Insights of Brazilian Luxury Market Palestra UBIFRANCE

Haroldo Monteiro
PHD Candidate
ESC Rennes School of Business, Rennes, France
Executive Director
Planning & Management Consulting
Insights of Brazilian Luxury Market

CONTENTS
I. Brazilian Luxury Market
II. Brazilian Luxury Fashion Market
III. Marketing and Finance Interface in Luxury Fashion
Brazilian Companies
IV. The role of CFO’s personal traits in a luxury strategy

Brazilian Luxury Market
• Brazilian Luxury Market Overview
• Snapshot of Brazil’s Luxury Consumers
• The logic of Luxury in Emerging Markets
• Challenges of Brazilian Luxury Market
• Who Luxury Consumer is : Behaviors and
Consumptions Patterns
• Cultural Aspects of Brazilian Luxury Consumers

Brazilian Luxury Market Overview
Brazil is a nation whose largest city has more
billionaires than Paris, Los Angeles and Geneva.
Its economy saw its luxury segment to grow 5% in the
last 12 months, well above the GDP performance
Source: www.businessluxo.com.br

• There are now 52 billionaires in Brazil, and after reaching a
record number of 65 individuals in last
March’s FORBES World’s Billionaires List
• The total wealth of the Brazilian billionaires is down from
$186.3 billion in March 2013 to the current $158.7 billion
(2014) Source: Forbes
• Brazil has 211,593 millionaires – A percentage growth from
2013 to 2014 was 8,9%
Source:Wealth Insight
• One person in Brazil became a millionaire in every 27 minutes
in 2013 .
• 78% of millionaires live in São Paulo and Rio de Janeiro
Source: Wealth Report 2013 published by Wealth-X

Source:Wealth Insight

By Luxury Segment

Automobiles represent 50% of the Brazilian luxury
market

Snapshot of Brazil’s Luxury Consumers
• 58% are women
• 53% live in Sao Paolo
• 47% have post-graduate degrees
• 33% are age 26 to 35
• 4,700 reals ($2,545) – average ticket price of a luxury
purchase
• São Paulo has more helicopters than any city in the world
• Luxury car sales rose 45% per year from 2005 to 2010*
• *Considering Aston Martin, Ferrari, Jaguar, Bentley, Lamborghini, Maserati, Porsche, Spyker and Pagani
Source: Mckinsey & CO

Snapshot of Brazil’s Luxury Consumers
• GDP per capita in Brazil (195 million people) is almost $
11,000;
• An estimated 30 million people entered the middle class in
the last decade;
• Unlike Europe and Japan Brazil has only 6.7% of its population
over 65 years, mean age below 30 years;
• McKinsey estimates that about 3 million Brazilians can afford
luxury goods
• One third of millionaires is under 35 years;
Source: MCKinsey & Co.

The strong growth of the Luxury Market in Brazil creates an
opportunity for specialized media in luxury
Thinking about that, in 2014, the journalist Fabiano Mazzei
decided to create a new space for discussion and dissemination
of this important business sector: the portal Business Luxury (
www.businessluxo.com.br ) .
According to Mazzei, there are on the market today, few vehicles
that propose to a specialized coverage in the luxury market
business. Inversely proportional is the interest of the media by
the lifestyle and the high-income consumer. But why not give due
weight to the economic view on this coveted niche?

Challenges of Brazilian Luxury Market

• Import tariffs need to come down or labels are forced
to position themselves at a much higher level in Brazil than in Western
markets
• Brands such as Topshop and Forever 21, which are considered as “high
street” in the UK or in Europe, have to be positioned as affordable luxury
in Brazil.
• After all the taxes are added on, a luxury product costing $1,000 at the
port of entry could wind up with a price tag of $2,300 for a shopper in São
Paulo.
• Ultra-high import tariffs mean that luxury brands are typically positioned
much higher than in Western markets
• Social class A consumers like to downplay their wealth because of fears
over security
• The pessimism with our economy is affecting the consumer confidence

• Brands remain positive about the opportunities in Brazil, although the
Brazilian’s Economic forecasts are very pessimists.
• While some economists may argue that Brazil missed the window of
opportunity, the rise of the middle, or C Class, is evidence of the country’s
potential in the global economy, according to a panel session at the 2014
FT Business of Luxury Summit.
Economic Scenario can strengthen the share of an aircraft usage
"For the CEO of Avantto, Rogério Andrade, need for more agile movement
and uncertainty in the Brazilian economic scenario can be positive for the
aircraft share market.
In the evaluation of the executive, the prognosis is a difficult 2015. But that
may end up favoring the decision for acquiring the services of your company.
That's because companies and entrepreneurs remain with their demands for
displacement maintained, but with less cash to invest in the purchase of an
aircraft "
Source: www.businessluxo.com.br

The logic of Luxury in Emerging Markets
• The recent financial crises of 2008 revealed that luxury industry is
not immune to crisis. The crises originated in the financial industry
affected the US, Western Europe, and Japan.
• Emerging markets are driving global luxury consumption growth,
with Brazil the third largest contributor, after China and Russia
• “The logic of luxury in emerging markets is a growth story that
needs attention and documentation. What intrigues me is how
come consumers from Brazil, Russia, India, and China (BRIC) today
account for approximately 18-22 per cent of the world’s luxury
market? The luxury market is growing at 20-30 per cent in these
countries and it is estimated that BRIC will contribute approximately
36 per cent of the global luxury market by 2015 and is predicted to
have the largest base of luxury consumers”. By Dr. Ashok Som, Professor of Management
and Associate Dean of the ESSEC Global MBA

The logic of Luxury in Emerging Markets
• The Chinese luxury consumers want mostly outwardly visible and
status-driven products which in the luxury parlance is called the
'logo strategy'. The bigger the logo the more the tendency to show
off; more conspicuously demonstrate the products can be
consumed
• The Indian luxury consumers are different - they are more conscious
and probably are probably searching to customize their needs
• In Russia, the consumers expect luxury products to have a balance
between tradition, modesty, and wealth. And interestingly, Russian
consumers usually have been seen to buy goods that have much
higher prices than they are ordinarily sold at because they like to
show off that they can spend that amount of money for a valuable
product.

Who Luxury Consumer is : Behaviors and
• They are very brand conscious
• Well informed and traveled
• They are very familiar with international luxury brands and they
care about quality and exclusivity
• They are influenced by European culture and style, and by the
American casual fashion style and consumption standards.
* These characteristics are more common in elite consumers

• Brazilian consumers, long known for being spenders and not
savers
• Why are Brazilians willing to pay such huge premiums? Because
being seen to be rich is an important part of being rich. At one
nightclub, for example, when a customer buys a $1,500
jeroboam of champagne, the house music stops and the bottle
is illuminated by fireworks.
• They love credit: Even brands that won’t consider offering
installment plans anywhere else do so in Brazil— consumers
demand it. More than 70% of luxury-product sales are credit
card installments.

• Brazilian shoppers of all socioeconomic classes are accustomed to payment installments for
all sort of different categories, luxury and otherwise. Even Brazilian consumers at the high-
end, who could afford to pay for an item all at once, expect to be able to pay in monthly
(credit card) installments, allowing their money to stay invested and earn more money.
• Caltabiano , a Brazilian car distributed innovated and is bringing a new form of payment in car
sales: credit card American Express Membership Card. The payment option is available to all
premium line of vehicles.
• You can make the payment of the car by up to 12 fixed installments on the card.
• This mode speeds up the approval of the purchase and generates points in the Membership
Rewards Program, if you are subscribed to the same.

• Why are Brazilians so different? Many of the rich are newly so,
with the impulses that often attend that group. They are in
their 30s and 40s and they want their fun now.
• Brazilians spend more on luxury in the U.S. than visitors from
any other nation
• High Net Worths like to spend and show-off. They own two to
three vehicles, usually armored.
• They buy the boats that make land-locked Brasilia a major yacht
market.

Cultural Aspects of Brazilian Luxury Consumers
The attitude of Brazilian consumers is: Why wait if I can have it
now?
Consumers want their products immediately. It’s telling to look
at the business of luxury cars in Brazil versus the U.S. or Europe.
In Brazil dealers must have the car in stock, while in other
countries you can maintain and manage a waiting list. If
anything, being put on a waiting list in the U.S. serves to enhance
the exclusivity and desirability of a car. Not so in Brazil.

The beauty segment deals with different cultural aspects
depending on the country.
• In China, for example, tanned skin is characteristic of those
who work in the field. The bourgeoisie, in turn, had a lighter
skin. "This is one of the factors that causes there is a high
demand for cosmetic whitening in the country," explains Jean-
David Sebaoun, director for Latin America of Guerlain.
• “On the other hand in Brazil tanned skin is synonymous of
health and beauty, so that our best seller in the country is the
Terracotta line that gives this solar air to the skin “
says Mauritius Queiroz architect specializing in retail

• Brazilians have taken the concept of service to the extreme. In
the U.S., many companies offer private shopping hours. In
Brazil, that’s just the beginning. Instead of exclusive store
access to a collection, Brazilians have private showings at their
house. YSL, for instance, has done product launch events at a
client’s house, with souvenirs for the invitees. Product
demonstration in loco is also very common for luxury brands
in Brazil. Customers are able to take products home to test
them at no extra cost.
• Brazilians consumers are particularly responsive to the feeling
that a product is being made just for them, whether it’s the
inclusion of a monogram on the product or the development
of exclusive designs.

Two Luxury Worlds in Rio de Janeiro
• Traditional elite and the new elite, but the common sense are the
highborn the South Zone and Barra da Tijuca new rich. "Luxury in Brazil
does not have only one face. It must be seen on a regional basis"
• The well-born, for example, gives a great importance in traveling and
prefer to go to exotic places to have unique stories to tell. And why is that?
"Because, for this group, who has friends has power, and it must be shown
in conversations wealth of his repertoire.
• The trips do not have the same meaning for the new rich who adhere to
scripts "mainstream" - Miami, Orlando, New York, Paris - as shopping
destination and sightseeing. They live the dilemma of inclusion, and have
no such network of friends that makes them special. They need to prove
all the time who have money and who are successful.
• The culture of buying products with (golden) monogram plays an
important role for them
Source : Consumoteca Consulting

• According to Michel Alcoforado an anthropologist owner of
Consumoteca consulting who followed twelve women (considered as new
riches) on a tour to Miami and Orlando for a week , in which each woman
spent an average of $ 14,000 in purchases only. "The first reaction was
euphoric, living doing well because of the prices. Then they felt sorry for
the relatives who would not have access to those brands. So bought 30
shirts Armani / Exchange with that X in the chest, to take to their the
family. Because for them there is no difference between Emporio Armani,
Giorgio Armani or Armani Exchange, he said.

Brazilian Luxury Fashion Market
• Brazilian luxury fashion market
• The characteristics of luxury fashion consumers
• The most known luxury fashion companies
• The main differences between Brazilian luxury fashion
companies and foreign luxury companies
• Temples of luxury fashion brands

Brazilian luxury fashion market

The characteristics of luxury fashion consumers
• Despite Brazilians love of the casual fashion style, they like to
dress up. “Wealthy woman in Brazil is completely fashion
oriented, follow American Vogue and knows everything about
fashion”
Source: Brazilian Luxury market report - Valor Luxury Lab 2014

Brazilian luxury fashion market
The fashion sector is the most promising one, with 26% of the
Brazilian luxury market. 35% of this amount corresponds to
foreign companies. (site Brazil Business)

The characteristics of luxury fashion consumers

The most known luxury fashion companies
Osklen is inspired by the dynamism of the metropolis and the exuberance of
Brazilian nature, giving life to a style based on the harmonization of contrasts.
The integrated perception of nature, culture and society, combined with a
refined aesthetic, makes Osklen is considered by WGSN one of the ten most
influential and inspiring brands in the world, believed to Future Maker by
WWF-UK. Today, Osklen has 62 stores in Brazil, two stores in Milan, two in
Tokyo and one in Rome, New York, Miami, Buenos Aires and a season shop in
Punta del Este. In addition to showrooms in Italy, Greece, Australia and USA.
*Book: Global Luxury Trends – Hoffmann, Jonas & Coste- Manière, Ivan (SKEMA, Business School)

Cris Barros has over 350 models for collection, all with limited run. "That way, I keep a
certain exclusivity," says the designer. Investing in haute couture techniques, keeping
the attributes of national fashion is one of the secrets of success of the brand. Because
even with above average quality, lacking the luxury brands specific knowledge of the
body and the Brazilian temperament. "Hardly an imported clothing has the ideal
model for the Brazilian," says Cris.
In addition, one must understand that Brazil has several "countries" within it. What is
considered sexy in the Northeast can be common in Curitiba. The more formal style of
Curitiba can displease Bahia and so on. The challenge, therefore, is dealing with a
country with distinct regional preferences.

For over 20 years, ANIMALE, today with
more than 60 stores and 500 outlets,
wearing Brazilian women with ready-to-
wear premium and sophisticated. Leader
in design, communication and
distribution, the brand is among the five
largest fashion companies in Brazil. It
began in Rio de Janeiro in 1991.
Presented at São Paulo Fashion Week
as one of the great attractions of the
event, the brand showed its Concept
Line signed by stylist Vitorino Campos
from the winter collection 15.

In 2008, the Company acquired Bo.Bô -
Bourgeois Bohemia . With just a few
products showroom and store at the time.
The Company redesigned and
repositioned the brand and expanded the
product portfolio, so that today is your
highest luxury brand.
In 2011, the Company acquired the John
John, which marketed jeans through a
small wholesale network.
The Company was founded in 1982 under
the name Restoque Clothing Ltda. By two
renowned professionals in the Brazilian
fashion market. In 1988, Le Lis Blanc
brand was created with the aim of
developing a women's fashion business
targeted to high-end public.

Daslu has collections made up of styles
and quality materials and exceptional
quality of products. It was the first brand
in Brazil working with leather, chamois.

Ricardo Almeida is today one of the
leading menswear brands in the
country. His work is focused on tailored
pieces as palettes, pants and shirts.
Another specialty of the designer, his
jeans sport line, knitwear and leather
becomes object of desire every
collection.

The main differences between Brazilian luxury
fashion companies and foreign luxury companies
“Luxury brands are regarded as such because they are associated with nobles
values. For traditional European luxury brands those noble values have been a
commitment to quality, employment, innovation , contemporary forward
thinking and the holders of a societal meaning”.
“There is a need to transform the luxury management to combine
environmental respect for raw materials (sourcing) to aesthetic appeal and
craftsmanship in order to transform luxury consumption, for clients to develop
a perception of what values luxury stand for: a New luxury “.
“And there lies a great opportunity and challenge for Brazil. If Brazilian
companies and brands are able to materialize our way of life, our joie de vivre,
our sensuality, informality and health, that I call since the 1990s, the Brazilian
soul, in association with raw materials from sustainable socio-environmental
origin….” ( Oskar Metsavaht – Osklen’s Owner)
Source: Global Luxury Trends, the book – Jonas Hoffman

A deep and creative journey to the interior of Brazil is the starting point of the
summer 2015 Animale. Detached from a specific style, the collection dares in
color blends, pattern and shape to translate landscapes, animals and cultural
expressions.

Animale Summer Collection - 2015

Temples of luxury fashion brands

Temples of luxury fashion brands
Oscar Freire Store

Marketing and Finance Interface in Luxury
Fashion Brazilian Companies
The role of CFO’s personal traits in a luxury strategy
• The role of marketing and finance interface in luxury
companies
• The necessary traits that a CFO should have in order to deploy
the CMO’s luxury strategy
• The CFO storyteller

The role of marketing and finance interface in
luxury companies
Perspective of interrelationship of marketing and finance
• The study of marketing and finance interface proves that its relationship
affects not only the firm performance but also the expectations of a firm
performance so that it creates value for shareholders in the long-run
• The difference of focus is a field of discussion between the two areas.
Marketers study consumer and product data, on the other hand financers
study firm level data.
• The feeling is that, consumed by a focus on shareholder value, CEOs and
companies are unable to see the value of marketing. Therefore, in this line
of reasoning, marketers must find metrics that will document the positive
impact of their activities on shareholder value KUMAR, N., (2004)

luxury companies
Perspective of marketing in luxury industry
• The management of marketing for luxury markets is different.
The anti-laws of marketing
1. Forget about ‘positioning’, luxury is not comparative
2. Don’t pander to your customers’ wishes
3. Don’t respond to rising demand
4. Make it difficult for clients to buy
5. The presumed price should always seem higher than the actual price
6. Do not sell
7. Keep stars out of your advertising
Source: More on Luxury Anti-Laws of Marketing Vincent Bastien, Jean-Noël Kapferer
A “luxury marketing strategy” might be regarded as the peak of high-end
strategies. such a strategy might be differentiated by special characteristics,
such as long-lasting value, superfluity, and highly impressiveness to others.
Hennigs, Nadine; Wiedmann, Klaus-Peter; Klarmann. MaY 2012.

luxury companies
Perspective of marketing & finance interface in a luxury industry
• Due to the difference in way of marketing managing and in finance
managing, one must develop specific traits to work in this kind of company.
To these traits are added those aspects specific to luxury, often ignored or
underestimated. Kapferer 2012
• Kapferer., Bastien, 2012 highlights the role of human resources in a luxury
industry and the importance of the team, which encompasses artists,
artisans, and managers.
• Managers in a luxury industry, should have ‘something extra’ which means
that they know how to work with artists and handle fluid concepts, since
they have an artistic side, and know their limits in this field. Kapferer.,
Bastien, 2012

luxury companies
Perspective of marketing & finance interface influencing financial markets
• Marketing shall create indicators, in order to focus on the financial market
expectations
• The stock markets form perceptions of the firms that are reflected in their
share prices. They based their studies in the data that is available in the
present like cash flow, profitability and risks, however, predictions are
necessary in order to forecast future cash flows
• The marketing and finance interface has direct impact in brand valuation,
working capital, and product investment decisions.
• Maximization of customer and shareholder value has been recognized as
drives of a firm’s long-term viability and survival

luxury companies
A dynamic framework for studying the marketing/finance
relationship
The multiple paths in which marketing influences financial
markets and vice-versa. Lovett.J.M.Mac donald.B.J ,(2005)

The necessary traits that a CFO should have in
order to deploy the CMO’s luxury strategy

Artist Approach Trait --- Cost reduction Strategy
• Instead of cutting costs, it is more important to invest in communication,
creation, and distribution to construct an environment of desire for
customers. It means that financial managers must have the capacity to
understand the subjective language of the creator.
Creativity Trait -- Business Planning Strategy
• Financial Managers must design strategies as to increase their companies’
value. Kapferer and Tabatoni, 2010 . Financial managers must help
marketers to construct a strong brand image. It is in turn, necessary not
to increase the sales; instead, it is to recreate the dream to prepare the
future.
Communication Trait ---- Financial Market Strategy
• This message must encompass an idea of luxury strategy brand’s aura.
Finance is not so much about numbers; it is about emotions and dreams.
Kapferer and Tabatoni, 2010.
• They must convince the shareholders about the brand’s DNA, its value and
its capacity to create a dream for their consumers.

Commercial and Psychological Traits - Economy of Scale strategy
Instead of following the economy of scale strategy, CFOs must build up their
brands in order to make customers dream about their products. If the brand
creates an aura of uniqueness, exclusivity, it will create more desire and
demand will grow

The CFO storyteller
“After a presentation, 63% of attendees remember stories. Only 5% remember
statistics”. Author: Chip & Dan Heath
“People think in stories, not statistics, and marketers need to be master
storytellers”.
‖
http://www.marketingprofs.com/articles/2013/11036/arianna-huffington-marketing-megatrends-vocus-conference
“Storytelling is by far the most underrated skill when it comes to business”
https://twitter.com/garyvee/status/10675127621

The CFO storyteller
Remember….
Numbers are not enough if they are not brought to life

The CFO storyteller
• The more a brand evokes status, glamour, seduction, exceptional quality and
prestigious to their clients the more it can make the consumer market dream, as a
result, it can command high prices and mark ups, generating future cash flow.
Kapferer and Tabatoni 2010

The CFO storyteller
“People are looking for a connection. Tell a good enough story
about your brand and people will not only get invested, they’ll
want to buy from you”.
http://johnmichaelmorgan.com/10-triggers-of-brand-influence/

Haroldo Monteiro
PHD Candidate
ESC Rennes School of Business, Rennes, France
Executive Director
Planning & Management Consulting
Contact: 55-21-997344863
haroldomonteiro@planningconsultoria.com.br

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