Natura Cosmeticos’ position as the leading cosmetics company in Brazil may ultimately depend on its ability to connect to international markets, according to Euromonitor International.
Marlous Kuiper, non-store manager of beauty and personal care, pointed out that whilst the company still had a competitive edge in Brazil, it was also facing fierce competition on its own turf.
The company’s market share in the country hit a wall and declined from 14% to 13% in 2012 as a result of strengthening competition from its rivals, despite substantial revenue growth and the launch of new product lines.
Kuiper also pointed out some of the company’s strengths, including a “surprisingly solid” presence in the ten fastest growing beauty markets in the world- including Brazil itself, but also Argentina and Mexico- and growing revenue and growth in its international operations.
He commented: “Natura continues to make substantial sales gains, but rising competition at home and softening demand for direct selling saw its share slip in 2012.”
Direct selling could be a weak link
Natura’s strongest roots are in Brazil, a single market which accounts for around 90 percent of its overall sales.
The company’s strong presence in direct selling is now being counterbalanced by its difficulties with weak product launches and a reduced demand for this form of marketing.
Kuiper also noted that the company had not been proactive in launching a global beauty brand with a Brazilian flavor onto the market.
As a result, revenue growth was disappointing over this quarter.
Natura’s problems were exacerbated by increased competition from specialized beauty retailers like Botica.
Natura’s responses and options
Kuiper approves of some of Natura’s responses, such as their improvement of their international operations division, which is showing “strong revenue growth and significant improvements in profitability.”
The company also launched liquid soaps and moisturizers in its cheaper SOU sub-brand, with more products in these categories planned for later in the year.
Kuiper commented that the company has grown its shares in both Brazil and Mexico over the review period of 2007-2012, which is good news thanks to the high growth expected in those markets.
He noted: “This reflects the company’s expansion strategy, but importantly also underlines that its long term development does not only depend on Brazil.”
“Ultimately, however, Natura may need to seek other international markets.”