AGRIMARKETING IN BRAZIL
HOW TO SUCCEED IN LATIN AMERICA'S LEADING AGRICULTURAL POWERHOUSE
by Mark Ingebretsen, Contributing Editor
Some years ago, Douglas Johansen was driving a group of Brazilian friends to the Iowa farm where his family lived at the time. Along the way, one of the Brazilians asked, "Where are all the people?" Johansen realized this meant, "Where were the farm hands?"
"That epitomizes the differences between the way agriculture is practiced in the U.S. and Brazil," says Johansen, who is a visiting instructor of international marketing at the University of North Florida in Jacksonville, and a consultant with business dealings in Brazil. While U.S. farmers rely on capital-intensive machinery to work their farms, Brazilians may find it cheaper to hire laborers to do the work manually.
That's just one of the lessons U.S. agrimarketers should take to heart if they are to succeed in Brazil. The bigger lesson is that Brazil has already arrived as an agriculture superpower. Just as China embraced manufacturing, Brazil is also moving to a more mechanized and capital-intensive environment. Even though old-fashioned methods are still in use today, the climate is rapidly changing. And while the learning curve may be steep, huge rewards await agrimarketers able to take part in Brazil's agricultural bonanza.
Indeed, visitors to Brazil return with stories of "soybean fields that span the horizon, endless acres of inexpensive virgin soil and boundless water resources," as a U.S. Department of Agriculture report once revealed. Brazilian farmers, while slowly adopting mechanized farming, nevertheless enjoy major land and production-cost advantages over their American counterparts, along with the benefit of a two-crop growing climate.
Those advantages and other factors have helped rank Brazil as first in the world in citrus fruits, frozen concentrated orange juice, sugarcane and coffee, according to the USDA's Economic Research Service. Brazil is also second in output of soybeans and products, and third in tobacco and poultry. And the nation ranks with the leading five nations in corn and rice production, and among the top 10 beef producers. It is self-sustaining in most agricultural products, the government figures show.
What those statistics don't show is the phenomenal growth rate of Brazil's ag sector. Since 1990, Brazil's soybean production has increased more than two-fold. Corn production has risen by 40 percent, again, according to USDA figures. During the same time frame, the production of soybeans and corn in the United States has expanded by roughly 42 percent and 25 percent, and wheat production has declined. Brazil's soybean production has far outpaced domestic demand, the USDA says. Instead, the increased production has contributed to rising exports and growth in global market share.
There is tremendous excitement and optimism in the Brazilian ag sector. They have witnessed rapid success and growth in a short number of years, and understand that they are very cost competitive and have only begun to tap into their potential," says Claudia Garber, manager of communications and brand promotions with Case IH, a farm equipment maker with a major presence in Brazil.
No statistics on Brazil's agricultural potential are more revealing, perhaps, than those related to the nation's fertile interior regions known as the Cerrados. The name loosely translates as closed off; however, Brazilian farmers are gradually opening up the Cerrados, which encompass an estimated 336 million acres suitable for agriculture.
Tapping into these vast resources of land, Brazil's farm products have helped drive the nation's total exports to a forecasted $94 billion by the end of 2004, according to Reuters.
All told, experts say that Brazil's ag sector is the engine behind roughly a third of the nation's GDP, more than 40 percent of the nation's exports and close to 40 percent of the country's jobs.
The good news is that Brazil has already opened its doors to American agribusiness. "The big players in the U.S. are also big players in Brazil and most likely have been for a while," says Johansen. Those U.S. companies have succeeded in opening up Brazil through a variety of mechanisms ranging from simple exports of agricultural implements to American-owned or joint venture manufacturing and marketing operations.
There's a reason why American companies have succeeded in Brazil thus far. "American products are considered high quality and cutting edge," Garber notes. "After all," she says, "it is recognized that American agriculture is highly developed and competitive. Having a made-in-the-U.S. designation or being tied to a U.S. company is usually viewed as positive attribute that may even command a premium price."
American marketing has likewise earned a respected place within the Brazilian business community. "People from the United States are known for our marketing prowess, and this holds true in Brazil," says James Thompson, whose public relations firm, Thompson Caiapo, helps foreign companies establish themselves in Brazil. "Our European and Asian friends are definitely doing well in the Brazilian market, but the U.S. companies are doing better," he says.
OPPORTUNITIES FOR SMALLER COMPANIES
Plenty of opportunities likewise exist for small firms, adds Johansen. He mentions ag-related software as one example of a potentially open niche. Another might be aftermarket parts for U.S. and foreign branded farm implements. In the latter case, speaking hypothetically, a U.S. parts supplier might partner with a branded distributor in Brazil or alternately go through a dealership network, he says.
Yet another avenue might better suit smaller American companies, particularly manufacturers who must take local competitors into account, Johansen says. "Brazil has a very well-established manufacturing base, and they're able to produce almost any product. If an American company has unique design or proprietary technologies, they might also consider licensing," he adds.
However, importers might find opportunities as well - even in the face of stiff competition from local manufacturers. For example, farm equipment manufacturing is so advanced in Brazil that U.S. companies use their Brazilian subsidiaries as launching pads for exports to other nations. According to AgProfessional, "Brazil's National Association of Vehicle Manufacturers (Anfavea) estimates exports of agriculture machinery will total $1.6 billion this year, 66 percent more than last year."
But surging demand for Brazilian farm equipment both at home and abroad has led to shortages of materials, which along with Brazil's infrastructure problems has created opportunities for importers. As one ag expert commented in the article, "a tractor made in Brazil and exported to Venezuela was 50 percent more expensive than one manufactured and exported from the United States."
ON THE GROUND HELP
To jumpstart any of the aforementioned marketing efforts, Thompson and others typically recommend partnering with a Brazilian company. "Although that company may have less investment than you in the sales success of your line of wares, they will know the lay of the land and how to do business in Brazil. It may be useful to find a Brazilian company that already has a distributor network and does good relationship marketing, and use their network to reach customers," he says.
Garber at Case IH agrees. Her company's Brazilian operation, like those in other areas, "is run by local managers," she says. "They know the customers, understand the intricacies of the market, buying trends, key influencers, local financing and taxation issues. Of course, there is close coordination with our North American and European operations, but local decision-making is the norm," she says.
A local partner might also demonstrate to customers that your company wants a long-term presence in the Brazilian market. Says Johansen: "If you're going into Brazil you need to make a long-term commitment to try and understand the marketplace. Attend trade events. Get to know the people, get to know the industry. In Brazil, you'll do much better if they feel like you're interested in the long haul, that they feel like they're going to have a long-term business relationship with you."
ADVICE FOR ENTERING THE BRAZILIAN MARKET
With years of marketing experience both in Brazil and the United States, James Thompson, who co-runs the Brazilian ag specialty public relations firm Thompson Caiapo, has this advice for U.S. firms wanting to enter the market there.
Adopt the local business customs: There is a lot more marketing done here in the way it was done some time back in the United States. Farmers here throng to field days to see the latest equipment, inputs, varieties and so on. Also, there is a strong emphasis on sending promotional teams, including technicians (agronomists in some cases), on tours where they give presentations about products.
Choose an ad agency with farm savvy: I would find out if there is anyone in the agency who has grown up on a farm. This may seem hokey, but I think it can make a big difference. You want to make sure you have someone on the team who knows the way farmers think ... and can do a reality check once in a while on marketing ideas.
Use the media: Ask yourself whether your public relations agency or representative has contacts with the editors of the agricultural trade publications, broadcasters and wire services. There is plenty of trust in the media in Brazil, and there is no need to pay for PR. If your story is good and newsworthy it will run.
Get personal: Relationships are much more important in Brazil, in my opinion, than in the United States. A Brazilian typically figures that if several suppliers offer products of similar quality and price, he will opt to buy from the person he likes better. Brazilians are generally a very friendly and social people - that is not to say they don't drive a hard bargain - and so they prefer human contact. A U.S. customer might be grateful that you called or faxed, because you are saving him time. A Brazilian customer would rather spend the time and see a face.
Find people of influence: The best relationship marketing in Brazil is probably not done just with the farmer, but with the veterinarian or agronomist with whom he or she works. There are agronomist and veterinary associations in Brazil, and they have publications and meetings.
Think regionally: Even though Brazil is geographically such a large country, wealth is concentrated geographically. The southern third of the country (Rio, São Paulo, Curitiba, Belo Horizonte, Porto Alegre, Florian-polis) has a far greater GDP per head than the rest of the country, so you can concentrate there. Consider that the city of São Paulo has 18 million inhabitants. That is more than Chile. The city and state of São Paulo have about as many people as all of Argentina.
Trust but verify: Carefully check out your Brazilian distributor. Most Brazilians, like most U.S. businesspeople, are honest. However, due to a history of currency devaluations there are some Brazilian franchisees, distributors and importers who get into the business merely to speculate in U.S. dollars and the exchange rate. Set goals and timelines for your representatives or marketers here, as you should in any market. It is a good idea to put everything in writing. That way your counterpart can follow up later and make sure he or she understands with the aid of a dictionary.
NORTH AMERICA VS. SOUTH AMERICA:
WHO'S GOT THE EDGE IN AGRICULTURE?
While American agrimarketing executives might see Brazil as an unstoppable farm-sector behemoth - akin to China as a manufacturing power - the real picture is not quite that simple or alarming. Both Brazil and North America possess distinct advantages when it comes to farming - a fact which tends to level the playing field, while also ensuring spirited competition between the two great food- producing regions for years to come.
Aptly illustrating that point, an Iowa State University economist looking at the relative advantages in soybean production in Iowa and Brazil found that while the areas studied in Brazil did hold "a small advantage in non-land production costs," this didn't automatically translate into greater competitiveness on world markets. Two other cost components must also be considered. "When you add the cost of transporting soybeans to a port, the transportation cost advantage of Iowa farmers more than makes up for this small difference because the U.S. transportation infrastructure is already in place and paid for."
Elsewhere, a study by the Illinois Farm Bureau outlined those differences this way:
The Plus Side for North America:
The Plus Side for South America:
Mark Ingebretsen writes a column on health care and biotech for the Wall Street Journal Online. He was founding editor of the magazine Overseas Business.