Interview with JOÃO CARLOS BASILIO DA SILVA, President of ABIHPEC

How was your previous experience in Perfumery business before joining ABIHPEC?
In 50’s, my brother founded a store in Augusta Street, one of the first in the region. At that time, there weren’t Malls in São Paulo, and Augusta Street had an unique and very expressive business. He was fashion designer, and then his store sold accessories and also prêt a porter. As his proposal was to offer personal and home care products, very sophisticated, the store grew in a very outstanding performance. At the beginning of 60’s, he created a cologne for the store and named it as the store’s brand: Rastro. The cologne’s essence was from Firmenich and we produced it in a third-party way. The business started to perform in a very strong manner and, in 1967, my brother invited me to work with him. I was very young but my will was to face challenges. I founded the company in the same year, we started to grow strongly and complement the brand’s range with a soap, deodorant and others products. In 1979, I left the company and formed a joint venture with Italian executives; I started to work with Victor brand, one of the first men’s colognes, Acqua di Selva. When I returned to Rastro in 1986, I found the company deeply in debts, and then I brought to company the range of Victor’s brands. With little capital and much will of overcoming the tough situation, we started everything again, but with the changes in Brazilian economic plans and the inflation that reached 80%, the company had financial difficulties again and it was necessary to raise it again and again. My brother died and, due to this entire hard context, I decided to sell the brand to Monange.

How did you start as president of ABIHPEC?
We hadn’t the ABIHPEC yet, only a Regional Office. For many years, Unilever was in the chair of the Sector’s Union and, with the normality of the democracy and the entry of companies such as Procter and Gamble and others Unilever’s competitors; Unilever decided to leave their chairman position and asked me to help them to select a successor. We didn’t find a successor among the suggested names, so Unilever’s president concluded that I would be in this new role and say to me: ‘now we only have you’, then I started to manage ABIHPEC, that was founded in 1995.

What is the role of ABIHPEC and how is its relationship with the associated companies?
Supported by its members, ABIHPEC is the official representative of Cosmetic, Toiletry and Fragrance Industry in Brazil, in all municipal, state and federal government levels. All negotiations: labor, regulatory, tributary, etc are in the role of the association. This interaction is made by a board of executives, the majority of the most representative companies in the sector are part of our board; we discuss all issues related to our business and, through a consensus, we take decisions and share our growth vision that lead us to a more positive performance in our industry. Besides, we represent Brazil in MERCOSUL, we have partnership in USA, in European Community and also I’m the president for all Latin America, a project of representing the industry in the international market.

Tell us how ABIHPEC started to perform its role in the industry and reach what the association is today.
Initially, the sector was not organized, there was not a unit. I was a Brazilian industry executive in a small company, and then I tried to find ways that would show and search for the development of our industry. Before any claim, I needed to know who we are, how many we are, how much we produced, what we represented in all areas. It was a difficult work, because we had to talk to all companies and know what their revenues were. Which was the revenue in each product category: cosmetic, perfumery, etc…? There was a initial resistance to obtain such business information, but they were basic to reach the authorities and say to them: “We are here, we are that”, this is the number of people that work direct or indirectly in our industry and start to look for claims that could attenuate or reduce the tax burden in our sector.

Was the tax burden already a big challenge?
The tax burden was absurdly high at that time; in 1992, we had IPI Aliquot of 77% and sum of ICM and PIS we reached 154% of taxes. The consumer access to these products was low, they are luxury goods and we showed to our authorities that many categories of products in our sector were essential: the promotion of the intimate, capillary, buccal hygiene’s, finally, the personal care is essential to preserve the well-being and act in the prevention of diseases. We had very significant taxes reductions which were very important to change the profile of our business and to become us a very structured and organized association, creating conditions to offer our members a series of projects that bring benefits to the general industry with diverse actions and market information. Abiphec’s reports represent more than 75% of Brazilian market.

Across the last years, how has the Brazilian consumer reacted to the development of the perfumery market?
In a general manner, Brazilian people like perfuming themselves, they always enjoy this habit, and this always was a characteristic of our culture and history, in which the North and Northeast regions always have a strong market participation. Historically, in 60’s, 50% of our business are made in North and Northeast of the country. In the South-east and South regions, the consumer was low. At that time, there was prejudice against male perfumery, for example. Brazilian men had resistance to perfume, to use deodorant, that is, among 10 men, only 3 wore it. Also, the perfumery had high taxes and only social classes A and B bought imported perfumery. Later, and across the years, companies such as Rastro, Boticário and Natura changed the habits of the Brazilian Perfumery and, this is very connected to a clear business vision of these companies that command and lead the market, because they know how to translate what is the expectation of the Brazilian consumer, differently from overseas companies that bring to Brazil an international range of fragrances that, many times, it is not what the Brazilians like. Brazilian companies have insight and sensibility of creating products according to Brazil tastes and this tactful understanding has opened the path to the creation of new lines and products formulations from makeup to fragrances.

In 2009 consumer habits in perfumery were not affected, Brazilians continued to consumer even in the global financial crisis and our market share numbers are very relevant in global participation. Could you please comment about it?
It is important to us to understand and interpret what occurred in this global financial crisis. All previous crisis in which Brazil was involved brought disastrous consequences for our economy; in all of them we had the return of inflation. This was the first crisis that Brazil faced, and knew control inflation. Brazilian purchasing power was not affected, that is, the government has continued maintaining the policy of salaries’ readjustment above inflation and the habits of hygiene and perfumery were kept. In 2005, Brazil was in the 3rd position as one of the biggest world markets in perfumery, in 2006 we moved to the 2nd position, in 2007 and 2008 we also kept the 2nd position reaching the market share of 10,7% in global participation. We already have a expressive participation in the global market with 5 billion 300 million dollars, growing 32% in 2008 and in 2009 we reached a market share of 13, 6% in the market, growing about 15, 7% minus inflation, what results almost 12% of growth, a great result. I can say that we have everything to be the biggest market of perfumery in the world in 2010.

Thanks for your interview. We wish you success for ABIHPEC and for all professionals involved in the development of this sector in Brazil, and in all Latin America.