Brazil's rising power changes perceptions

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It was the 1990s. H.J. Heinz executives were considering getting into Brazil's pet food market. The South American country had suffered through major currency devaluations, but in-country experts assured the Heinz team those problems were over.

A couple of weeks later, another one came.

"The environment was a little bit fragile then, and things did not work out," recalled Mike Milone, now executive vice president, Rest of World, global enterprise risk management and global infant/nutrition -- a mouthful of a title that reflects his far-flung responsibilities for the Pittsburgh company.

Also on the case back then: Bill Johnson, now chairman, president and CEO.

The world kept spinning and economic fortunes shifting. In 2001, a Goldman Sachs executive wrote a paper identifying four countries set for explosive growth. The paper might have been forgotten but for the acronym used for the countries -- Brazil, Russia, India and China became the "BRIC" group.

And grow they did. Even in 2010, when the U.S. gross domestic product grew 3 percent, Russia was at 4 percent while Brazil posted a 7.5 percent gain, India 10.1 percent and China 10.3 percent. Although things slowed in 2011, all four still grew faster than the U.S.

Heinz, which had been in China since the 1980s, continued to expand there with a focus in recent years on its baby food business. In India since the early 1990s, the company has found success in foods targeted for children. An investment in 2005 helped expand its reach in Russia's ketchup, condiments and sauces market.

But even as Brazil's economy began to make good on its potential, Heinz found identifying market opportunities there a challenge.

About two years ago, Mr. Milone said management took another look. The available trade data didn't seem to reflect the whole picture, focusing mainly on modern sales venues rather than the mom-and-pop shops that people in emerging markets tend to frequent.

It turned out as much as half of retail sales in Brazil were coming from smaller, harder-to-track venues.

Based on data that reflected such sales, Heinz found multiple candidates for acquisitions.

Last April, the Pittsburgh food company acquired 80 percent of a Brazilian company that makes tomato-based sauces, tomato paste, ketchup, condiments and vegetables.

In the most recent quarter, Heinz said sales through the business exceeded $100 million. In addition to selling Quero-brand products, the company plans to start making Heinz ketchup in Brazil by next year.

Bringing Brazil to Pittsburgh

Ever since the G-20 summit of world powers came to Pittsburgh back in 2009, Carla Leininger has been able to find international decorations at the Mike Feinberg Co. store in the Strip District.

But some supplies to feed the Brazilian native's need for a taste of her home country require a six-hour trip to Newark, N.J., where sales of the familiar salted meats, the breads, the chocolates are supported by a larger expatriate population.

Ms. Leininger came to the U.S. as a teen when her mother studied here and then earned her own master's from Point Park University. She estimates the Brazilian population in the region is in the 500- to 1,000-person range, with people regularly moving in and out -- like the friend who worked for Heinz and went back to Brazil last year.

Ms. Leininger, now a public relations professional who has, among other things, done work with companies seeking to enter the Brazilian market, remembers when most of the U.S. news reports about Brazil seemed negative and acquaintances asked things like whether elephants roamed the South American country.

Now, she said the reports tend to be positive.

Businesses have begun to prize fluency in Portuguese -- the language of Brazil. "If a business is not doing business right now with Brazil, they are looking to do it," she said.

Sports organizations want a part of the country's surge, too. Brazil is scheduled to host the 2016 Summer Olympics and the 2014 FIFA World Cup.

Ms. Leininger has been involved for years in building cross-cultural awareness in Pittsburgh. She worked to create the Brazilian Radio Hour on WRCT 88.3 FM, a weekly independent show since 2004. Every Friday at 6 p.m., the show broadcasts in both English and Portuguese, featuring music, news and guests such as artists and former government officials.

A newer project, Global Beats, organizes arts events that feature contemporary world music.

Awareness raising hasn't just occurred locally in recent years. Last year, a Brazilian TV program came to town to talk about growing interest here in that country, a report that was broadcast back home.

"It was a great promotion for the city of Pittsburgh," Ms. Leininger said.

Talk the talk

Among the faces on the TV report was that of Ana Paulo Carvalho, the Portuguese language coordinator at the University of Pittsburgh's Department of Hispanic Languages and Literature. Another native of Brazil, she's been here about a decade and seen interest in the language program grow from less than 10 students to about 150 a year.

The university only offers a minor in Portuguese, but that's drawn students from a range of degree fields, everything from engineering to nursing.

"They're seeing that this is an upcoming region," said Julian Asenjo, assistant director of academic affairs in the university's Center for Latin American Studies.

A few years ago, Pitt and neighboring Carnegie Mellon University began holding a joint weekend-long course focusing on the BRIC countries.

Within Pitt, program support has come from several areas including the business and engineering schools.

The South American country is rich in energy and mineral resources -- things in which a number of southwestern Pennsylvania companies have expertise. The Pitt team has a number of connections with companies already operating in Pittsburgh, such as Alcoa, Ariba and Bayer.

Ms. Carvalho needs more freshmen interested in Portuguese. That goal could get a boost if more high schools in the region start teaching the language or at least having after-school programs.

The Center for Latin American Studies has been working with teachers -- generally Spanish instructors -- from local public and private schools to help them pick up the language.

Meanwhile, those at the center point out another sign of Pittsburgh's growing connection with Brazil. Last year, the Brazilian consulate based in New York sent a team to Pittsburgh twice to set up shop temporarily. Another visit to the Pitt student union is planned March 30.

"We hope to continue to offer this service at least one visit per semester," said Janlou de Amicis Silva, spokesman for the Consulate-General of Brazil in New York, in an email. More than 70 people showed up for the last visit in October, getting passports updated and help with other legal matters.

Money flows across borders

One company with a representative at that CMU/Pitt BRIC conference session was PNC Financial Services, and the Pittsburgh bank wants its customers to know that it can handle their payments and currency needs around the globe.

PNC also has economists such as Bill Adams on staff, whose job it is to help business clients understand how they should react to things like the European debt crisis or trade battles with China.

Mr. Adams, who spent five of the past 10 years living in China and joined PNC last year, checks the news via his smartphone each morning before arriving at his office in Three PNC Plaza. Then he checks economic data from overnight, websites of foreign state agencies or the latest moves from central banks in places such as England or Brazil.

"Any country you are focusing on now, the economy is global," Mr. Adams said. That means that while a big risk to the U.S. economy is a potential war with Iran -- and the oil price spike that would likely result -- that's also a major risk for Brazil, India and China.

The fast-growth BRIC nations weren't immune from the consumer spending slowdown that hit developed countries in the last couple of years, Mr. Adams noted.

He is forecasting an economic upturn in both Brazil and China by the second half of this year. Most of the world is starting to recover, he said, with the frustrating exception of Europe.

Even smaller businesses are starting to think globally, he said, often because their clients are doing business abroad.

In addition to the energy and minerals potential in Brazil, Mr. Adams said the consumer market in the South American country is booming on the strength of the currency, the real.

His colleagues from a newer PNC market, South Florida, have reported that malls in the Sunshine State are seeing people fly in from Brazil, buy two suitcases, fill them and go back home. The shoppers can sell a couple of the things they buy and cover the expense of the trip.

Weighing risk and reward

Mike Milone at Heinz still has the company-supplied materials meant to help him learn Spanish, though he hasn't yet mastered the language. But Heinz's Spanish-speaking employees that have worked in markets such as Venezuela and Mexico have eased communication with Quero management.

With a company like Heinz, which works all over the planet, a move into a new market tends to get the attention of its employees. Some people in marketing and some in research and development already spoke Portuguese. Some employees were sent to Brazil to visit and advise, while others took full-time positions there, even as Quero management brushes up on its English.

Mr. Milone said both sides in this deal have been learning. In addition to local knowledge of the Brazilian market, he said, "We are getting lots of insights into their packaging technology."

And when the Quero team visited the Heinz ketchup plant in Fremont, Ohio, they were impressed by the temperatures at which the ketchup containers were filled.

The many challenges to come in learning the Brazilian market aren't being underestimated, but that's part of business. "Risk is something we have a lot of debates about," Mr. Milone said.

While emerging markets are expected to produce more than 20 percent of Heinz total sales in fiscal 2012, the company makes the case that it isn't overly dependent on any single emerging market.

It also isn't too focused on acronyms in determining where the next high-growth opportunities may be found.

Mr. Milone pointed out there's a whole class of markets seen as rising behind the BRICs. Some refer to the CIVITS -- China, India, Vietnam, Indonesia, Turkey and South Africa -- as the next economic drivers. The continent of Africa has significant potential, too, he noted, although the complexity of so many languages makes it especially challenging.

Some argue that Russia's growth has slowed and Brazil is well developed at this point, taking a little of the shine off the BRIC label. But others say there's still economic opportunity for globally active businesses, as illustrated by Brazilian company Braskem's recent purchase of the polypropylene business of Sunoco Chemicals Inc.

Even American shoppers may soon become convinced of Brazil's position as an international hot spot. In May, department store chain Macy's plans to create in-store shops involving collaborations with Brazilian designers.

The retailer set off a minor controversy in January on its Facebook page when it announced the promotion. The international issue? Macy's spelled the country's name with a "s" -- as in Brasil -- the way the natives do.

Ms. Leininger, for one, seemed impressed.


Teresa F. Lindeman: tlindeman@post-gazette.com or 412-263-2018.


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