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Exceptional opportunities for luxury brands in the booming markets of Brasil and Chile

Opportunities 03 November 2009

Sao Paolo

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Having recently been chosen as the host of the 2014 World Football Cup and of the 2016 Summer Olympics, has been creating euphoria in Brasil for the past 6 months. The news is also coupled by the discovery off the coast of Brasil of an important oil reserve. An IMF (International Monetary Fund) report estimated a growth of 3% for the entire Latin American region in 2010. Recent figures indicate that the economy of Brasil is likely to grow by 5% in 2010, while the economy of Chile is likely to grow by 4%. The Argentinian economy is estimated to grow by 1,5%. By comparison, the Chinese economy will likely grow by 3% in 2010. BRASIL The general economic boom is creating more wealth among certain tiers of population, thus creating opportunities for the luxury market. According to CPP Management Consultants Ltd, the luxury target segment in Brasil is made up of 1 million people (annual income of over USD 200.000). Sao Paolo, the largest city in Brasil with 11 million inhabitans also has the highest concentration of rich people (over 50%). Two other districts with increased potential are Rio de Janeiro and Bahia, which are both the top tourism destinations in the country. The total population of Brasil is 187 million inhabitans. According to Capgemini, Brazil had 143 individuals with more than USD 1 million of investible assets in 200, compared with 362 in the UK and 364 in China. Currently, the segments of the luxury industry with the highest development are fragrances/cosmetics, and auto. The most underdevelopped segments of the Brasilian luxury industry and therefore the ones with the highest potential are SPA's, fashion & accessories and hotels. Due to visa restrictions and distances, over 50% of the wealthy local consumers do not travel internationally, which is a great asset for the local luxury industry. SAO PAOLO presents increased opportunities for luxury businesses also because of the fact the target for luxury goods would be made up of over 70% locals, while in Rio de Janeiro the percentage of local consumers for luxury would be less than 40%, the rest being foreigners.The majority of SPA's in Sao Paolo are those within hotels, with a limited range of services. For instance the there is only one stand alone SPA listed by the prestigious Conde Nast Johansen guide (the SPA Unique Garden). As for the fashion segment, Louis Vuitton is the indisputed market leader with 4 shops in Sao Paolo, Giorgio Armani 1 store, Dolce Gabbana 1 store, Versace 1 store, Dior 1 store, Ferragamo 4 shops and Gucci with 2 shops. Brands such as Prada, Bottega Veneta, Chanel and many other brands do not have a presence in the market, this being an opportunity for potential local franchisees. As for luxury jewelry, Sao Paolo is the only city in the world to have four TIFFANY'S stores. H STERN, a major international jeweller has 5 stores in Brazil and plans to open more shops in densly populated North East area of Brazil. The luxury car manufacturers are also enjoying exceptional results with Porsche the number one selling brand. PORSCHE sold a record 723 units in 2008 and estimates a volume of 500 units in 2009. Sao Paolo also has one of the largest FERRARI dealerships in the world and has sold over 200 units in 2008. However, the luxury industry segment with the highest potential in Sao Paolo is hotels. For a city with a population of 11 million, Sao Paolo has five five star hotels, none of them being under an international chain. to be continued

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