# Presentation: 060045

## Retail Brazil 2006 / 2007

**Trade Americas **
**Conference Presentation**
**May 4, 2006**

## Retail in Rio Concept and Results

**The In-Store Promotion 2004 –2005**
**Phase I: Retail Outreach**
**Phase II: Instore Promotions**
**Phase III: Reporting Results **
**General Concept Idea **
**Financial Scenario**
**Results **

**Notes:**
The In-Store Promotion was a one year pilot program developed and launched by Commercial Service Rio de Janeiro (CS RIO) in 2004.  The program occurred in 3 phases, which I will explain in more detail later.
The idea was to develop agreements with local retailers, who would support a local in-store promotion by prominently displaying select, primarily new-to-market, U.S. merchandise in a separate, high-traffic section of the retailer’s store. 
During the pilot we did not charge a participation fee, but participants in Phase II shipped product to Brazil at a substantial discount.  This year, we are charging a nominal fee of US$500.  
Results: 170 companies participated and generated 64 success stories to date worth $916,542 /GKS follow on sales potential

## Benefits and Structure

**180 million consumers with increased purchasing power.**
**Phase I:**** New web-based promotion.**
**Program allows you to test market and promote your products for a small fee.**
**Phase II:**** participants avoid slotting fees and long term contracts.**
**Local retailers receive products at a discount and get to test potential new product lines.**
**Phase III: ****We let you know how well your products did.**

**Notes:**
This is a great time to test market your products in Brazil.  An appreciating real has increased the purchasing power of Brazil’s 180 million consumers!

Program occurs in 3 phases which will occur over the next 12 months.  
During phase I, for a nominal fee, we conduct initial promotions for you with retailers, commercial associations and distributors, and post a translation in Portuguese of your company info and provide links to your websites and electronic catalogs.

Companies selected for Phase II –are encouraged to ship to the retailer in Brazil a reasonable amount of product at a substantial discount – for instance $5000 dollars in product (wholesale value) for $2000  in exchange for waiving the slotting fees being waived by the local retailer.  
The discount helps to offset the high import taxes, which raise the price of US products.  Products are prominently displayed in various retail stores during special in-store promotions.

During Phase III at the end of the program, we survey retailers to find out how well your products did and report the results to you.

## Retail Brazil – the Expanded Initiative

**More outlets: CS Rio, São Paulo, Porto Alegre, and Belo Horizonte **
**Stores, distributors, online retailers, trade events**
**Local promotions description**

**Notes:**
The Commercial Service in Brazil has a network of 5 offices that cover various regions of the country.  Based on the program’s success in Rio, we decided to take the benefit of our experience along with lessons learned to expand the initiative to other posts in Brazil to provide more market-test opportunities for US manufacturers, wholesalers, retailers and distributors. The multi-post approach means more local promotions and more “sales calls” on our part.

SP promotion: SP is the second largest city in the world with a pop. Of 40 million.  Most retail stores have their HQs in SP, and there are a number of trade events occurring each month.

Belo has opportunities in pet supplies, housewares and food products. Pop. Is aprx. 5 million

Porto Alegre is located in the south of Brazil and shares borders with Argentina and Uruguay.  We have two supermarkets interested in featuring US products and a chain of stationary stores

Rio:will turn again to the local Commercial Associations for product promotions to local retailers and local events that worked for us before like the Feira de Providencia in Rio.  We also plan to work with distributors and retailers in Rio.  Currently Rio has two potential retailers lined up: Shoptime an online retailer that also produces infomercials and Ponto Frio – a Brazilian version of Best Buy.  Rio also plans to widen our outreach to distributors, who supply the retailers, and various importers. Last year, the duty free shop Brasf participated in Retail in Rio. 

## What type of products work best?

**Notes:**
(REFERENCE CHART) Based on our experience last year, U.S. companies that deal with high-end products that play to demand from a higher income market segment, or low-end, easily affordable products are likely to enjoy the most success from this initiative.

Note: the products that are already on Retail shelves in the US stand the best chance of making it onto retail shelves in Brazil – particularly products that are known brands or “cutting edge.” (e.g. the Ipod).  Others should consider using our GKS service to find a distributor.

CS Brazil posts will target multipliers such as associations to organize local promotions that will attract the attention of local retailers.  We will display samples shipped for the promotion to give local retailers the chance to evaluate the products first hand and decide what they want to order.

We will diversify the types of local retailers and distributors recruited for this program who can import high and low-end products from the United States. 

## Type of company best suited to participate in Retail Brazil

***Highly motivated***
***Proven Retail Track Record***
***Export ready***
***Products with modern design***
***New gadgets @ right price***
***Catchy packaging***
***High-end and low-end ***_[ ](http://images.google.com/imgres?imgurl=http://www.psychologue.levillage.org/motivation.gif&imgrefurl=http://www.psychologue.levillage.org/Motiver.html&h=216&w=301&sz=19&tbnid=lUQT01OsZgWwPM:&tbnh=80&tbnw=112&hl=en&start=22&prev=/images%3Fq%3Dmotivation%26start%3D20%26svnum%3D10%26hl%3Den%26lr%3D%26sa%3DN)_
***Increase to market***

**Notes:**
Now we’d like to share with you the type of companies we feel you should target to participate in Retail Brazil. 
1) U.S. companies targeting Brazil should be the ones that are truly interested in exploring their product potential in the Brazilian market, and ideally should have a proven track record of sales in the United States.
2) US companies should be export ready. They need to have their price structured and be able to understand and provide the FOB price to the retailers.
3) Companies that have products with modern design features also proved to be more successful in the retailers’ selection process.
4) The Brazilian market is price sensitive but is also hungry for new products. Gadgets are welcome!
5) Cosmetics companies should pay especial attention to the labeling process. Catchy packaging can be a plus! 
6) We will target a broad audience of retailers in Brazil so technically both high-end and low-end products will find their niches. 
7) For companies who already have a presence in Brazil, this is your chance to increase your sales outlets!

## Things to Bear in Mind

***Registering food, health and cosmetics products***
***Size standards for apparel***
***Need for FOB and electronic catalogs***
***US turnover and communication issues***
***Need to target products**********
***Portuguese translation needed in ***
***    ******some cases***

**Notes:**
The registration process for exporting food, health and cosmetics process to Brazil is fairly lengthy and complex.  There will be a separate fee of $800 for cosmetics companies interested in this program. 
U.S. companies in apparel industry need to be aware that design and size standards might vary considerably in Brazil.
3) U.S. companies that were not able to supply FOB price and electronic catalog of their products might face more difficulty selling in Brazil.
4) U.S. companies selected by local Retailers to participate in local promotions must be prepared to respond immediately to calls and emails, to avoid delayed delivery of the products to the consignee at the U.S. ports.
5) Brazilian retailers expect us to show them brand new consumer good products.  

## Types of Products in Demand

**Apparel**
**Food products (FAS)**
**Cosmetics/**
**Health and Beauty**
**Housewares**
**High-end electronics**
**Office supplies**
**Pet supplies**
**Sporting goods**
**Toys**

**Notes:**
Based on last year’s experience these are the industries we feel will do well in Brazil on both the high and low end as previously discussed.  

Food products along with cosmetics/health and beauty products given all have special requirements for product registration with ANVISA – the equivalent of the USFDA. Unfortunately, ANVISA is on strike, so there is a backlog for approvals.  We have requested a meeting with ANVISA to get an exception for product samples from these categories, but that meeting has not yet been scheduled.  In June, the Secretary of Commerce will visit Brazil, and we will put this issue on his agenda to discuss with the appropriate Brazilian authorities.  Unfortunately, until the situation is resolved we may have to delay participation in Retail Brazil for cosmetics and health and beauty products.  There is however, some good news for food manufacturers.  

Not all food products are subject to ANVISA approval.  The US Commercial Service works closely with USDA’s Foreign Agricultural Service to facilitate food product exports.  FAS has a free program for certain types of food exports.  

## Local Events in Brazil

**May 20-23, 2006 –****Toys Parties & Xmas Fair**** -SP**
**June 2006 - ****Surf and Beach Show ****- SP**
**June 2006 - ****FLUMISUL**** – Rio **
**August 2006 –****Expolazer-Sporting Goods ****-SP**
**August 2006 –****Photo Image Brasil**** - SP**
**August 2006****- Escolar Paper Brasil Intl Trade Fair**

## Local Events in Brazil

**August 2006  - ****House wares and Gift Fair****- SP**
**September 2006  - ****Fitness Brazil-Sporting Goods**** -SP September 2006 –****Int’l Music Fair****-SP**
**------------------------------------------------------**
**September 1- 4,  2006 –Beauty Fair  -SP**
**September 23- 26, 2006- Cosmoprof Int’l Exhibition & Conference – SP***

**Notes:**
As you can see we have targeted many different industry sectors, and we are working with other posts to promote these events.

Please note: we will offer a separate promotion for cosmetics for US$800.

## IBPs Targeted for RB Promotion

**April 28-May 5, 2006 – ****IBS 2006****  NY Hair show**
**May 20-23, 2006 –****NRA Show**** Chicago, IL**
**July 24-28- ****Las Vegas Market**** **
**July 11-13 – ****VSDA Home Entertainment****  **
**July 16- 18 ****Cosmoprof Las Vegas **
**August 23-26 ****International Woodworking Machinery and Furniture Supply Fair USA**
**October 16 –22 High Point - ****International Home Furnishing Center**
**Oct 31 – Nov 3 - ****SEMA SHOW /  APPEX**

**Notes:**
Here is a list of IBPs CS Brazil will support with buyer delegations.  In these instances, we willbe bringing potential buyers to you!
Cosmoprof in LV could present another opportunity for cosmetics firms to find a Brazilian distributor, since we are recruiting a delegation to go to that show

## Phase I: Retail Outreach

**April 1-June 15 ****Market Test Phase I begins:**** US companies who register with appropriate products send samples and catalogs. **
**Ship 3 samples and 10 catalogs for each city to:****	****Camille Richardson**
**Unit 3501**
**APO, AA 34030-3501**
**Expect a 4-6 month lag time for initial responses.**

**Notes:**
We thought it would be useful to present a project timeline with target dates.

For Phase I, we get back to each of you about the best course of action for you to explore opportunities here in Brazil.  For those companies that are good candidates for Retail Brazil, we will indicate which cities offer the best opportunities.  Once you have paid the participation fee, will begin receiving catalogs and samples from you that we will use to market to Retail Outreach Initiative to various retailers and distributors here in Brazil.

We ask that you send enough for each city.
Please note:there will be some size, weight, material and quantity limits associated with shipping through the APO.  We will let you know what these restrictions are once you register.

You should expect a possible 4-6 month lag time.  I’ll explain why on the following slides.

## Phase I continued

**June 30 –first wave of CS promotions in Brazil through Commercial Association using samples and catalogs.**
**June-August retailer selection and negotiation with US companies for Phase II.**
**NOTE: NOT ALL products will be selected For Phase II.**
**GKS/IPS option**

**Notes:**
We will accept samples and catalogs through June 30, after which we will showcase them in  
organized promotions through commercial associations to reach a wider audience.

Over the summer (actually winter here) we anticipate that retailers will contact companies in which they are interested.  That’s where the lag time comes in.  If we receive goods in April, a retailer may not make a decision until June or possibly August.

NOTE: NOT ALL products will be selected in a test market program.
Please note that the US$500 covers the participation fee and our promotional expenses.  If your products are not chosen, then you will receive negative results for the market test.  $500 does not guarantee participation in Phase II: the Instore Promotion Initiative.

If you still wish to look for an agent or distributor we have additional product options for you such as our Gold Key program, which I will explain later.

## Phase II: Product Shipments for In store Promotions

**8/15/06 consolidated shipment leaves the US via Fedex. **
**9/1/06 products arrive in Brazil and clear customs.  Products distributed throughout Brazil by Fedex. **
**Late September products promoted to Feira de Providencia in Rio.**

**Notes:**
* More consolidated shipments may be arranged based upon number of retailers interested in local promotions

## Market Test Phases II& III

**October 2006:  first in-store promotion programs with Brazilian retailers throughout Brazil **
**December 2006 Feira de Providencia in Rio.**
**Christmas promotions at other posts.**
**January-March 2007 ****Test Market Phase III:**** CSB offices follow up to harvest success stories/share results with USEACs**

**Notes:**
The timing for the instore promotions will be determined by the retailers, but will more than likely be scheduled for Christmas.

## How you can participate

**Register online at: ****http://www.buyusa.gov/tradeamericas/retailbrazil.html**
**Product consulation city selections, and payment.**
**For more info on Brazil ****visit:http://export.gov/comm_svc/press_room/marketofthemonth/Brazil/011006brazil.html**
**US$500 to participate**

**Notes:**
You can register online at this address.

You will can begin to do some research on Brazil if you haven’t already. (Reference BZ MOM)

After you’ve made an initial consulation with us, and your city selections, you can pay the $500 participation fee to either Delia or Bill as indicated on the registration form.

For US$500 each participating company will have a description in Portuguese on the CS Brazil website, with a link to their site and catalogues.  The listings will be up for a year, and we will use the money to cover our local travel and promotion costs. 

Note: this is not the only avenue open to you.  We offer a variety of other products and services to help you explore your options.

## Other CS Products

**Gold Key Service:**** Customized business appointments**
**International Partner Search:**** List of pre-screened distributors **
**Customized Contact Lists**
**International Company Profile**

**Notes:**
Customized schedule of appointments with pre-screened potential agents, distributors, or other business contacts according to your needs. 4-6 appointments per day, typically at each Brazilian company's offices. We will also arrange initial hotel reservations, driver services, and interpreters for a separate fee. 
Cost: US$ 685 for the first day and US$ 400 for subsequent days. Delivery Time: Six weeks advance notice is required. 

IPS: a pre-screened search to identify up to 5 qualified potential representatives, distributors, licensees, franchisees, or strategic partners interested in your product or service in Brazil. The preferred method for showing your products and company information to Brazilian firms is your web site or electronic catalog/brochure. If a web site or electronic catalog is not available, we will require 20 sets of product literature. 1 month lead time. Cost: $600 
CUSTOMIZED CONTACT LISTS 
List of 10 - 20 potential Brazilian agents, distributors, and importers of your product for your follow up. The list will contain basic information, such as company name, address, and phone/fax numbers. 
Cost: US$ 200. Delivery Time: 5 - 10 business days from receipt of payment. 

INTERNATIONAL COMPANY PROFILE 
Evaluate potential Brazilian business partners through confidential background checks on their financial health and business standing in Brazil. We conduct due diligence on a Brazilian company through such actions as visiting the company, its suppliers, customers, neighbors, and bankers. You can request answers to a detailed set of questions or add special ones of your own to our standard list. Cost: US$ 520. Delivery Time: 15 business days. 

## After Retail Brazil

**Goal I: Feedback: Phases 1,2,3**
**Goal II: Establish agreements with Retailers or distributors**
**CS business counseling**
**Visits to Brazil (GKS, IPS)**
**Goal III: Shipments to Brazil to sell products**

**Notes:**
Please remember that this is a test market program – there are no guarantees that your products will be selected despite our best efforts.  Consider carefully how you wish to proceed with the following goals in mind:

Goal 1: We will let you know up front if we think your product will do well in Retail Brazil and in which cities.  For those of you who qualify and decide to participate in Retail Brazil – you will receive feedback on each phase. 

For example – if during phase 1 no retailers select your products – you may decide to go straight to Goal 2 and seek a distributor through one of our services.  For those of you who do well through retail Brazil, Goal 2 would be a logical next step – unless you sign an exclusivity agreement with a local retailer. 

Goal 3 is our bottom line for all of you, no matter which product or service you choose!  We love to hear about how and when you make a sale!

## Shipping and Import Costs

**Imports are subject to a number of taxes and fees, usually paid during the customs clearance process.  **
** ****(1) Import Duty itself (aka "II")**
**(2) Industrialized Product tax (aka "IPI"), **
**(3) Merchandise and Service Circulation tax (aka "ICMS"), **
**(4) Social Integration Contribution (aka “PIS”) (5) Social Security Financing Contribution (aka “COFINS”). **

**Notes:**
Import duties are an important consideration BEFORE entering a marketplace.  A number of you had questions about Brazil’s import duties.  To give you a better idea of how they work, I’d like to ask Patricial Marega of our SP office to give you a brief overview: Patricia?
        Import Duty – applies to all foreign (in this case US) products
Import duty is a federally mandated product specific tax. Brazilian import duty rates range from 10 - 20 %.
         Industrialized Product Tax (IPI)
The IPI is a federal tax levied on most domestic and imported manufactured products.  It is assessed at the point of sale by the manufacturer or processor in the case of domestically produced goods, and at the point of customs clearance in the case of imports. Generally, the IPI tax rate ranges from 0 to 15 %.  In the case of imports, the tax is charged on the product's CIF (Cost Insurance & Freight) value plus import duty. 

The ICMS is a state government value-added tax applicable to both imports and domestic products.  The ICMS tax on imports is assessed ad valorem on the CIF value, plus import duty, plus IPI. 
The PIS/COFINS rate is 9.25% but it can represent up to 12.63% of the CIF price due to complex formulas 

## Shipping and Import Costs

-  _**Additional Miscellaneous Taxes and Fees**_
**	****-****  ****Warehouse Tax:****  0.65% of CIF for a 15 day period**
**-**** ****Typical Terminal Handling Charges at Santos'     **
**  ****port:  US$100 per container**
**- ****Merchant Marine Tax:****  25% of ocean freight   **
**  ****charges (does not apply to air freight)**
**- ****M****andatory Contribution to Custom Broker's **
**  ****union:****  2.2% of CIF with a minimum contribution **
**  ****of ****	****US$71 and a ceiling set at US$160**
**-****  ****SISCOMEX**** ****usage fee:****  US$30**
**-****  ****Typical Cargo Transportation Fee:****  US$35**

## Hypothetical Cost Buildup for an Imported Machine in US Dollar

**Hypothetical Cost Buildup for an Imported Machine in US Dollar**
**FOB price of Product . . . . . . . . . . . . . . . .. . . . . . . . . . . . .  . . . . . .. . .**	**100,000**
- Freight** **. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . 	2,400
- Insurance (1%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1,000
**CIF Price of Product. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .**	**103,400**
- Import Duty Rate: 19% -- applied to CIF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19,646
- IPI: 5% -- applied to CIF + import duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6,152
- ICMS: 18% -- applied to CIF + import duty + IPI . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23,256
- Merchant Marine Tax: 25% of ocean freight cost . . . . . . . . . . . . . . . . . . . . . . . . . . . .	600
- Warehouse: 0.65% of CIF; or min. US$ 170, max US$ 235. . . . . . . . . . . . . . . . . . . .	235
- Terminal Handling Charges: average US$ 100 per container . . . . . . . . . . . . . . . . . .	100
- Contribution to Custom Broker's union 2.2% CIF; or min of US$ 71, max US$ 160 . 	160
- Custom Brokerage Fee: average 0.65% of CIF or min US$ 170, max US$ 450 . . . . 	450
- SISCOMEX Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 	30
- Typical Cargo Transportation charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 	35
- Typical Bank Costs: 2% of FOB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 	2,000
**FINAL COST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . **	**156,064**

**Notes:**
That’s an hypothetical cost buildup for an imported machine, shipped in a 20 foot container, from Miami to the Port of Santos.
Illustrates how taxes and fees are calculated. 
It also illustrates the impact of importing costs on the landed price of the product in the Brazilian market. 
Some taxes such as Import duty, ICMS, and freight, varies depending on the state or on the product.

Camille: Note that despite the high mark ups there is a market for new and cutting edge products from the US – particularly electronics.  For examples, IPODs sell in duty free shops for US$1000 and an Oster chrome blender that would normally sell in the US for US$70, sells here for over $300.

## Payment Terms

**It is unwise to sell on unsecured open account terms to new clients.**
**However, US Exporters do ****lose sales**** because competitors offer open account terms.**
**Brazilian buyers will negotiate hard for open account terms, particularly because Brazilian lending rates are 25% to 30% per year. **
**Accordingly, US Exporters need to consider the full range of sales and export finance options.**
**Visit the following USCS publication entitled “Getting Paid by your Brazilian Buyer” in order to learn more about possible payment / export finance mechanisms:**
**	**** ****http://www.buyusainfo.net/docs/x_4677546.pdf**

**Notes:**
After all is said and done, and you’ve decided to sell in this market, we imagine you’d like to know how to get paid! John Mueller, the Director of our Belo Horizonte office wrote a manual on how import payments work in Brazil.  
You can contact John directly with questions: at John.Mueller@mail.doc.gov

## Overview of Main Payment Terms

- * Short-Term: up to 6 months, Medium-Term:  6 months to 5 years.
- ** Costs are estimates and will depend on transaction characteristics, particularly the Brazilian Buyer’s creditworthiness.

**Cost **

**paid **

**by:**

** **

- N.A.

- Brazilian

- Buyer

- N.A.

- US Exporter

- Brazilian

- Buyer

- Brazilian

- Buyer

- Brazilian

- Buyer

## Doing Business in Brazil

**Will require patience, dedication and teamwork.**
**We look forward to working with all of you to explore your market potential!**
**www2.focusbrazil.org.br/siteUSA/index.htm**

**Notes:**
Here is the website link for the CS Brazil website where you can find more market and industry specific info along with a full listing of our products, services and events.

We will make this presentation available to all the participants.

We’d like to thank everyone for their participation, and now open the floor for questions and comments.

## Points of Contact

**Rio: Camille.Richardson@mail.doc.gov**
**Maria.Luiza.Leal@mail.doc.gov**
**São Paulo: Frank.Carrico@mail.doc.gov**
**James.Cramer@mail.doc.gov**
**Belo: John.Mueller@mail.doc.gov**
**Mauricio.Vasconcelos@mail.doc.gov**
**Porto Alegre: Roberto.Muhlbach@mail.doc.gov**

**Notes:**
Camille: Here are the main points of contact in all four cities.  We are happy to answer any questions you may have.