Rio Slums Undergo a Marketplace Makeover

Once-Dangerous Areas Transform Into Safer, Tourist-Friendly Communities Ripe for Marketers

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When Michael Jackson shot a video in a dangerous Rio de Janeiro slum back in 1996, permission to film was granted by the local drug lord whose gang controlled the neighborhood. Times have changed. A few months ago, Unilever escorted Britain's Prince Harry on a visit to another Rio slum, or favela, to open a cultural center sponsored by the British Embassy and Unilever's Kibon ice-cream brand.

Rio's government started embedding special community police units in 21 Brazilian favelas a few years ago to drive out the ruling drug dealers, and now marketers are entering these previously no-go areas in search of new consumers. The pacified communities, as they are called, will make the city safer for visitors when Brazil hosts the World Cup in 2014 and the Olympic Games in 2016. But the communities are also being transformed as banks, retailers and new services appear in places even the police used to fear. A local ad agency, NBS, is opening an office in July in the Santa Marta favela to do projects for clients, conduct research and lead immersion tours for marketers. Several have already visited Santa Marta with NBS, including Coca-Cola, local hamburger chain Bob's and Takeda Pharmaceuticals.

With ruling drug dealers gone, marketers are entereing these previously no-go areas in search of new consumers.
With ruling drug dealers gone, marketers are entereing these previously no-go areas in search of new consumers. Credit: Haas&Hahn for
Banco Santander, for instance, has opened branches in all 21 of Rio's pacified communities, with a total population of about 600,000 people, since 2010.

"One of every four accounts we open is a family's very first bank account of their lives," said Sergio Ricardo Macedo, Santander's executive superintendent, at a NBS-sponsored event in the Santa Marta favela.

"The idea is to help clients talk to this community correctly, develop their brands here and at the same time help the communities develop through relevant social efforts," said Andre Lima, partner and creative head at NBS. Each brand has to contribute, he said.

Santander offers special products, such as micro-credit plans and consulting help for small local businesses. Coca-Cola teaches two-month entrepreneurship courses for people who want to start businesses. And Unilever's Kibon ice cream sponsors Santa Marta's bright-red cable cars that transport 10,000 people a day.

"This effort is part of our global Sustainability Living Plan," said Monica Nascimento, Kibon's brand manager. "We wanted to have a social impact in these communities."

Kibon also handles maintenance for the cable cars, and trains people for jobs at the cable-car stations.

"We also created a training program for people to improve their own little supermarkets inside the community, helping them increase sales by 40%," Ms. Nascimento said. Unilever has stepped up supplying those small neighborhood shops with the company's brands, previously only found in the bigger grocery-store chains outside the communities.

NBS developed a manual with tips for marketers, from suggesting they open schools and staff new stores with local residents to recommending, "While communicating, teach."

That lesson is an important one for consumers learning about new products and services, including basics such as electricity.

Until recently, Rio de Janeiro's electric utility company Light had only 73 customers—and only 24 ever paid their bills—in Santa Marta. As in other favelas, most of Santa Marta's 6,500 residents got their electricity through illegal connections fed by mazes of tangled, jerry-rigged cables. Light employees rarely entered neighborhoods like Santa Marta, where they were threatened and sometimes held hostage and forced to service the local drug dealers' own illegal electricity hookups.

After the embedded police units expelled drug dealers, Light workers entered and began installing the miracle of electric power. For people who have never paid for electricity before, some education about saving energy was needed.

To help residents conserve energy, Light is swapping the refrigerators in 36 ,000 homes for new, more energy-efficient ones in a government-financed program. One million light bulbs will be similarly exchanged. A recycling program offers discounts on electric bills that get bigger with the more garbage the residents recycle. Educational efforts are paying off, and average electricity consumption has fallen dramatically from 280 kilowatts an hour to 170 kilowatts.

So far, Light has entered 11 pacified communities such as Santa Marta and installed legal electrical connections for 42,000 families totaling 160,000 people. In some cases, the company even puts up the first signs with street names. For many, electric bills now serve as proof of address, another leap forward.

"The electric bill became a citizenship certificate for community residents," said Gerson Kelman, Light's president. "It allowed them to have an official address, and to gain credit at retail stores."

In Santa Marta, 91% of Light's new customers are paying their electric bills, the company says.

A safer community with better infrastructure is also encouraging retailers, although they have to be inventive. Consumer electronics chain Casa & Video wants to establish stores in all 21 of the pacified communities, and started opening outlets in September 2011. Due to lack of suitable large retail spaces, the stores are tiny compared to Casa & Video's average size of 1,000 square meters per store. The first Casa & Video to open in one of the communities was a 40-square-meter store in Santa Marta, followed by slightly bigger stores elsewhere of 60 and 300 square meters. But the retailer has found a solution by partnering the tiny stores with bigger ones to offer same-day delivery.

"We can't have everything inside the store, because the stores have to be very small, but everything we don't have gets delivered the same day by one of our big stores nearby," said Isabela Tochetto, Casa & Video's expansion manager.

Rio's favelas have always been colorful, often clusters of small dwellings clinging to a mountainside by the ocean. Now they're benefiting from paint company Akzo Nobel's project to bring color to poor communities whose buildings need painting and restoration. The company has donated its Coral paint brand and trained local residents to paint 2,000 buildings not only in Rio, but around the country. In Santa Marta, the company worked with the local community to paint 34 houses and train 25 painters.

Word is spreading. The New York Times last year reviewed bars and restaurants that opened in several of Rio's pacified communities after the community police units were set up. In Santa Marta, the review recommends fried-chicken specialist Bar do Zequinho, located near a statue and mural of Michael Jackson.

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