BW Confidential - Issue #17 - March/April 2014 - (Page 78)

Emerging markets Company profile: Mahogany Taking the store route Brazil-based Mahogany is seeing success with its franchise model and is also looking to expand through door-to-door and e-commerce by Renata Ashcar S ome 10 years ago, São Paulo-based manufacturer of health and beauty products, Mahogany, was sold through Brazil's main supermarkets and pharmacies such as Pão de Açucar, Droga Raia and Onofre. But in 2006, it decided to move away from doing business with its traditional partners and open its own network of franchise stores. Today, the company has 160 boutiques, with plans to expand to 300 outlets over the next five years. Mahogany was founded in 1991, when the market was very different from today. At the time, Brazil was just opening up, and although Grupo Boticario and Natura had good-quality products and were expanding in franchising (for Boticario) and door-todoor sales (for Natura), in traditional retail, there were few premium body care and fragrance brands. This is where founder Jaime Drummond saw an opportunity. He began creating high-quality products at affordable prices and selling them through local department stores like Mesbla, Mappim or Sloper, which were well-known in the 90s. The brand managed to get good visibility at these retailers and took the lead in the premium bodycare product category. Finding new distribution However, after the government introduced economic reform (The Real Plan) in the second half of the 90s, many companies suffered, and most of the main department stores went bankrupt. Mahogany was 78 s Mahogany currently has 160 stores, a figure that should reach 300 in five years forced to find a new way to distribute the brand. By that time, the brand was already becoming established in perfumeries and the " Back then [in 2003] we were in more than 3,500 points of sale, but sales growth was below the potential of the brand-it was time to have shops under our own name " Mahogany founder Jaime Drummond pharmacy channel and was also expanding in supermarkets. In the self-service supermarket channel, however, profitability was disappointing, as the company failed to ensure high volume, due to its prestige price positioning. As a result, Mahogany came out with less expensive items. It also launched a store-instore concept in 2002, but was disappointed that many retailers failed to respect how the products were meant to be merchandised. This spurred Drummond to create his own franchise stores, and in 2006, he started out with 10 boutiques. Almost ten years later, the company counts 160 stores in 76 cities. "Back then, we were in more than 3,500 points of sale, but sales growth was below the potential of the brand," Drummond explains. "It was time to have shops under our own name." More space, bigger baskets With the stores, the company overcame the problem of minimal space on supermarket and pharmacy shelves and was able to March-April 2014 - N°17 - BW Confidential

Table of Contents for the Digital Edition of BW Confidential - Issue #17 - March/April 2014

Cover
Comment
Contents
Update
Brand & retail news recap
Companies on the move
Take note Market facts, figures & trends
Best of BW Highlights from our e-publication
Launches The latest in fragrance, skincare & make-up
Interview Guerlain ceo Laurent Boillot
Insight: Make-up
Category overview
Budget brands
The latest trends
Retail
Innovative strategies
Retail
Vending machines
Store concepts
Digital Social media content
Market watch: Latin America
Regional overview
Mexico: country analysis
Mexico: prestige retailing
Colombia: country analysis
Colombia: prestige retailing
Argentina: country analysis
Argentina: prestige retailing
Radar A profile of six up-and-coming beauty brands
Emerging markets Company profile: Mahogany
Travel retail: Brazilian travelers
Analysis
Industry viewpoint
Packaging: Decoration techniques
Trends analysis
Innovations
Last word Diagonal Reports analyst Jacqueline Clarke

BW Confidential - Issue #17 - March/April 2014