November 29 2016 Central Highlights

Robert Chatwin, VP of Natura Internationalization: "...people are more concerned with the origin of ingredients, formulation and manufacturing process"

1 - Why will Natura export to Latin America through Argentina, when some multinational companies choose Brazil as the base country for exports to the region?

The new distribution center increases the capacity of operation and storage, with gain in productivity. The inauguration does not imply a change in strategy, since we were already exporting part of the local production from Argentina to the other Latin American countries in which we operate. The main export base for Latin American countries remains Brazil.


2 - Does the government offer any subsidy for the company to remain there after the political-economic turbulence that the country faced?

It is not a matter of subsidies. The investment in Argentina is a strategic decision of the company, with the aim of promoting sustainable business growth in the country. Argentina is our largest operation outside Brazil and we are the preferred brand of the sector in the country.


3 - What is the capacity of the new CD of the company in that country and to which countries will Natura export it?

The new distribution center has a processing capacity of up to 18 thousand demands per day and a total area of 22 thousand square meters, twice the size of the previous structure.


4 - Who are the largest importers of Natura products in the world today? Does the export strategy, especially for Latin America, remains?

The largest importers of Natura products are our operations in Latin America (Argentina, Bolivia, Colombia, Chile, Mexico and Peru). We remain with our export strategy for all countries, with local manufacturing of some categories in Argentina, Colombia and Mexico.


5 - The Natura store model of France would you say was a success? What are the reasons for the restructuring?

We have just designed a new business model for the French market, focusing on three channels: our own store, e-commerce and multi-brand retailers. With this restructuring, the direct sales operation, which has only 2% participation in the country's cosmetics sector, will be closed.
The changes in France began in February of this year, when we opened a new store in Paris, in the Le Marais district, with an unprecedented architectural project, replacing the unit we had in the Saint-Germain des Près neighborhood. At the new address, the store is open every day of the week, including Saturday and Sunday, in a very busy area of the city. The focus on channels more adherent to the French market should propitiate the sustainable growth of the brand in the country in the coming years.


6 - What is the current volume of Natura brand exports (without Aesop) and how much does it represent in financial terms for the company?

Exports accounted for more than 25% of Natura's net revenue in the first nine months of this year. Most of the products are exported from Brazil and there is also local production through partners in Argentina, Colombia and Mexico. In Argentina, half of what is sold by Natura is already manufactured locally.


7 - How much did Aesop's expansion represented in some countries - and in Brazil - for Natura in the last year - and last semester?

Between 2014 and 2015, Aesop's share of Natura's consolidated net revenue increased from 4% to 5.5%. In the first nine months of 2016, Aesop's net revenue in the period represented 6.9% of the total.


8 - There will there be more branded stores in the country in 2017? Will it continue with the expansion plan in other countries? How long does it take in average for the cost-benefit of this movement to be positive and even significant for the brand and for the company?

We will continue to expand the number of Aesop stores and enter new countries. We reached the end of September with 169 stores in 20 countries. That means we've opened 49 units and we've reached two new markets in a year.

In Brazil, we should have some more stores. We do not have a new settled place yet, so we do not make projections. For now, we are getting good results in the two stores, at Oscar Freire Street and at Vila Madalena, in São Paulo.

Aesop quickly turned out to be a successful business, with rapid revenue growth and profitability. In addition to the financial gains, the exchanges of learning are very rich. We learn from their experience of retailing and acting in mature markets, for example.


9 - Both Natura and Aesop must face a lot of competition abroad - from brands with equally natural profile and unnatural but global brands. Would you say that the natural-sustainable model of brands is sufficiently developed and accepted among the consumers of these times as a competitive differential? Or is this still a matter for the future?

Sustainability is at the heart of Natura and pervades the development, manufacture, distribution and communication of our products. Sustainable use of biodiversity is one of the company's main drivers of innovation, and more than 80% of our ingredients are already of plant origin. All our perfumery uses organic alcohol, and our packaging is eco-efficient, with the use of recycled materials post-consumer and refills.

This view is common to all brands, but some lines carry sustainability attributes with more evidency. This is the case of Ekos, which makes intensive use of technology to discover and enhance the vocation of the actives from the Amazon; And of Sou, which uses packages with 70% less plastic and allows the use of the product until the last drop.

We are always very attentive to the habits and preferences of consumers. We know that people are increasingly interested in innovative products, with technological solutions that bring solutions to their day to day, and are also much more concerned with the origin of ingredients, the formulation and the manufacturing process of cosmetics.
Proof of this is the success of the Ekos line, our main platform for the sustainable use of Brazilian biodiversity, which establishes links with forest communities through socially just, environmentally correct and economically viable business opportunities. When the consumer uses Ekos, he knows that it helps to move that network.


10 - And what is Natura's most successful model abroad? Shop or direct sale? And there is still e-commerce.

We believe that for every market there is an ideal model. In international operations in Latin America (Argentina, Colombia, Chile, Mexico and Peru) we have grown 30% a year with the direct sales model and we are the preferred brand of cosmetics in three of these markets.
In more mature markets, such as France, other channels are more suitable, such as department stores, e-commerce and own stores.