Go-to-Market Go-to-Market StrategyStrategy

Presented by:Presented by:Kathleen CroninKathleen Cronin

16 September 200916 September 2009

Global Business Perspectives: Emerging Markets in BrazilGlobal Business Perspectives: Emerging Markets in Brazil

OverviewOverview

Objective: Determine feasibility of entering Brazilian market

Company & Product Overview Why Brazil Market & Environmental Analysis Customer Segmentation Recommendation Marketing Mix (4P’s) Implementation Plan Financials

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The Company: Bare Escentuals Inc.The Company: Bare Escentuals Inc.

Leading prestige cosmetic company in US

Innovator in mineral-based cosmetics

Develops, markets, and sells branded cosmetics and skincare products

Produces cosmetics with 100% all natural minerals

Appeals to public’s desire to have skincare and makeup in one product

International operations: United Kingdom, Ireland, Japan, and Germany

Retail contracts with department stores, home TV networks, spas & salons

Started: 1976 in Los Gatos, CA2008 Sales: $560M3,000 employees112 privately owned boutiques

Started: 1976 in Los Gatos, CA2008 Sales: $560M3,000 employees112 privately owned boutiques

3Worldwide Leader in Mineral Based Cosmetics

Bare Escentuals’ first product Most popular and profitable product line among consumers

bareMinerals was foundation that started Mineral Makeup Revolution

Top Selling Product sold on QVC

Bare Escentuals holds exclusive patent for extracting fine minerals used in bareMinerals

Complete line of loose, powder-like products that are 100% pure bareMinerals

The Product Line: bareMinerals®The Product Line: bareMinerals®

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Made with crushed minerals from the earth, 100% pure bareMinerals Ingredients include zinc oxide & titanium oxide – natural sunscreens, tints Ground into fine powder without preservatives, talc, fragrance Free of fillers and binders Weightless Provides adjustable coverable Improves the condition of skin over time Long Lasting - Stands up to heat and humidity

All skin types Especially those with skin sensitivities, allergies, scars, blemishes, rosacea and wrinkles

Foundation contains a natural SPF 15 sunscreen

Carries Skin Cancer Foundation Seal of Recommendation

The Product The Product

Pure Natural Make-up from Earth

Video: Customer TestimonialsVideo: Customer Testimonials

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Why Brazil? Why Now?Why Brazil? Why Now?

Ranks as the world’s third largest market for cosmetics– 18% growth from January to June 2009

– Color cosmetic sales expected to grow 19% over next 5 years

– Brazil to grow to be 2nd largest cosmetic market by 2011

Increase in niche cosmetic products to address consumer

demands

Very image conscious culture– Increase in life expectancy and the desire for elderly to look their best

Sustained strength of Brazilian economy

More women in the workforce

Fastest Growing Cosmetics Market Worldwide7

Market Potential ForecastMarket Potential Forecast

> 20% of total cosmetics market

Facial Make-Up Will Consist of 20% of Total Market8

External Analysis: Competitive MatrixExternal Analysis: Competitive Matrix

Avon Smooth MineralsBetter-than-bare beauty

The Company for women

NaturaBem estar bem

“Well being well”

O BoticárioSensitivity, Harmony & Beauty

%Mkt Share 34% Total Cosmetic Mkt Share 13% Total Mkt Share 8.3% Total Mkt Share

Strengths • High Brand recognition• Features: Sweat proof, skincare & makeup in 1 product• Strong infrastructure

• High Brazilian Brand recognition• Strong Distribution of Direct Sales method• Frequent release of new products

• Brazilian brand recognition• Most successful Franchise model in Brazil

Weaknesses • Broad product line; not focused on solely launching Smooth minerals in Brazil

• No dedicated product line to mineral cosmetic products

• Expensive• Not 100% pure mineral based

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Significant Opportunity for Mineral Based Products Due toHighly Saturated Market with Broad Range of Cosmetic Products

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Business Environment in BrazilBusiness Environment in Brazil Economic Forces

Strong economic growth GDP increasing at 5% Color cosmetics market increasing at 28% (YoY)

Rapid rise of middle class (Class C) From 36% of population in 2003 52% in 2009

Sales of personal beauty products increase during recession Exchange rate fluctuation risk

Legal & Political forces ANVISA (similar to FDA) approval required High import taxes (approx. 70%) Government bureaucracy Register trademark and patents with National Institute of Industrial Property

(INPI)

SWOT AnalysisSWOT Analysis

Strengths• #1 mineral cosmetic product in U.S.• U.S. Brand recognition• Unique product characteristics

– SPF– Mineral based– Weightless feel– Cosmetic & skin care combined– No preservatives

Opportunities• Ability to source raw materials &

manufacture in Brazil• 18% growth rate over next 5 years• Brazil-third largest cosmetic market• Growing spending power of women

Weaknesses• No Company Brand Recognition in

Brazil• Lack of knowledge of unique product

characteristics• High import taxes

Threats• Extremely saturated market• Customer mindset is high brand

loyalty to competitors• Complexity of ANVISA approval• Difficulty in forming relationships with

distributors

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Significant Market Potential for Mineral Cosmetics in Brazil

Market PenetrationMarket Penetration

Total Market (All Female)

Served Market

Share of Market

198.7MA/Bclass: 16%C: 52%D/E:32%

100.5M

45.2MAvg age 29 yrs

Female /A,B,C Classes/15-64 years of age

Female /B,C Classes/15-64 years of age/Interest in Mineral Facial Makeup

7M

Total Brazil Population (in Millions)

86% in Urban areas

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Customer Segmentation of Potential Buyers in Brazil Customer Segmentation of Potential Buyers in Brazil

SEGMENT DEMOGRAPHIC BENEFIT SOUGHT

1 Bio-DiversityEnvironmentally conscious

Age: 15-45University educatedLong-term thinkersMay already own other mineral based products

Ecological benefitsWant to show they are green, trendy, innovative, etc.Want to make a political statementContains vitamins & minerals

2 Trend Setters Age: 15-29InnovativeComfortable with new technologyLive in CitiesClears skin of acne

Embrace new technologyEducated about new cosmetic products, or become knowledgeable before purchase

3 Minimalist Age: 15+All-in-one makeup

Desire to save moneyLooking for one make-up that does all

4 Anti-Aging Age: 30+ Reduce wrinklesRemoves dead skinReduce Rosacea Breakouts

5 Sensitive Skin Age 15+ Hypo-allergenicClears skin of acne

13bareMinerals Addresses All Customer Segments

Target Segment & Value PropositionTarget Segment & Value Proposition

bareMinerals is superior to traditional cosmetic products because it provides the unique combination of cosmetics, skin care, and sun protection for women of all ages, using the highest quality minerals.

Target Segment: Urban females from 15-64 years of age in Class B & C income

levels

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Marketing Mix: The 4 PMarketing Mix: The 4 P’’ss

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Acquisition, Education, and RetentionAcquisition, Education, and Retention

Continued Consumer Education is Key to Growth16

Implementation TimelineImplementation Timeline

Customized Starter Kit with High Quality Accessories

Production in USA Promotion focus is on brand building

events: Makeup Sessions + Free Samples

Viral marketing through Orkut and other social media forums

Customized Starter Kit with High Quality Accessories

Production in USA Promotion focus is on brand building

events: Makeup Sessions + Free Samples

Viral marketing through Orkut and other social media forums

Reduce costs and taxes by using Contract Manufacturing

Online and Magazine Mass Advertisement

Possible introduction of new product lines and exploration of distribution channels through direct sales.

Reduce costs and taxes by using Contract Manufacturing

Online and Magazine Mass Advertisement

Possible introduction of new product lines and exploration of distribution channels through direct sales.

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Success MetricsSuccess Metrics

Short-Term: Repeat buyers Conversion rate from other brands Percentage of positive consumer feedback regarding the brand Feedback from partners and distributors Extent of viral marketing through Orkut and other online mediums

Long-Term: Reduction in Production Cost ROI on Advertising blitz Market Share (>6%)

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Projected Financials Projected Financials

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Healthy Profit Margins by 3rd Year

Break-Even AnalysisBreak-Even Analysis

Break-even point reached at 207,000 units sold and 2.88% market share 20

SummarySummary

Focused product satisfying multiple customer needs

Target segment: Urban females from 15-64 years of age in

Class B and C income levels

Fuse rapidly growing internet usage with social culture

through online distribution and marketing

Transition to domestic production to reduce costs and

increase profit margin

Provide Customer Experience is key to sales

Revolutionize the Brazilian Cosmetic Market Industry21

Obrigado! BackupObrigado! Backup

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Independent Clinical Results for bareMinerals®Independent Clinical Results for bareMinerals®

In clinical studies of women between the ages of 18 and 65 with various skin conditions who used bareMinerals for two weeks:

76% reported that bareMinerals has corrected and improved the appearance of their skin condition and:

Skin dehydration was improved by 75% Overall condition of the skin, smoothness, elasticity and texture was improved by 49% Redness was reduced by 31%

Over 80% of the women felt that bareMinerals is ideal for sensitive skin and noticed a reduction in the appearance of flaws and imperfections.

Over 75% of the women noticed an improvement in the appearance of their skin and saw a reduction in redness and irritation.

Over 70% of the women agreed that bareMinerals smoothes the appearance of fine lines and wrinkles and that with continued use, their skin was less irritated and they had fewer rosacea flare-ups.

Over 60% of the women agreed that with continued use, the appearance of their skin was improved and that they had fewer acne breakouts.

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Break-Even AnalysisBreak-Even Analysis

Fixed Costs (R$) 10,000,000Manufacturing Costs 30Promotional Costs 10Import Taxes (75%) 23Total Variable Costs 62ASP 99 Total Brasil Facial Makeup Market (2008 in R$) 700,486,000

Units Sold Total Revenue Fixed Costs Variable Costs Total Costs Total Profit Market Share0 0 10,000,000 0 10,000,000 (10,000,000) 0.00%

50,000 4,950,000 10,000,000 3,105,000 13,105,000 (8,155,000) 0.71%100,000 9,900,000 10,000,000 6,210,000 16,210,000 (6,310,000) 1.41%150,000 14,850,000 10,000,000 8,185,000 18,185,000 (3,335,000) 2.12%200,000 19,800,000 10,000,000 10,160,000 20,160,000 (360,000) 2.83%250,000 24,750,000 10,000,000 12,135,000 22,135,000 2,615,000 3.53%300,000 29,700,000 10,000,000 14,110,000 24,110,000 5,590,000 4.24%350,000 34,650,000 10,000,000 16,085,000 26,085,000 8,565,000 4.95%400,000 39,600,000 10,000,000 18,060,000 28,060,000 11,540,000 5.65%450,000 44,550,000 10,000,000 20,035,000 30,035,000 14,515,000 6.36%500,000 49,500,000 10,000,000 22,010,000 32,010,000 17,490,000 7.07%550,000 54,450,000 10,000,000 23,985,000 33,985,000 20,465,000 7.77%600,000 59,400,000 10,000,000 25,960,000 35,960,000 23,440,000 8.48%650,000 64,350,000 10,000,000 27,935,000 37,935,000 26,415,000 9.19%700,000 69,300,000 10,000,000 29,910,000 39,910,000 29,390,000 9.89%750,000 74,250,000 10,000,000 31,885,000 41,885,000 32,365,000 10.60%800,000 79,200,000 10,000,000 33,860,000 43,860,000 35,340,000 11.31%

Break-even point reached at 207,000 units sold and 2.88% market share

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2013 Market Size Forecast2013 Market Size Forecast

Facial Makeup consists of 20% of Total Market25

External Analysis: PorterExternal Analysis: Porter’’s 5 Forcess 5 Forces

Bargaining powerof suppliers

Low- Raw materials available through many

commodity suppliers

Bargaining powerof buyers

Medium- Price is set but Consumers have many

brands from which to choose

Threat of substitutesHigh-

Lack of educated market to understand benefits of

mineral makeup

Threat of new Entrants

High- Mineral makeup is the new growth area in

today’s cosmetics industry

Competitive Rivalry

High- there are multiple competitors that are large multi-national companies and high numbers of local

competitors

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