Having a “real” good time in Brazil
It’s hard not to have a “real” good time—the currency is the “real.”
The day in this overwhelming city was spent at two businesses (or on the highway going between the two) which gave us some interesting views of life in Brazil.
The first was with two operations/marketing people from Azul airlines, Brazil’s equivalent to Jet Blue. In fact, the airline was founded by one of the Jet Blue entrepreneurs, who left the US airline in something of a cloud, but who had a good enough reputation with investors to parley 235 million dollars into the start of what is Brazil’s 3rd largest airline. If you think of the size of Brazil (5thlargest country) and population (5th largest country), and the poor infrastructure, air travel makes a lot of sense. Donald Needleman recognized that need for business travelers, and copied the Jet Blue model here in 2008. In six years, the company has grown to the point where it has filed to fly to Miami and New York, using secondary airports (Fort Lauderdale and Newark) ala Jet Blue’s model. The founders set a nearby city of 7 million, within driving distance of San Paulo (it’s apparently easier to drive away from the city than into it; Sao Paulo has the second largest number of helicopters for in city travel in the world—and when the Azul executives go into the city, they travel in a bullet proof car; most of the industrial factories, and some of the homes, and even a few of the malls, are fenced with razor wire at the top), as a hub, and have managed, through efficient computer programs, to capture about 85% of business traffic on smaller planes with more frequent service than the existing domestic airlines. They demonstrated that it’s cheaper (as well as faster) to fly than to take a bus or a car, though rates are also subject to equations that maximize revenue.
They painted an interesting picture of the airline industry in Brazil, describing it as akin to the balance of mass destruction in the Cold War. If everyone is rational, all can survive, but if one lowers fairs, it could ruin them all. They also described some of the problems peculiar to airlines in Brazil—the high taxes on fuel (which led to experiments with local manufacturer Embraer in an ethanol friendly plane, ethanol being one of the domestically-produced alternatives to fossil fuel) and the short runways or the lack of fire trucks which makes it difficult to expand. The government did privatize the major airports they said, which has reduced the amount of bureaucracy (Brazil is the 79thworst country in the world to do business) , but the presence of Petrobas, the gasoline monopoly, makes aviation fuel almost 40% more expensive in Brazil than in the United States. They also discussed the possibility of carrying freight, but they said it would require larger planes, though they do carry small packages. We also saw the command post where they work on scheduling maintenance, arranging luggage in plane (from the corporate headquarters) etc, When I asked about corporate social responsibility—almost invariably the first topic any of the Indian companies mentioned—they were ambiguous, mentioning “education and kids.” As for reducing carbon footprint, they said that they would embrace it when customers were willing to pay for it, because in the long supply chain the airlines were much less profitable than the manufacturers or the airports….it’s not India.
The second visit gave us a glimpse into the retail/consumer goods economy—at the French retail/online chain, Sephora. The general manager for Brazil (a recent addition to the company; trained as a chemical engineer and bored with manufacturing—“it’s the same thing every day”—she got an MBA in marketing, worked for banks and L’oreal before coming to Sephora. She is part of the Americas division (US, Canada, Mexico, and Brazil) and described what we in business call “glocalization”—the adaptation of a global model (French in this case) to meet the needs of a different target market (in this case, Brazilians). Her numbers and observations on the marketplace were interesting. Despite the recent slowdown in the economy (despite high employment, there is high inflation, and discontent with the money spent on the World Cup and Olympic facilities at the expense of addressing social issues) as women move into the middle class, one of the early purchases is fragrance—and especially, in Brazil, hair care. While something like 70% of the women have curly blonde hair, they purchase an average of 5 products to straighten their hair and care for it. There are only 14 or so stores, and 40% of the sales are on the internet, but the company has fostered ecommerce with free shipping in Brazil. She talked as well about developing some products in Brazil as a way of bringing the price down and catering to local tastes. Most of the products come from the United States, France, or China—meaning high tariffs on imported cosmetics.
Dinner was at a local barbeque, with something like 19 different cuts of beef for sampling. I probably ate more beef tonight than in the last three months. Our guide promised nightmares, but I’m hoping for pleasant dreams, which I wish on you too.
We have another visit tomorrow morning, then leave the “real” world for Argentina.