As CEO of Unilever in Brazil for the past four years, Kees Kruythoff has seen the country's middle class grow so rapidly that even poor neighborhoods are trading up to the company's premium brands. Although Brazil's economy is booming, he still sees major challenges ahead in improving education and infrastructure, and lowering the cost of credit for consumers, he said in a speech at Brasil.Inc 2011, a conference held this week in New York at the Plaza Hotel by Grupo M&M.
Grupo M&M, publisher of Brazil's leading advertising and marketing publication Meio & Mensagem, is Ad Age 's international partner in Brazil.
"By 2015, and certainly by 2020, we believe another 30 million will be getting into the middle class," Mr. Kruythoff said.
Now he faces a new challenge starting this month as CEO of Unilever North America, the company's biggest market (Brazil is No. 2), after moving to New York from Sao Paulo with his wife Sabine and their four young daughters. As part of a broad restructuring of Unilever's senior management, Eugenio Minvielle, who had headed North America, shifted in April to lead what a Unilever spokeswoman described in an email as "an important initiative to develop strategic alliances and future [merger and acquisition] activities in North America." Dave Lewis, formerly president-Americas, in June was named president of global personal care.
"There are big challenges with the [U.S.] economy in a different phase than what we experienced in Brazil, [but] you can create development in sub-segments," he said. He cited the U.S. launch this year of Magnum, a premium ice-cream bar long popular in Europe.
"Who would have said launching Magnum in this economy would go as well as it's going?" he said. "[With Magnum] you create aspiration and individual indulgence and outstanding price/value equation."
Another conference speaker, WPP Group Chief Executive Martin Sorrell, cited a CEO survey done in his role as chairman of the Economic Business Council of the World Economic Forum. Mr. Sorrell said CEOs were asked, in light of what's been happening in the global economy, how much they planned to cut budgets in 2012 and invest in different markets. He said most CEOs responded that they plan to cut overall (not marketing) budgets between zero and 5% in 2012. Many of them planned to increase investments significantly in the four BRIC countries of Brazil, China, India and Russia and other developing markets, he said. And regarding investment in the U.S. and Western Europe "most said they would keep things in place," he said.
Sharing numbers from WPP, Mr. Sorrell said that WPP is forecasting group revenue of $16 billion this year, with an average growth rate of 6% and a much higher 14% rate for the BRIC countries. He said WPP's projected 2011 group revenue -- which will total $19 billion if affiliates are included -- breaks down into $1.1 billion from China, $700 million from Brazil (more than half the $1.3 billion total for Latin America), $450 million from India and $200 million from Russia.
"You build your business in those four countries, then go on to the next 10," he said, referring to the group dubbed "The Next 11" by Goldman Sachs. Mr. Sorrell dropped Iran from the Next 11 as it was not investment-friendly, leaving a group of 10 high-potential developing markets that includes Indonesia, Vietnam, Colombia, Mexico, Egypt, South Africa, Korea, Turkey, Bangladesh, Pakistan and Nigeria.
He also expressed concern that the frenzy to snap up local companies in Brazil has led to high prices for the sought-after Brazilian agencies that are enjoying a "Champagne moment" that makes selling irresistible.
"There are altered financial mechanics, and that 's a problem," he said.
At a dinner hosted by Nizan Guanaes, founder of Brazilian ad holding company Grupo ABC, to launch a project called Brazilian Global Leaders, Brazil's Finance Minister Guido Mantega said more than 40 million Brazilians have been added to the "consumer class" in the past few years.
Former President Bill Clinton, who also attended the dinner and spoke briefly about Brazil's potential, said "You're well positioned to lead the world in this new century."
As part of its international initiative, Meio & Mensagem is adding to its site an English-language section called Brazil Briefing that includes a weekly newsletter in English.
Contributing: Jack Neff