Oriflame May Acquire Competitor to Enter Brazilian Cosmetics, Chief Says
Stock Chart for Oriflame Cosmetics SA (ORI)
Oriflame Cosmetics SA, a Swedish makeup maker that sells its products in 62 countries, may acquire a competitor to enter the Brazilian market as soon as possible, its Chief Executive Officer Magnus Braennstroem said.
Buying a local set-up is an attractive option because of Brazil’s size and varying regulations in different provinces make the country a tricky market, Braennstroem said yesterday in an interview in Stockholm. The problem is finding the right acquisition target, because it has to be “a good deal,” he said.
South American expansion is one of Luxembourg-based Oriflame’s top priorities as it now mainly sells in smaller markets there, such as Colombia. New York-based Avon Products Inc., the world’s largest direct-selling cosmetics company, last year had almost 40 percent of its sales in South America with a 9 percent revenue increase in Brazil. Oriflame had 5 percent of its sales in Latin and South America.
“Brazil is the country I would say is the most strategically interesting market in the world to enter right now,” Braennstroem said. “Brazil already has a very high consumption of cosmetics, strong growth within cosmetics and direct selling is a highly accepted sales form.”
Oriflame, whose products are marketed by 3.5 million representatives selling from their homes, gets about 55 percent of its revenue from former Soviet republics. To compete with larger rivals, such as Avon and Mary Kay Inc., Oriflame also wants to expand into new markets in Asia. Malaysia, Laos and Cambodia will likely be added in the next five years, Braennstroem said.
Avon said in March it will add a new research and development center in Shanghai to support growth in China and Asia. Oriflame’s expansion in China depends mainly on the availability of local sales recruits, which is the makeup maker’s biggest difficulty, given the tough competition from international and local direct sellers, Braennstroem said.
Oriflame will be “forced” to enter the U.S., the stronghold of Avon and Mary Kay, if it wants to realize the long-term target of becoming the world’s largest direct-selling cosmetics company, Braennstroem said. It’s unlikely to happen within the next five years, he said.
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