The company is a huge player in the Brazil and Latin American market, but has been focusing on extending its international footprint into the US market, something that was highlighted by the opening of a US headquarters in Freehold, New Jersey, two years ago.
We asked Marcelo Golino how the company has had to adapt its business model to the US, how it has focused on meeting the local needs, implications such as efficacy leading to additional costs, and how expansion into other countries is working out.
How have you adapted the product offerings to the local requirements in the US market?
Often the texture and the fragrance is a little bit different. The way of texturizing and giving feel is different to the market in Latin America, so we have to adapt the formulations to that particular demand in a relevant way. That’s why we have created a dedicated facility in the North Eastern US region to create these formulations and to enhance our agility. We need to provide prompt assistance to our customers.
Can you explain about how you have adapted to indie beauty requirements?
We have also been working with a new company called Beauty Disruption to help adapt our formulation offerings to the American market in the West Coast. That business is being headed up by a former Chemyunion employee and the company is specifically targeted at the indie beauty market, which is currently one of the fastest growing categories and one with very specific needs. They are only working with new business. We wanted to be ready to adapt to all kinds of formulation needs in the American market and to be there as fast as possible to help them with their needs.
This means we have one facility for the west coast market and one for the east coast market, which are the two biggest markets in the US. The focus on these two regions reflects the fact that they have both evolved with quite different characteristics.
Why have you made the decision to have a more localized approach in the US market?
There is nothing better than using local formulators in international markets to help us adapt. They know the market requirements better than anyone else, so they can help us to provide the right type of products for the local requirements.
For example, you can make mistakes with choices for preservatives, for silicones and other such ingredients. Ingredients that are restricted or not accepted in formulations in the US, might not be a problem for formulations in Brazil, so we need to be clued in.
The free-from trend has developed on a very localized basis. So, for example, free-from silicones, sulfates and certain preservatives are popular in the US, whereas customers in Brazil do not need to follow the same requirements.
How does the difference in US formulation impact costs?
Often the US formulations are richer and contain many more ingredients in order to make the products more effective. Although costs are still very important in the US market, the efficacy of the product is also crucial because of the competition.
In Brazil, everything is very specific. The customer has to be very realistic about costs. If a Brazil brand puts the value of its position in the market before costs, it might not prove to be a competitive product.
Our international customers have very different requirements and the costs associated with formulation are much higher, so the approach to this side of the business is very, very different to the one we take for our domestic market.
Hair care is the crucial category in Brazil, but what is more important in the US?
In Brazil it is all about hair care, but in the US it is all about premium skin care. It is the opposite in Brazil, where premium skin care is very small, but the category is crucial in the US market. We have a significant hair care expertise, built around our local market, but we have now also built a very comprehensive skin care portfolio which is much more targeted at international markets, and specifically the US. The skin care portfolio has actually been tailored for customers overseas.
What are Chemyunion’s goals for the expansion of its international business?
Our exports to the US are getting bigger and bigger because we are meeting the needs in that market by following the local trends. I believe 10 to 15 percent of our sales are represented by the US market now. Worldwide our exports represent around 30 percent of our business and those exports are expected to grow significant in years to come.
Also, a big slice of the international exports is the rest of the Latin American market, with Colombia accounting for a significant portion of that market. It is interesting to note that the Colombian market is also very much about skin care and in many ways it is very similar to the US market so we have manage to grow the business there by focusing on these same needs.