste

More Sweetened Products

Use of local flavor's like orange

Product Packaging will be in Portuguese language.

Product will be of standard size because

refrigerators available in brazil are similar to US.

Plastic & Paper Cartons will be used for packaging

with our trade mark packaging of blue colour.

PRICING STRATEGY

Cost Leadership Strategy

Due to backward integration we can have a control on our cost which will

help us to penetrate the market with a considerable price and less than

the competitors.

Competitors Price for 250 mgs – 4 to 6 $

Our price for 250 gms 3$ which comprises (Actual cost + Retailers

Markup)

Combo Pricing & Bulk Pricing Techniques can be used.

Manufacturing plants in Southern region of brazil.

Bahia & Rio Grande de Sul

It satisfies the required conditions :

Location –Highland areas with high altitudes

Good climatic conditions

Adequate Rainfall

Soil

Manufacture of Instant Tea,& Blending

By using Maratha’s Packaging

industry in Rua Sao Jose in Rio we

would not need to find a new place for

a packaging industry which would

save a lot of efforts and cost.

Implementation of new technologies

can be done.

PACKAGING INDUSTRY

Setting up new distributing centers would result in higher

cost.

Existing centers of Maratha Group are not able to compete

on that level with other major players like Lipton’s Carrefour

and Walmart.

So it is important that distribution should be outsourced to a

major retailers who has its renowned presence in brazil

DISTRIBUTION CENTERS

Companhia Brasileira de Distribuição is the largest retailer in brasil.

It comprises of

GPA(167 supermarket)

Extra(213 supermarkets; 137 hypermarkets; 183 minimarkets; 159 drugstores;

83 gas stations)

Assai Atacadista (78 stores)

Subsidiaries Like:-

• Casas Bahia (611 stores)

• Ponto Frio (361 stores)

Using this Retail option will not only ease the process of distribution but will

provide with their wide reach throughout the country which accounts for over

95% of the population.

DISTRIBUTION-RETAILER

Celebrities Endorsement • Football is the most popular sport in Brazil.

• Players can be used to endorse products which will have a greater impact.

Sponsoring Events

Olympics 2016 is one the major events to be held in brazil after the

Football worldcup.

• This kind of a global event will not only create awareness but will

also have a huge impact on the target market.

PROMOTION STRATEGIES

Outlets

Presence in all over the country.

Ambience

Same ambience with our trade mark colour blue and Brazilian

Yellow.

Online presence

Continuous activities all over the Internet

PHYSICAL EVIDENCE

Manufacturing

Retailers

Packaging

Consumers

ORGANIZATION STRUCTURE

ASSUMPTIONS

ESTIMATED P&L (IN CRS)Particulars Mar,15 Mar,16 Mar,17

Income

Net sales 4000 4800 7000

Other income 1000 1150 1500

Total income 5000 5950 8500

Expenditure

Raw materials 400 400 400

Other manufacturing exp 500 550 600

Selling & admin expenses 300 1000 700

Other expanses 150 100 300

Total expenditure 1350 2050 2000

Operating profit 2650 2750 5000

PBDIT 3650 3900 6500

Interest 401.5 429 715

PBDT 3248.5 3471 5785

Depreciation 50 50 50

PBT 3198.5 3421 5735

Tax 1119.475 1197.35 2007.25

Reported net profit/loss 2079.025 2223.65 3727.75

Net profit march,14 3600cr

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