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Brazil’s O’Boticário Bets Big on Colombia

The Brazilian beauty giant launches a major push in Latin America's third-biggest market.

BOGOTA — “There are 150 shopping malls in Colombia. If we can be in each one of them, that gives you an idea of the potential,” declared Nicolas Borrero, O’Boticário’s country manager, when asked how many shops the Brazilian beauty giant could open here — a top growth market amid sluggish sales at home.

“Colombia is our only direct operation in Latin America where we are opening our own stores,” Borrero said, adding that the firm won’t sell through catalogs in Latin America’s third-largest beauty market. “It is a much bigger market than Ecuador or Peru, retail is developing rapidly and there are many attractive cities.”

Despite its promise, O’Boticário has had a tough time seducing Colombian consumers away from heavyweight rivals such as Peru’s door-to-door seller Belcorp and MAC Cosmetics, which has taken the market by storm.

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Following a big launch investment in 2014, sales were disappointing, making then-country manager Andres Giraldo’s previous forecast that the chain could install 100 stores and hit $90 million in sales by 2016 look overhyped.

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In fact, the 4,000-strong-door beauty retailer has managed to open only nine stores in Bogotá. It also has delayed plans to enter Medellín and other big Colombian cities like Cali or Cartagena.

Borrero, who acknowledged that Giraldo’s views were too optimistic, said the firm will continue to grow rapidly but declined to detail precise door counts. One insider, however, said the chain could feasibly operate 12 stores by 2018.

“We will open stores but their number and pace will depend on how much consumers want O’Boticário, the locations we find and the economy,” said Borrero. “In three years in Colombia, we have learned that doing business here is not easy. There are [regulatory] barriers and it has very strong direct and multi-channel competitors like pharmacies and very high rents.”

Despite that, Borrero said the company posted double-digit sales gains last year when the retail market began to cool amid an economic slowdown.

This year is set to be tougher.

The beauty industry is forecast to grow 1.5 percent to just over $4.2 billion — half of its 2016 rate — as the South American economy expands 0.5 percent to 1 percent from a 1.8 percent spike last year.

“Consumers are feeling the pinch from a recent tax reform that brought sales and personal taxes higher and our top export markets Venezuela, Mexico, Ecuador and Peru (Colombia exports over 20 percent of cosmetics production) are not doing well,” said Juan Carlos Castro, head of diverse industry lobby Andi’s beauty division. Recent state corruption scandals have also hit consumer confidence, he added.

To meet this challenge, O’Boticário in February launched a major advertising campaign that Borrero claimed is the largest ever done by the firm outside Brazil.

Dubbed “Cree en la Belleza [Believe in Beauty], it is intended to lift sales 15 percent this year.

“We are pretty much relaunching the brand,” Borrero said, adding that marketing spending will be 100 percent higher than in 2016. “So far, the quantitative and qualitative feedback is very positive. People are talking about the brand. We are creating engagement and affection.”

Citing campaign quirks, Borrero said O’Boticario placed two huge window displays on Bogota’s busy 15th and 11th streets. Designed by well-known visual merchandisers and local artists, the spaces have generated buzz from a public unaccustomed to such forms of advertising.

The outdoor and print effort, running until April, is designed to push O’Boticário’s main fragrance and makeup products, notably female and male perfumes Lily Essence and Malbec, respectively. One spot boasts the firm rescued the ancient enfleurage technique to extract the lily scent while another talks up Malbec as an artisan product made from wine using French oak barrels.

Borrero said O’Boticário can fend off tough competition from Belcorp and other Peruvian direct seller Yanbal, as well as Natura and MAC.

“Belcorp has catalogs and we are retail,” Borrero said. And unlike Belcorp’s leading Ésika and Cyzone trademarks, “our brands follow the latest fashion trends,” often informed by São Paulo Fashion Week, which O’Boticário often sponsors.

Make B, the firm’s color line, also markets products tailored to ethnically diverse Colombians while offering health benefits.

“Our professional line has 12 makeup colors that adapt to 50 skin tones,” Borrero said. “And our brow fix products have hydrating properties.”

Another staple Nativa Spa sells products made from Brazil’s açaí fruit, exuding a “sweet and exotic” aroma that has won hearts, he added.

O’Boticário has strong growth potential in Colombia, where Natura has also fared well amid a beauty culture that is similar to Brazil’s, said Castro.

However, it must move fast as Belcorp, Yanbal, Avon, Natura, MAC, L’Oréal’s Kiehl’s and new Colombian perfumery chain Cromantic are moving to build retail footprints.

There is still room for everyone, as the market undergoes changes. Panamanian perfumery chain La Riviera exited Colombia last year — closing 70 stores as part of a U.S. money-laundering probe against parent Grupo Wisa.

“There is a big gap to be filled,” Castro said. “But everyone is rushing to get in.”