Small businesses are taking advantage of the Made in Britain brand to sell luxury and high-quality products to Brazil. However, the perception of the market and its high import taxes may be putting more SMEs off targeting the country.
Philip Gray, managing director of Commercial Doctor, which advises companies on exporting to the region, says: Brazilians love brands. In certain areas, especially where theres a British link, the Brazilians do like the UK. They trust us, like our brands and the quality of things we produce.
The strength of the British brand was highlighted by each of the small businesses we spoke to.
Dean Jackson, owner of endurance sportswear company Huub, was surprised by the speed at which he was able to start exporting to Brazil, saying it took two weeks between meeting local distributors and retailers, to getting products into the market. And adding the growing middle class represents a huge opportunity.
The challenges for SMEs wanting to export to Brazil include the scale of the country and diversity of its markets, bureaucracy, cultural differences (including the language barrier) and import taxes. This goes some way to explain the relatively low growth in the share of SMEs exporting to the country.
Only two per cent of small businesses surveyed in the Western Union Business Solutions October Trade Monitor exported to Brazil, a similar level to the previous year and below the BRIC nations of China and India. Paul Martin, international sales manager at Freight First, added that the level of freight his companys seen from SMEs has remained relatively level over the last few years.
Read more on Made in Britain:
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Ross Hunter, founder of investment copywriting company Copylab, says he was able to meet nine to ten companies, including three out of four of the largest banks and the largest insurance company, during a recent week-long trade mission to look at the potential to export its services.
However, the next issue is working through the tax implications: What were not clear on is the financial aspects and the tariffs, tax and regulation is the key barrier, we need to work out whether this is possible. To help Copylab deal with these concerns Santander, which supported the trade trip, is recommending local accountants and lawyers.
Jackson thinks the import taxes may be whats putting his competitors off. However, in his experience the Brazilian distributors are already factoring that into the price. Youve got a bigger buffer than you think on the standard margins we work with in the industry,” he said.
Grey agreed, saying Brazilians are willing to pay extra for the British brand and this is factored into the retail price: The import taxes are quite high. On the other side of that, Brazilians are used to paying more for imported goods. Its not necessarily a shock that your products more expensive. The upshot is that it’s complex and difficult to get into Brazil, but the pricing can make it quite profitable.
There are trade agreements between the UK and Brazil, and no export licence is needed. Transport is cheap too. Martin says the high level of imports into the UK mean shipping products to Brazil means low-cost freight is available as these companies need to return containers.
Gray says engineering, particularly geared toward the oil and gas sector, medical and automotive perform well with a demand for high-quality parts and technology, and Commercial Doctor is setting up a business hub to target manufacturing and engineering opportunities in the country in conjunction with UKTI.
Jackson says it’s worth thinking about who could be a secondary benefactor of your company entering the market. In his case, Huub worked with a local triathlon magazine that would potentially benefit from advertising revenue and used this connection to learn about the market and make contacts. Gray adds SMEs supplying parts to major operators may be able to follow them into the market, piggy backing on their exposure.
Each of the interviewees featured in this piece noted the importance of visiting contacts and the Brazilian business culture favours a face-to-face approach when building relationships. Indeed, Hunter and Jackson where overwhelmed by the positivity of the response they received on their first trade visit to the country.
Martin says he thinks the country is a sleeping giant in terms of the opportunities offered to SMEs; highlighting high-value luxury items, manufactured parts for factories, automotive and aerospace: They [SMEs] need to promote the high quality that we have in the UK and sell the British product. The British brand is very strong,” he concluded.