Globalization of Markets - Brazil

NAME
Gaurav Bajaj
Naseem Ahmad
Sonali Rawal
Divij Kaul

ROLL NUMBER
GDEC12GLM041
GDEC12GLM046
GDEC12CMM30
GDEC12CMM12

Email Address:
gaurav.gdec12@spjain.org
naseem.gdec12@spjain.org
sonali.gdec12@spjain.org
divij.gdec12@spjain.org
Date Submitted: 27th May 2013

Faculty:
Professor Martin Stack

Submitted by:SonaliRawal

Executive Summary
This project talks about exploring the opportunity of taking American brand Ben &
Jerrys into a new geography and entering a new market. The brand is currently present in every
continent except Africa and South America and we have through this project decided to
introduce the brand in South America and in specific the launch of this brand in Brazil. For this
we have conducted a brief SWOT Analysis of the company then looked at the political,
economic, trade, legal and cultural factors that would affect the firms entry into a new territory.
We have also used tools such as Hofstedes index and transparency international to further
understand the challenges that lie ahead while entering a new country.

Introduction
In 1978 two high school friends Ben Cohen and Jerry Greenfield formed what would
become one of the worlds most popular dessert brands. This was called Ben & Jerrys
(source: www.benjerry.com). They began by churning out all the rich and creamy, fun and
chunky ice cream flavors theyd always dreamed about, flavors loaded with all their favorite
chunks of fruits, nuts candies and cookies (source: www.benjerry.com). This brand now exists
across several countries around the world and is one of the most popular brands associated with
ice creams globally. In 1996 the company introduced no fat, no cholesterol, no lactose sorbets
with pure spring water and fresh fruits and flavors. In 1999 it changed its to a neater more
compact form of packaging. At present the company exists with exclusive stores in 27 countries
across Europe, Australia, North America and some parts of Asia. The ice cream business usually
falls under the food industry broadly but more specifically, based on the products sold by Ben &
Jerrys it is a frozen dessert. This brand falls under the Anglo Dutch company Unilever who
1

bought the company in 2000 and broadly has products under the ice cream, frozen yogurt, sorbet
and ice cream novelty products category and is headquartered in Vermont, USA (source:
www.wikipedia.com).
Below is a list of major players in the ice cream market in the world as per market shares
based on the brand names, also given below is the parent company that owns these brands
(source: www.euromonitor.com).

Brand

Company name (GBO)

2008

2009

2010

2011

2012

Magnum

Unilever Group

3.6

3.6

3.6

3.8

3.7

Cornetto

Unilever Group

2.4

2.3

2.5

2.5

2.5

Dreyer's/Edy's

Nestl SA

2.3

2.6

2.4

2.2

2.1

Hagen-Dazs

General Mills Inc

1.6

1.7

1.7

1.8

1.8

Hagen-Dazs

Nestl SA

1.8

1.8

1.8

1.7

1.7

Yili

Inner Mongolia Yili Industrial Group

Co Ltd

1.1

1.1

1.1

1.3

1.5

Carte d'Or

Unilever Group

1.3

1.3

1.2

1.3

1.3

Eskimo

Morinaga Milk Industry Co Ltd

1.1

1.2

1.3

1.3

1.3

Breyers

Unilever Group

1.7

1.6

1.5

1.3

1.2

Mengniu

China Mengniu Dairy Co Ltd

0.9

0.9

1.1

Wall's

Unilever Group

0.8

0.8

0.8

0.9

1.1

Ben & Jerry's

Unilever Group

1.1

1.1

Nestl

Nestl SA

Based on the above data we can see that Ben and Jerrys in the world is outside the top
ten brands again emphasizing the fact that it is not prevalent in most geographies in the world
and the need to expand operations globally to increase its global market share. Since it is an
American brand it is also important to look at the market share of ice creams in North America
which will help us determine where Ben and Jerrys stands. The below table looks at major
2

players in the North American Ice Cream market with their market shares which will show us
that it has more than a 3% market share in USA and is in the top eight brands that exist there.
This shows that it has enough strength in the domestic market to expand internationally while
continued focus on domestic operations (Source: www.euromonitor.com).

Brand

2008

2009

2010

2011

2012

Dreyer's/Edy's

10.4

11.6

11.3

10.9

10.5

Hagen-Dazs

8.3

8.3

8.8

8.8

8.6

Breyers

7.9

7.5

7.2

6.7

6.1

Klondike

4.1

4.1

4.2

4.3

4.5

Bluebell

3.2

3.5

3.6

3.9

4.1

Blue Bunny

4.1

3.9

3.9

Drumstick

3.3

3.3

3.2

Ben & Jerry's

3.2

3.1

Popsicle

2.9

2.7

2.7

2.6

2.5

Turkey Hill

1.5

1.6

1.5

1.7

1.9

Skinny Cow, The

1.2

1.4

1.9

1.8

1.7

Weight Watchers

1.5

1.5

1.4

1.3

1.2

Good Humor

1.3

1.3

1.3

1.2

1.2

Nestl

1.3

1.2

1.1

Magnum

0.2

0.9

0.9

Snickers

0.9

0.9

0.9

0.9

0.9

Chapman's

0.7

0.7

0.8

0.8

0.9

Fudgsicle

0.9

0.9

0.8

0.8

Carvel

0.9

0.9

0.9

0.8

0.7

Galaxy/Dove

0.7

0.8

0.7

0.6

0.7

Mars

0.6

0.6

0.6

0.6

0.6

Why expand internationally?

The question is why not? Unilever bought Ben and Jerrys back in 2000 in order to
increase their presence in premium brand frozen desserts (source: www.smartmoney.com). The
compounded annual growth rate between 2006 to 2010 of the US ice cream market, which
includes artisanal ice cream, frozen yogurt, impulse ice cream and take home ice cream, was at
a mere rate of 1.7% (source: www. researchandmarkets.com). The US market earned a revenue
of around 10 Billion US Dollars in 2010 with take home ice creams proving to be the biggest
sales drivers generating 6.8 Billion USD alone (source: www.researchandmarkets.com).
According to the same report the market is expected to decelerate between 2010 to 2015
reaching

value

of

around

10.9

Billion

US

Dollars

by

2015

(source:

www.researchandmarkets.com). With this kind of stagnation and slow growth expected in the
American market it is natural for the company to try and expand overseas to generate more
revenue. The market size will roughly remain the same with more if not the same players in the
market meaning less for everyone to share. In a situation like this a strong global brand like Ben
& Jerrys can afford to take a decision to expand itself internationally. Ben & Jerrys can look at
entering preexisting markets and trying to penetrate further or it can enter new countries where it
sees an opportunity for growth to introduce its products, something we will explore momentarily.

Why Brazil?
Currently, Ben and Jerrys is located in 27 countries around the world and has not yet tapped the South
American market (http://www.benjerry.com). Brazil being one of the fastest growing economies of the world
becomes the perfect target to penetrate the South American market. It is the largest economy in South America.
Brazil is a developing country with a high potential for growth as it is self sufficient in terms of oil and natural
resources (www.euromonitor.com).
Its proximity to the US and barrier free trade also make it an attractive market. Additionally, Brazils
population is growing and peoples incomes are expanding. The ice cream sector grew by 17% in 2012 and is
expected to grow by 10% CAGR from 2013-2017. Brazil will also be the host of the football World Cup in
2014 and the Olympic Games in 2016. Brazil has its work cut out to improve its infrastructure. Introduction of
global brands such as Ben and Jerrys can be a part of the readiness for these events (www.euromonitor.com).

Political Variables:
Brazil is a federal republic with 26 states. It has three branches Executive, Legislative and Judicial. The
executive branch is headed by the president. Legislative power comes under the National congress which
consists of a Senate and a House of representative and the judicial power comes under Federal Supreme Court.
Brazil has 19 political parties in which major parties are Workers Party (PT) , the Green party (PV) and the
Brazilian Democratic Movement Party (PMDB).The current party in power is the workers party (communist)
which is led by DilmaRousseff. The workers party has been into power for last 10 years. (sourcehttp://globaledge.msu.edu). This signifies that the political parties are stable in the country.
The current partys policies have been very liberal towards FDI. It has been viewed as an employment
generating channel. (Government and Political Conditions, (2010)) Since the political party is very open to FDI
and other forms of foreign capital, this will help our business to work smoothly.

Key Economic Variables:

Brazil is one of the fastest

Total GDP - Brazil

growing economies in the world and is

R$ mn - Current Prices

the largest economy in Latin America. Its

total GDP is of R$4.1trillion (US$ 2.5
trillion) in 2011, which makes it the sixth
largest economy in the world overtaking
the

UK.

It

has

shown

5,000,000.0
4,000,000.0
3,000,000.0
2,000,000.0
1,000,000.0
0.0

Year

steady

improvement in its macroeconomic stability over the last decade (www.euromonitor.com).

Even though Brazils real

Real GDP Growth (%)

Real GDP Growth - Brazil

GDP growth in 2012 was only

10.0

0.9%, Brazilians seem blissfully

5.0

unconcerned. IPEA, a Brazilian

0.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
-5.0

Year

research institute found that twothirds to three-quarters of the

families said that their financial

GDP Measured at Purchasing Power

Parity - Brazil

condition improved in 2012. This

is because most families incomes
2011

reached its lowest and there was a

significant rise in the pay scale
(http://www.economist.com).

Year

are growing fast, unemployment

2008
2005
2002
0.0

500,000.0 1,000,000.0 1,500,000.0 2,000,000.0 2,500,000.0

GDP at PPP $ mn

Even though it is decreasing, one

Per capita GDP - Brazil

of the major problems that Brazils

R$ Per Capita

25,000.0
20,000.0

economy faces is the high income

15,000.0

inequality. Brazils Gini index in

10,000.0

2012 was 51.5 which is the 10th

5,000.0
0.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Year

highest in the world. Generally,

people living in the cities and near

Source: Euromonitor International

the coastlines are richer than those

staying in the country side or the Amazon forest. Another major difference is among the different races that
exist here, the white population being richer than the indigenous population. The low level of education is
another reason for the income

Annual Gross Income

education; these individuals are

not able to bridge the gap.
President LuizIncio

Lula

da

Silva had taken the tasks of

poverty and economic growth into
broad social reforms and people's

Annual Gross Income R$ million

disparity, because of lack of

4,000,000.0
3,000,000.0
2,000,000.0
1,000,000.0
0.0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Euromonitor International

Year

livelihood had generally improved (www.euromonitor.com). The income is highly distributed, the richest one
percent of the population accounts for 13% of all household income. This is equivalent to the poorest fifty
percent of the population.

and disposable income have been increasing

steadily. This has boosted the demand for
impulse and indulgence products to spend on
non-essential

food

products

(www.euromonitor.com). This has manifested

Annual Disposable Income R$

per capita

However, the per capita gross income

Annual Disposable Income

2002

15,000.00

2003
10,000.00

2004
2005

5,000.00

2006
0.00

2007
Annual Disposable Income - R$
Per Capita

itself with growth numbers of 17% by value

2008

and 4% by volume in 2012 in the ice cream sector (www.euromonitor.com). Impulse ice cream is the largest
category within the ice creams in terms of value. Therefore, there is enough appetite in the Brazilian market for
our product offering.
Since, Ben & Jerrys is a super premium
ice cream brand, we will be targeting the upper

Population Distribution
Upper Class
14%

Lower Class
34%

middle class and the upper class of individuals.

This total number is close to 74 million.
Middle Class
52%

Along with the usual global competitors

Source: http://www.brasil.gov.br

of Unilever, Nestle and General Mills, there are a number of regional brands in the market. The regional brands
are expected to increase their market share in terms of value due to the competitive advantage they have in
terms of logistics as ice cream requires chilled distribution. However, this plays a major role to the price
sensitive customer. Ben & Jerrys is not targeted to the price sensitive customer and therefore, will not be
threatened by the regional players in this regard. At the same time, addition of new flavors has been proven to
be a winning strategy in the past and the regional players are able to beat global brands in this regard
(www.euromonitor.com).

Ben & Jerrys direct competitors in the take home category will be Kibon, Jundia, Hagen-Dazs, La
Basque etc. In the single scoop space, the competitors are Kibon, Nestl, Cornetto, Hagen-Dazs etc.
Overall, the economic health of Brazil has had a trend to be improving and has a huge potential for
growth. The purchasing power of the inhabitants is on the rise, and they are tending towards impulse products.
All these factors are contributing positively towards our decision to expand into the Brazilian market.

Trade Variables
Brazil has positive trade balance
with export marginally higher than import.
The import of Brazil has increased
substantially by almost 250% in last 8
years.

However export has increased relatively

lesser when compared to import. The export
has increased by 125% in last 8 years. This
is because of increase in disposable income
and consumer expenditure of the citizens of
Brazil.
The import as percentage of GDP
has been increasing over the last decade
except during year 2009, which is because
of global financial crisis. However export
10

has increased and then became almost stagnant because of high consumer expenditure.

The major export partners for Brazil are Asia

and Europe having share of more than 50 percent
combined together. The rest is exported to North
America, Latin America, Africa and the Middle East

Brazil imports majorly from Asia and Europe

which is 55 percent of total imports. The
import from North America is 16 percent.

Brazil

is

major

exporter

of

crude

materials, food and animal products. Other than

this it is also exporter of chemicals, mineral fuels,
machinery transport and equipment and basic
manufacturer items.
11

Brazil major import is machinery and transport

equipments which constitutes one third of the total
import. The other major imports are mineral fuels,
chemicals and basic manufacturing items. The food
items constitute 4% of the total import.

Brazil has been attracting a lot of

foreign investors. FDI inflow in the country
has been constantly increasing. It has
increased by 330 percent from 2005.
Considering the football world cup which is
going to happen in 2014 and Olympics in
2016, FDI inflow is expected to increase.
Brazil has restrictions to FDI in some of the sectors like health services, aerospace, postal and telegraph
services, nuclear industries (source - www.brasil.gov.br). However, our target market is food sector which
doesnt have any restriction on FDI.
The country is ranked 69 in terms of corruption perception index as of year 2012 as per the information
from transparency international. It has got a score of 43 which is quite close to 50 and can be considered as
quite decent (www.transparency.org).The country had large number of FDI during year 2011 and 2012. It has
12

been considered as second best destination globally with respect to FDI value and fifth best with respect to
number of projects starting in the country (www.euromonitor.com).
The information from trade variables helps us identify that countrys import is improving because of
increasing consumer expenditure. The government is allowing Foreign Direct Investment to the country.
Therefore, there is a market opportunity for the new consumable goods. There is already trade happening
between North America and Brazil (16% of total import) which implies that general regulations are already
setup between the two countries. Therefore trade can occur smoothly between America and Brazil.

Legal System Overview

Brazil is a federative republic, constituting of

1. Indissoluble Union of States

2. Municipalities
3. The Federal District
Brazil has a codified legal system where in the laws are issued by the Federal Government, States, and
Municipalities, each within their domain of responsibility. The court is responsible for the proper application of
existing Brazilian Law. Under the circumstances where no legal provision exists, the court decision is based on
the analogy, custom and general legal principles. Although legal precedents only provide a supporting role in
specific court decisions, it does not bear the force of law in Brazil.

The Legal System is responsible for providing a structural framework for doing business. The legal system
of Brazil was brought in by Portuguese and is based on Napoleonic Code or Code Napoleon. Initially it was
called as the Code civil des Francais or the civil Code of French (www.heritage.org)

13

Civil code versus Common Law

The legal system of US & UK is based on common law which is quite different from the civil law. The
differences not only control how the business is done, but also reflect how Brazilians and the lawyers consider
the law. The implications of the difference have an impact in the way business is carried out. For instance, in
the USA if we want to know about a particular law we not only refer to the status, rules and regulations but also
refer to how these laws were interpreted and applied in earlier incidences, on the other hand for the Brazilian
law which is primarily Civil Code the inquiry stops with the knowledge of the rules, regulation and status, as
precedence doesnt play much importance in the judgment (masterclassbrazil.com).

Corruption
Brazil is considered to be one of the worlds leading investment destinations because of its large market
size, encouraging foreign investment and good connectivity. In order to retain the investors the government
promotes state contribution in the economy along with the respect for the contractual rights for the investors.
Even though, Brazil has a well-established business environment but various surveys and studies have shown
that corruption and bribery are one of the major hurdles in doing business with the government at the local level
Additionally, corruption is a big hurdle for business development (source: www.business-anti-corruption.com).

Positive developments in relation to corruption and investment

Brazil is one of the few developing countries which has a strong legal framework with the objective of
curbing corruption but if it is supplemented with an effective enforcement law it will become a role
model for developing countries.

Since coming to power President Rousseff has enforced zero tolerance towards corruption, and has been
instrumental in resignation of several ministers who had corruption charges against them.

14

The passage of historical law Freedom of Information Law in October 2011 is considered as an
important milestone to curb the corruption by making system more transparent.

Risks of corruption

Owing to the vast range of regulatory authorities that exist as a result of the federal structure of the
Brazilian political system, the likelihood of the public official demanding bribe is enhanced.

According to the World Bank & IFCs

CORRUPTION PERCETION
INDEX

Enterprise Survey 2009, only a handful

of firms expect to pay a bribe to procure
a government contract. Over the past few

INDEX

50

years the major scandal related to

corruption has emerged which involves

Source: transparency.org

2012

2010

2008

2006

2004

2002

YEAR

politicians and bureaucrats taking a share in exchange of awarding public contract.

The Tax system of Brazil is complex which makes it more susceptible to corruption. Under such a
system tax collectors ask for a bribe in return to relaxed assessments & inspections, or abstinence from
taking action against the tax fraud (masterclassbrazil.com).

Intellectual Property Rights Index

Intellectual Property is set of laws that safe guard
the creative and innovate product though a legal
framework such as patents, copyrights and
trademarks. IPR contributes vastly to economy of
state and the nation. IPRI constitutes of three
major factors (www.internationalpropertyrightsindex.org)
Legal and Political Environment
Physical Property Rights

15

Source: www.internationalpropertyrightsindex.org

 Intellectual Property Rights

Brazil was initially considered to be low on IPRI score but over the past few years it is continuously increasing
on the score. Apart from IPR score which is slightly stagnated over couple of years owing the issues of Patent
Protection and Copyright all other factors have shown significantly increment (www.theglobalipcenter.com).
Since, we will be operating as a franchise, we expect that the local laws and regulations will be followed.
However, we will continue to monitor and review the operations and take necessary actions if required. Also,
we will be extremely vary of threats related to poaching of IPRs.

Cultural Variables
For Ben & Jerrys to be successful in Brazil, they will have to choose the flavors they serve wisely.
Brazil has a tropical climate due to which ice cream flavors that are in line with this climate are more popular.
Flavors such as, pineapple, coconut, grape, lemon are popular here. The usual conventional flavors of chocolate,
vanilla, strawberry and chocolate chip are also common.
There have been Brazilian legislations on trans-fat labeling that have led major regional and global
players to introduce low fat products and the current highest value growth has been in the frozen yoghurt space.
Therefore, along with ice creams, it is important to
introduce Ben & Jerrys Greek frozen yoghurts into

Racial Profile - Brazil

Indian
0.43%

Brazil.
Brazil's population is very diverse. It comprises
of many races and ethnic groups. In general, Brazilians
trace

their

origins

from

four

White
48%

Brown
43%
Yellow
1%

sources: Amerindians, Europeans, Africans and Asians

(Wikipedia.com). This gives a good population mix to
target.
16

Source: Wikipedia.com

Black
8%

Education is compulsory, free and available universally for all children upto the age of 14. Due to the
increasing demand, graduates earn 2.5 times higher than workers without a degree and about 5 times more than
those who have not completed high school (www.euromonitor.com). As more people get educated, their
incomes will increase and it will be more beneficial for us in the long run.
The average age of the population in 2012 was 31.5 years. Brazil does not have an aging population
which is favorable for our product offering as younger people tend to spend more on impulse products rather
than older ones (www.euromonitor.com).
The official language of Brazil is Portuguese. It is also the most widely spoken language. Other less
common languages include Spanish, German, Italian and English (cia.gov). Language will not be a barrier
because the employees interacting with the customers will be from Brazil.
The religions followed in Brazil are Christianity (Roman Catholic) 73.6%, Protestant 15.4%, Spiritualist
1.3%, Bantu/voodoo 0.3%, other 1.8%, unspecified 0.2%, none 7.4% (cia.gov). All these are fairly open and
have no restrictions in terms of the ingredients that will be used in our ice creams. Therefore, it is not required
to pay special attention to religion.
Comparing the Hofstedes dimensions between USA and Brazil, we focus on the dimensions that are
relevant to our company. Since, the parent company (Unilever) is already established in Brazil, it will be easier
to

overcome

cultural

differences

Hofstede Dimensions

between USA and Brazil while setting

USA

Brazil

up in Brazil. While, the two countries

91

differ in all the dimensions, the major

ones

are

the

power

distance,

76

69
40

PDI

65

62
49

59

46

38

IDV

68

29

MAS

UAI

17
Source: The Hofstede Centre

LTO

IVR

individualism, uncertainty avoidance and long term orientation.

Looking at the power distance, Americans will need to consider that Brazilians expect hierarchies and
people from different social classes expect different treatment. This is a positive for us, as we are targeting the
upper middle and upper class and it will be a status symbol for them to have our ice cream.
Since, Brazil has a highly collective culture, we expect that we will do well both in the single-space
market and the take-home as they both cater to the needs of a family. Lastly, the indulgence vs restraint index,
Brazil scores similar to America. Since, our product is an indulgent product; we believe it is the right market for
it.
Brazilians do not like to try out things that they are not familiar with, especially when it comes to food.
However, they are generally aware about American brands and products. Since, ours is an old American brand,
we should not have any trouble getting brand recognition. Additionally, promotional schemes like sampling can
help instill faith in the taste of the product.

Entry Mode
A brief background
No matter what the business is or how successful it may be globally or within its home market, success
is never guaranteed specially when entering a new territory. Keeping this is mind it would be understood to say
that it is vital and absolutely critical to choose the right mode of entry while expanding overseas. Brazil is one
of the fastest growing developing countries in the world as it aims to expand its development keeping in mind
social integration. Due to the rapid industrial development, urbanization and commercial development, Brazil
now has a complex internal system that requires a sound understanding in order to do business. The mode of
entry could be an import system, joint venture, franchise model, license or a wholly owned subsidiary or foreign
direct investment (FDI) depending on the nature of the business at hand with each having its own pros and cons.
18

Compustream, a consultancy based in Brazil, states that it is advisable to enter Brazil with a local partner who
has the knowledge to push the right buttons in order for the business to be successful rather than going alone
into a new market (CompustreamConsultoriaLtda, 2000-2009). Irrespective of what mode of entry is chosen,
the company needs to do a background check on the country, itself and a host of factors that affect doing
business within that particular region.
Ideal Entry Mode Choice
Before getting into the exact mode of entry there are a few things to be kept in mind. In order for a
company to sell American products in Brazil it needs to have legal representation in Brazil as the goods sold
need to be accompanied by an invoice at the point of sale which bears the identification of the seller and this
will only be the case if the company is registered in Brazil (CompustreamConsultoriaLtda, 2000-2009). We will
penetrate the Brazilian market by setting up scoop shops in the major cities and through retail stores. Our first
preferred choice of entry for the scoop shops would be to enter the country through a franchise and exporting
model. As far as the franchise is concerned we will choose a master franchise, which is an appointed entity that
takes complete control of all franchises within the country based on guidelines laid out by the parent company.
The master franchise would be the single point of contact for Ben and Jerrys in Brazil and whoever wants to
open Ben and Jerrys stores or stock our products would have to speak to the master franchise who will then
inform us.
As per our observation, Ben and Jerrys has mostly gone overseas as a franchise model and we feel that
this is the best way to carry it forward overseas. With a master franchise model, we get the help of a local
partner without actually investing a lot of capital in terms of finances in the overseas project. The local partner
and knowledge will be helpful in creating a unique strategy for the success of our brand in Brazil. It will be the
discretion of the master franchise to choose which sub franchise to lend our brand name to and the master
franchise itself will be chosen based on certain basic qualifications such as the company being worth a certain
19

amount of money in terms of wealth, having a certain number of years of experience of working within the
Brazilian market and having a certain amount of cash deposits. All the investment in the local market will be
made by the master franchise and local sub franchises. Ben and Jerrys at all times would be there to assist in
the set up and provide training to prospective franchise owners and employees to create a synonymous work
culture.
Setting up a master franchise will also help in ease of business as dealing with only one entity will help
avoid confusion and have a straight line of communication. For this purpose we will be charging the master
franchise an upfront fee for the franchise and thereafter a renewal fee every year. Apart from this we will take a
certain share of yearly sales from every sub franchise that is opened that will be agreed with the master
franchise beforehand. This will help us increase our cash flow and generate constant revenue. All marketing
expenses within the new market will be handled by the local companies based on Ben and Jerrys marketing
campaign strategy. The master franchise will also decide the local price points in the Brazilian market based on
the parent company pricing strategy. This model will also be accompanied by an export/import model because
Ben and Jerrys have a very unique blend of ice creams, flavors and preparation method. We dont want this to
be copied or imitated so manufacturing of the ice cream and products will be in USA itself and these products
will be exported by USA and imported by Brazil by sea. This will help in better inventory management and get
a first hand perspective on how our products are doing in Brazil as well as keeping a tight check on quality
control.
We have chosen this option because there is a bare minimum transport cost for transfer of goods from
one country to another as both of them are very close to each other geographically and access is fairly easy and
there are no trade barriers between the two countries. Exporting will also help us achieve economies of scale in
the long run. We are using franchising which is a form of licensing and is useful as it will help avoid major
costs of setting up a business overseas and has a lower degree of risk involved.

20

For the retail mode of entry, our parent company, Unilever, already has shelf space in some of the major
grocery outlets such as Extra, Po de Acar and Sendas. We will buy in additional shelf space and place
popular flavors in various sizes in these major retail chains.
In terms of scope we have plans to enter Brazil in all major cities which include cities like Sao Paulo,
Rio De Janeiro and Brasilia and expand our presence within the country to become the most popular brand
within the ice cream segment as far as the super premium ice cream brands are concerned.
The alternate mode of entry
The legal dictionary defines a joint venture as an association of two or more individuals or companies
engaged in solitary business enterprise for profit without actual partnership or incorporation (source:
www.legal-dictionary.thefreedictionary.com). Our alternate mode of entry would be a joint venture between
Unilever (Ben and Jerrys) and a company based in Brazil that has been in the market for a while preferably in
any related industry. We can benefit from the host countrys local host with its knowledge and understanding of
the market along with sensitive and essential elements like culture, language, political and business systems in
the new country. It is also a beneficial mode of entry because risks are shared between the two parties involved
in the venture and the help of the local partner can help control the interference of the local government if any.
However there are a few risks associated with this entry mode. These include the local firm getting access to
technical knowhow, total quality management procedures and technology access which in turn could spin off
local competition. To avoid this protection of intellectual property is critical along with trademarks and patents
and for this policies in every country vary in case of breach. Another important disadvantage includes lack of
control and this could often result in fight for control between entities and could affect the companys health
and profits.

21

Exchange Rate
Up to 1999 Brazil followed a fixed peg exchange rate regime where the Brazilian currency, the Real was
set equivalent to the US$ (1R$ =1 US$). However, like many other countries, Brazil has adopted a managed
floating exchange rate regime. Therefore, the exchange rate floats freely, which means that the exchange rate
changes daily depending on the supply and demand in the market.
At the same time, the Brazilian Central Bank (BC) may manage the exchange rate when the situation
demands. This management occurs principally in three circumstances: to build foreign exchange reserves, to fix
the localized and momentary imbalances in liquidity, and to contain excessive volatility that could affect the
normal functioning of the market (www.brasil.gov.br). Looking at the exchange rate between the US and
Brazil, we see that US$ appreciated greatly. This is because before that, the Real was pegged to the US$. The
Brazilian Real therefore, was overvalued. Once the peg was removed, the Brazilian Real depreciated and US$
appreciated. With Brazils continuous economic growth, the US$ began to depreciate against the Brazilian Real.
In the past few years, it has remained in the region of 1.75 to 2.25 Real for 1 US $
The mode of entry into Brazil will be
through a master franchise which will be
responsible for choosing sub-franchises
across the country. The ice creams and
other frozen desserts will be exported
from Waterbury, Vermont through ships.
However, when the Ben & Jerrys ice
cream comes into the Brazilian market, it
is considered an import for Brazil and an
export
22

for

USA.

Therefore,

it

is

important for this transaction that the US$ does

not appreciate against the Brazilian Real because
if it becomes expensive for the Brazilians to
import, then it will affect the price of the product
in Brazil since the pricing is kept in the hands of
the franchiser. This can eventually affect overall
sales.
Figure: Demand and supply of US $

If our franchises do well in Brazil, and assuming then the demand for our product increases, then in
currency terms, the supply of US$ increases. Assuming that the demand for $ remains unchanged, it will lead to
an appreciation of the Brazilian Real. This implies that we shall get more dollars for every Real than we did
before.
Since, import and export have remained at par with each other, we do not expect any considerable
fluctuation. However, if we see a major change, we will consider setting up a production plan in Brazil.
Conclusion
After conducting a thorough analysis of the opportunity for Ben & Jerrys to enter the Brazilian market
we find that there are more drivers of this opportunity than constraints. The drivers being Ben & Jerrys
strengths as a company, having its parent existing in Brazil, Brazils growing economic activity, its political
stability, its favorable trade rules with USA, its openness to American products and its stable currency. Some of
the constraints are corruption and threat of IPR poaching. These have an improving trend and can be monitored
and controlled. The cultural and other legal challenges can be overcome using the franchise model.
We believe that this venture will be a success and has immense opportunity of further expansion into
other South American countries. It will also be able to increase sales if it is able to position itself as a statussymbol among the Brazilians.
23

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