Taking off from Guarulhos International Airport, Sao Paolo after another eventful and successful trip I had some time to reflect on the past 10 days in Colombia and Brazil.
Some of you may think that all I do is travel the globe and have fun and to a certain extent you would be correct but of course I am always either working on existing projects with my wonderful clients or learning new things and meeting new people and companies who may need our help in the future. I find what I do extremely rewarding and hopefully I can make a difference to the people and companies that we consult for in whatever capacity. It is also important to me to learn about the culture and the locations that I visit so staying in my hotel all the time is no way to achieve this.
This was my first time visiting Colombia and it has been both a surprising and an enjoyable experience. In the past Colombia has been known to foreigners for its violence, kidnappings and drug wars, but from what we could gather, those days are gone, but of course the stereo type remains. When the concierge at your hotel recommends places to walk, you know that things have changed. Colombia has a population of 48 Million people and in 2015 achieved a GDP growth rate of 3.3% which puts it in the lead in South America for growth and beats the United States as well. Its GDP is 31st in the World and 3rd to Brazil and Argentina. The Flavor and Fragrance industry is healthy with most Top 10 global players having some sort of presence, as well as local and SME companies from North America and Europe. The optimism in the country is obvious and the Food & Beverage market is quite dynamic and opportunities abound. I am sure that I will return in the future but not only just for business.
The first part of my trip was to accompany our client through meetings with some of the distributors that we had identified and signed up as part of the Focus International market expansion services package. We went through training with sales and technical staff with our local partners and then followed this up with customer visits to introduce my client and the range of products and identify opportunities. The results were very encouraging and we came away with many sample requests based on a number of projects that were identified.
The last time I was in Brazil was 11 months ago and I apologize to my Brazilian friends for taking so long to return. It is truly amazing how things can change so much over a relatively short period. At that time, the biggest issue for Sao Paolo at least was the severe drought they were experiencing and water rationing was in full force as reservoirs were down to 20% capacity. This impacted everyone and as electricity is basically generated from Hydro-electric plants, then power cuts were a serious reality. The President Dilma Rousseff had been reelected late in 2014 and while the currency was weakening starting to weaken against the US$ there was certainly still a level of optimism. The World Cup had been a success apart from the ignominious exit of the Brazilian National football team and it was now time to look forward to the Rio Olympics in 2016.
Fast forward to today and what a difference – the drought was over and restrictions lifted as the reservoirs were once again full. Unfortunately, the world oil price had plunged and the Brazilian economy took a nose dive into recession. A huge corruption scandal broke related to the Brazilian Oil Company Petrogas and ensnared many high officials and politicians in its net and this continues even now and the President who originally had an approval rating of over 75% is being impeached for cooking the budget to make it look like things were much better than they were for the election. The Brazilian Real is languishing against the US$ and on top of all of that the ZIKA virus has become a huge concern not only in Brazil but across the rest of the Americas. The one bright light is the Rio Olympics which are less than 100 days away but unfortunately it seems to me that the local issues have marred the anticipation and honor of having such a prestigious world event such as the Olympics in your own Country. I remember the Sydney 2000 Olympics and all of the angst beforehand but once it started it was so great and everybody was so positive and I hope that this will happen in Brazil as well.
It is amazing how things can change so quickly but I am a glass half full guy so while things look really gray now they can only really get better and so I am rather upbeat about opportunities in Brazil. The currency is starting to appreciate and the corruption scandal is winding down and while the impeachment of the President is still underway, if she is ousted then her Vice President will replace her and he has a unique opportunity to turn things around and get the county behind him. Only time will tell! My colleague in Brazil, Donato Monticelli, sums it up very well that he has seen a lot worse than what is happening now and he too believes that things are turning for the better. How can we forget the BRICS definition of emerging market superstars who couldn’t do anything wrong? Remember that Brazil is still the 7th largest economy in the world and 5th largest in population so we shouldn’t dismiss them as a country that has no value for investment.
Once my client flew back to the States I had a number of meetings in Brazil with both existing clients as well as new ones, mainly in the M&A area and came away with some very interesting “sell side” opportunities in the Fragrance, Color and Cosmetics industries to add to the other sell side opportunities we are working on in the Flavors space. I have spoken to a number of people about investing in Brazil but many are influenced by the “bad news” which is not really surprising but as I said before things are starting to get better so now is an excellent time to get into the market. It only makes sense to buy on the low not the high, just like the stock market. The strong US$ buys much more than before and sellers are winding back their expectations re high prices and multiples that they had before. The Brazilian market is over 200 million souls and is the largest market in South America in the Fragrance and Cosmetic markets and in the top 3 globally so it is a very attractive market. There is a lot of M&A activity art present with founders having built their businesses have now reached an age where they are looking to exit, as many don’t have family members to take the business to the next level.
About Focus International:
We partner with SME companies in Flavor & Fragrance, Cosmetics and Specialty Food Ingredients.
Our “global success system” encompasses market research and strategic planning through to M&A and business development and everything in between. Our, on the ground experts, bring their more than 25 years of experience and proven track record of success to our clients to develop international markets with less risk and higher returns.
Focus International has experience in both the “buy” and “sell” side of a transaction and through our international experience, deep industry knowledge and successful M&A track record is able to assist owners of family businesses to prepare and confidentially market their companies.
Please contact Trevor Rahill at trevor@focusinternational8.com for a confidential discussion of your needs.