Establish a Distribution Channel in Brazil in less than 45 days
This is an extensive guide to demonstrate how your company, in as little as 45 days, can start selling your products or services through a Brazilian distribution channel.
At any given time there are thousands of foreign companies in the process of establishing a sales channel in Brazil. Most foreign manufactures are searching for local distribution through established channels but for many the process seems to go on for a much longer time than necessary due to poor planning.
If you are representing a technology company it should take you no more than 45 days of focused work to establish a sales channel in Brazil.
Before starting there is one thing to keep in mind. A large majority of the foreign companies trying to enter the Brazilian market never manage to get a single product across the border to Brazil. Their lack of success is often directly related to their lack of focus and understanding of local behavior. This results in spending a lot of time and effort working on dead-end deals.
Clean your calendar for the next month and a half and embrace the Samba. Keep in mind that in general January and February are bad months for business in Brazil due to vacations.
1. Find your price point in Brazil
As basic as it sounds, you need to figure out if your product will have a competitive price point on the Brazilian market. If your product or service cannot meet a competitive price point even before you are considering the added costs of doing business in Brazil, there are really no reasons why you should move forward.
When you found that your product or services price point can be competitive, you need to find the added costs of doing business in Brazil. This should include:
- Import taxes to Brazil
- Non-refundable sales taxes
- Industry average commission or mark-up for distribution in Brazil
Just by finding your price point you are better off than very many foreign businesses that are coming to Brazil.
Keep in mind that the taxation for your product can vary in the different states of Brazil. You don't need to research the price point in all states, normally São Paulo is the state with the highest taxation and a good base to use.
2. One Day Viability Study
When you found the price point and figured out that you have a base for possible future business, it's time to review the non-financial aspects of doing business in Brazil.
You should be able to answer these three questions:
- Are there any import or sales restrictions on my product in Brazil?
- Are my conditions competitive in Brazil?
- Is my value proposition valid in Brazil?
Finding your competitors pricing can sometimes be difficult, especially in niche industries. Keep in mind that in Brazil it's both common to give discounts when the client offers up-front payment as well as 0% interest for payment in installments. All depending on the industry you are operating in.
When it comes to evaluating your value proposition there are no simple rules, but in general Brazilian consumers and companies emphasize the following attributes stronger than Europeans and North-Americans do:
- Reduced Maintenance Cost
There are also some attributes that in generally are undervalued in Brazil compared to Europe and North-America.
- Product Design
- Certification like Fair Trade
- Environmental friendly products (quickly changing)
- Ecological products
3. Find partner prospects
There are many different ways to find partner prospects. Google is maybe the preferred one, but you will quickly run into language barriers in terms of navigating around in industrial directories and other relevant publications.
In order to easily obtain relevant partner prospects you should find an exhibition or trade-show that covers your industry and browse through the exhibitor lists. This is an easy first step to get started in building your prospect list.
Here are some local tips on how to select your prospects:
- Prospects outside São Paulo and Rio de Janeiro are easier to contact
- Prospects outside São Paulo and Rio de Janeiro are less likely to speak English
The e-mail is not the preferred way of first introducing yourself, so pick up the phone. In companies that are professional distributors you will most likely get around with both Portuñol and English.
4. Book a flight to Brazil
So after about 3 weeks of work you should now have confirmed meetings with at least 5 prospects. It's time to book a ticket to Brazil to get started with the real business. In Brazil you need to meet people face to face and establish a level of personal confidence before you land any committed long term agreements.
Don't spend too much time meeting brokers, logistic companies and other practical aspects during your first visit to Brazil. If you gain mutual trust with a Brazilian distributor, he will normally be more than happy to help out with the practical aspects of getting your products to Brazil.
A Brazilian company with established relationships will almost always get better deals with local suppliers than you can manage to get yourself.
Chamber of Commerce
If you have never worked with a national chamber of commerce, you might think it's a good idea to start there. National chamber of commerce is a great source for generic business information and a great hub for exchanging experience with other companies from your country that are doing business in Brazil.
However many companies seem to overestimate the level of active assistance that your national chamber of commerce is able to provide locally in your industry.
Here are three things you should know before contacting your national chamber of commerce in Brazil:
- Most chamber of commerce do NOT work for free
- Most chamber of commerce prefer to work with investment projects
- Most chamber of commerce are not the place to go for quick results
It sure looks good in the boardroom to engage with your chamber of commerce, but is your company's entrance on the Brazilian market significant enough to be mentioned in the chamber of commerce's annual report?