The document provides an overview and analysis for a potential entry strategy of GumYum, Inc. into the Brazilian gum market. It outlines Brazil's population size, economic factors, the size and growth of the gum market, and key competitors. The proposed entry strategy includes partnering with distributors, targeting consumers with new flavors, and promoting products at retailers. A financial analysis projects break-even in the second year with a 5% market share. Key strengths and weaknesses are identified.
2. GumYum, Inc.
Background
Situation Analysis
Strategic Advantages; Economic and Cultural Factors
Market analysis
Market Size; Market Potential; and Competition
Potential Entry Strategy
Implementation plan
Brazilian Preferences
Product, Place, Price, Promotion
Breakeven and S.W.O.T. analysis
Future outlook
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3. GumYum, Inc.
Largest country in South
America
Mostly tropical climate, though
temperate in the South
Leading producer of agricultural
products
Recurring droughts in the
Northeast with occasional
floods and frost in the South
Population: 203, 429, 773
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4. GumYum, Inc.
Multiple borders
7,491 miles of coastline
8,233 square miles of
renewable water resources
1.134% population growth
Low cost of production
Competitive advantage for
sugar production
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5. GumYum, Inc.
Steadily improving macroeconomic
factors by building up foreign reserves
GDP (2010): $2.194 trillion
GDP growth rate (2010): 7.5%
GDP per capita: $10,900
Labor force of 103.6 million
7% unemployment rate
26% of population below poverty line
$199.7 billion exports
$187.7 billion imports
1.77 Brazilian Reals (BRL)= 1 USD
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6. GumYum, Inc.
Languages:
Portuguese
88.6% literacy rate
87% of total
population is
urbanized
67% of population
between the ages of
15-64
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7. GumYum, Inc.
Primary market: males and females between the ages of 13-50
Food retailing accounts for around 30% of total retail sales,
approaching $50 billion in Brazil alone
Population of over 200 million
Poorest 20% of Brazilians account for only 2% of income
Wealthiest 2.5% earn over 30% of all income
Brazil is the world’s third largest market for sweets
Confectionary value sales have risen 46% between 2004-2009
Gum sales:
2008- $1,286,000,000
2009- $1,207,000,000
2010- $1,460,000,000
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10. GumYum, Inc.
Current economic
stability and lower
inflation
Surging sales among
poorest 50% of 2008-2013
population
Benefits from free
trade agreements
Huge potential for
growth and variation 2008 2009 2010 2011 2012 2013
to appeal to many
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customers
11. GumYum, Inc.
Hershey
Nestle Brasil (10% market share)
Especialidades Mentex, Nestle Classic, Alpino,
Chikito, Galak, Nescau, Seducao
Kopenhagen
Cadbury Adams (74.9% market share)
Trident, Ping Pong Ploc, Clorets, Plets
Leader in the gum industry
Arcor Group
Over 50 brands across product categories in
Brazil
Sambapito, Big Big, Poosh, Samba, Blow Up
and Tortuguita
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12. GumYum, Inc.
Point-of-purchase merchandising
Awareness of health-conscious consumer preferences
Mass production possible in the gum industry
Santos Port
Introduce new flavors into the core flavors market
“Burst and fade” effect
Ex: Pineapple, banana
Majority of growth in the Brazilian market is due to the increase of sales of
sugar-free chewing gum
One of the fastest growing subsectors in the whole confectionary industry
Consumers are heavily influenced by the benefits to dental health that sugar-free gum
can provide
A growing number of products exploit this considerably
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13. GumYum, Inc.
Contract with independent distributors and
wholesalers to handle logistics and supply
Electronic-data-interchange system
Use transportation company with the longest
and strongest presence in each region
Lower costs and greater speed
More sophisticated control of distribution
Maintain the highest green and eco-friendly
standards
Have salespeople work in tandem with the
distributors worldwide
Colón port of Panama
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15. GumYum, Inc.
Geocentric staffing approach
Eliminates cultural barriers
Builds a strong, unified culture
Uses HR efficiently
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16. GumYum, Inc.
Make it last long with full
flavor to remain
competitive in the market
Wrapper games
Eco-friendly wrapper and
packaging
Offer different flavors and
sizes
Fruity and minty varieties
Whitening and cavity
protection
Calorie counters
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18. GumYum, Inc.
Partner with Wal-Marts and
other large retailers/grocery
stores nationwide to sell at
registers
Gas stations and mini-marts
Newspaper kiosks
Padarias (hybrid bakeries)
Centralize production in major
cities
Salvador
Sao Paulo
Rio de Janeiro
Brasilia
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19. GumYum, Inc.
Convert Brazilian reals to US dollars
1 USD = 1.5630 BRL 1 BRL = 0.6398 USD
$0.99 pack of gum = 1.55 BRL
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20. GumYum, Inc.
Packaging to combat the hot climate
Majority of growth in the Brazilian market is due to the increase of sales
of sugar-free chewing gum
One of the fastest growing subsectors in the whole confectionary industry
Consumers are heavily influenced by the benefits to dental health that sugar-
free gum can provide
A growing number of products exploit this considerably
Curb your appetite by chewing gum
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21. GumYum, Inc.
≈ $6,000,000 in capital for plant
Cost of labor per year for 500
employees:
500 x $8,230 (GDP per capita) ≈
$4,115,000
Cost per pack of gum ≈ $0.03
Cost to export to the rest of South
America and/or Central America: $860
per pallet (7,500 individual packs or
625 cases containing 12 packs each)
≈ $0.11 per pack for shipping, $1.32 per
case
Sell pack of gum for the equivalence of
$0.99 worldwide
Mass order quantity discounts
Intra-national shipping discounts
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22. GumYum, Inc.
YEAR 1 YEAR 2
Estimated market share = 2% Estimated market share = 5%
Sales: 10.27M at $0.99/unit Sales: 25.67M at $0.99/unit
10,167,300 25,413,300
Fixed Cost Fixed Cost
Plant: $6M Depr: $0.6M
Operation: $0.1M Operation: $0.1M
Labor: $4.115M Labor: $4.115M
Variable Cost Variable Cost
Package: $0.03/unit Package: $0.03/unit
Shipping: $0.11/unit Shipping: $0.11/unit
Total Cost Total Cost
(11,652,800) (8,408,800)
Net Income before Tax Net Income before Tax
(1,485,500) 17,004,500
21 We will roughly break even on year 2
23. GumYum, Inc.
Strengths Weaknesses
•Imports and exports are booming as record •Well-established and reputable competition
numbers of exporters are gaining EU licenses already in place
•Brazil’s huge population offers substantial •Income inequality, with consumption patterns
return potential varying significantly according to salary
•Brazil’s large market makes it an attractive •Regional cultural variations limit the extent to
target for international retailers
which producers can rely on a single marketing
strategy for the entire Brazilian market
•The convenience store formats are set to
experience rapid growth
Opportunities Threats
•Trade officials are encouraging exports to •Economic stability cannot be guaranteed over the
countries other than the US , resulting in longer term
significantly higher total export volumes
•High interest rates place constraints on company
•Brazil has more unused commercially viable investment plans
land than any other country in the world,
•High inflation would have severe consequences on
potential for incumbent as well as new producers
this market, because price-stretched consumers
would cut back on non-essential purchases
•Rising production costs
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24. GumYum, Inc.
The Brazilian gum confectionary market grew by $17.3 million
in 2009, to reach a value of $508.3 million
Between 2010-2015, value sales are forecast to increase by a
further 41%
Gradual trend towards the purchase of premium confectionary
products, particularly among Brazil’s growing middle-class population
By 2015, the market is forecasted to reach a value of $683.5
million, an increase of 25.8%
Between 2005-2009, per capita food consumption increased
by 49%
In the next 5 years, it is expected to grow by almost 54%
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