UNDER ARMOUR in BRAZIL
Specialty Stores
in Rio de Janeiro and Sao Paulo
Dominick Fuccillo
Scott Glasthal
Guive Savoji
Ivan Velev
International Business Opportunities
"Under Armour's international expansion is a key
component of our long-term growth strategy for
the brand,“ Ryan Wood, President of Under Armour
Europe - July 2006
2009 - 5.6% of sales outside of USA / Canada
- Primarily in Europe / Japan
- Third-Party Manufactured from Southeast Asia
and South America
Source: Under Amour Press release 2006, 2009 Under Armour Annual Report
Why Brazil?
•Brazilian economy has rebounded from the global
recession and projects 5.5% GDP growth in 2010
with currency stability and a strong, inflation
targeting central bank.
•World Cup in 2014 and the Summer Olympics in
Rio de Janeiro in 2016, a high-upside international
marketing opportunity for global brand exposure.
Source: The IMF
Brazil Entry Proposal
•Proposal –Projected Cost $25 million USD in 2011, $73 million USD in 2014, $88
million USD in 2016
Establish two Under Armour retail stores in Sao Paulo and Rio de Janeiro.
Create a South American Headquarters in Rio de Janeiro and central
distribution center for all South American product distribution and potential
third-party retail sales.
Implement marketing strategy targeting current and up and coming Brazilian
athletes, specifically focused on the soccer market and creating brand
awareness and status among high end Brazilian consumers.
Targeted ramp-up of investment to coincide with World Cup and Olympic
events.
Source: Under Amour Press release 2006, 2009 Under Armour Annual Report
Brazilian Apparel/Footwear Market
Competitor Pricing Strategy
Shirt
Cleats
Price in the US (in US Dollars)
Nike
Adidas
Under Armor
$ 25
$ 30
$30
$ 150
$ 195
$100
Shirt
Cleats
Price in the US (in Brazilian Real)
Nike
Adidas
Under Armor
R$ 44
R$ 53
R$ 53
R$ 264
R$ 343
R$ 176
Shirt
Cleats
Price in Brazil (in Brazilian Real)
Nike
Adidas
Under Armor
R$ 110
R$ 80
TBD
R$ 400
R$ 650
TBD
Shirt
Cleats
Brazil price / US price in Brazilian Real markup
Nike
Adidas
Under Armor
2.5x
1.5x TBD
1.5x
1.9x
Source: esporte.netshoes.com, www.adidas.com, www.nike.com
Tariff and Legal
• Common External tariff is 35% on clothing
and athletic shoe
• China anti dumping law will not be
applicable to premium shoes
• Foreign companies treated the same as
Brazilian companies
• Paperwork chains
Source: The International Custom Journal: Brazil #6, 20th edition, 2008, Doing Business: Measuring Business
Regulations. www.doingbusiness.org
Political Economic Stability
• Socialism fears in 2002 of the first working class president
were proven wrong by a balanced government actions that
increased minimum wages, kept inflation low, and is working
to facilitate more foreign direct investment
• 2010 elections are expected to elect a leader that will
continue this trend
• President Obama called Lula “the most popular politician on
earth”
Source: The Most Popular Politician on Earth. Margolis, Mac. Newsweek. September 22, 2009.
http://www.newsweek.com/id/215941
Currency Instability
• Capital account Crisis in
1999
Source: The IMF and recent Capital Account Crises, Evaluation Reports, 2003, www.ieo-imf.org
Brazil’s
Brazil’s
Unholy
Unholy
Trilemma
Trilemma
– Pre
– 1999
1999
Free capital flow
East Asian Financial Crisis
Fixed exchange rate
Sovereign Monetary Policy
Currency Stability
Brazil currently has a slight current account deficit that is dwarfed by the
US’s. This would suggest further appreciation of the Brazilian Real.
3.0x
Max: 2.65x
2.6x
2.2x
Average: 2.65x
1.8x
Min: 1.56x
1.4x
1.0x
4/26/2006
4/26/2007
Source: www.oanda.com via Interbank exchange rates
4/26/2008
4/26/2009
4/26/2010
Exchange Rate Risk
$187 Million just sitting on the balance
sheet and its time to make a move
Questions?
We must protect this house!