Beleza Natural: - Alexander Chernev

ALEXANDER CHERNEV AND VASILIA KILIBARDA
Beleza Natural:
5-116-002
Marketing Strategies for Empowering Social Change
On a Saturday morning in January 2015, Leila Velez looked out the front door of her flagship
salon. Women from villages that surrounded the city of Rio de Janeiro poured out of charter
buses and into the winding line that led to the salon’s front door, where women from local favelas
(urban slums) had already filled the waiting room. Excited mothers, daughters, and friends waited
for multiple hours to begin Beleza Natural’s famous Super-Relaxante hair treatment. The
treatment had achieved a word-of-mouth reputation by delivering its promise to turn frizzy afroBrazilian hair into shiny, well-defined curls.
The overwhelming demand made Velez both happy and anxious. Beleza Natural had just
doubled its number of hair salons, called institutos, from thirteen to twenty-six in 2014. Velez and
her co-founders had created an expansion plan that targeted 120 institutes and over R$1 billion1
in sales by 2018, which excited her key investors. The question of how to catalyze accelerated
growth weighed on her mind, and she hoped to spend some focused time assessing her ideas on
her flight to São Paulo, where she was headed that afternoon to check on her newest salon. Her
teenage years of working double shifts at McDonald’s and tinkering with her own afro seemed a
distant memory. Now a successful CEO, she was determined to empower other women like
herself while taking her company to new heights.
Brazil’s Beauty Industry
Brazilians spent an estimated R$57 billion on beauty products in 2013, up from R$31 billion
in 2009. Brazil’s beauty products, personal hygiene, and cosmetics sector was expected to
continue growing and to reach R$83 billion in sales by 2018.2 Driving the sector’s growth was
the country’s new middle class.
In the early 2000s, Brazil’s economy saw higher levels of family income and well-being than
ever before as the government increased the minimum wage, implemented policies that gave all
socioeconomic classes access to credit, and controlled inflation. As a result, the country
experienced an expanding domestic market for consumer goods and services, and many families
of Brazil’s lowest socioeconomic classes ascended into what became known as the new Brazilian
middle class. With changing sociodemographics came changing purchasing habits, as Brazilians
reduced their savings to augment their spending. Families of the new Brazilian middle class were
spending increasing portions of their household income on makeup, hygiene, and personal
services.3
©2016 by the Kellogg School of Management at Northwestern University. This case was prepared by Professor Alexander Chernev
and Vasilia Kilibarda. Cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements,
sources of primary data, or illustrations of effective or ineffective management. To order copies or request permission to reproduce
materials, call 847.491.5400 or e-mail cases@kellogg.northwestern.edu. No part of this publication may be reproduced, stored in a
retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording,
or otherwise—without the permission of Kellogg Case Publishing.
BELEZA NATURAL
5-116-002
Historically, going to hair salons had been an upper-class pastime that typically cost R$200–
300 per visit. Despite the fact that 51 percent of Brazilians are black4 and 70 percent of Brazilians
have wavy to tightly curled (called “afro” or “kinky”) hair, salons focused on styling straight hair
and straightening curly hair, as Brazilian consumer society historically did not value African
heritage and favored Caucasian, upper-class beauty ideals (see Exhibit 1). In fact, afro hair was
colloquially referred to as cabelo ruim, bad hair.5
Women with afro hair—who typically composed Brazil’s largest and lowest socioeconomic
classes—frequented small, informal salons or independent hairdressers in their communities for
solutions like wigs, hair extensions (called mega in Brazilian slang), or chemical treatments to
straighten their hair. Large companies in Brazil did offer retail products targeted toward curlyhaired consumers, but most Brazilians with afro hair had lost trust in drugstore products that
consistently failed to achieve their promised results.
Brazil’s society, media, and beauty industry had propagated the idea of afro hair as
unprofessional, and as more black women entered the formal workforce during Brazil’s economic
boom, they had growing needs and concerns about how to present themselves professionally.
Beleza Natural
In the early 1990s, Leila Velez was attending high school while working long hours at
McDonald’s to help her family make ends meet. The young Velez appreciated the fast-food
giant’s training opportunities and admired its efficient processes. “I consider what I learned at
McDonald’s my first MBA,” she said.6
She soon befriended her coworker, Rogerio, who also came from the favelas of Rio. While
spending time together on weekends, Rogerio introduced Velez to his older sister, Zica Assis.
One of thirteen children, Assis had dropped out of school to become a housekeeper for wealthy
families in Rio. Although she was an excellent employee, her employers found her afro hair
unprofessional. Assis hated having to resort to toxic hair-straightening chemicals and grew
frustrated that hair-styling products on the market catered to straight, Caucasian hair. At home she
would mix natural ingredients with existing products from drug stores, hoping to find a solution
that would bring out the beauty of her afro curls. Velez quickly identified with Assis, as she, too,
was constantly at odds with what she called her “incredibly rebellious afro.”
The three friends spent their free time experimenting in the back of Assis’s home, creating
endless mixtures of ingredients and testing their riskiest concoctions on Rogerio. “Developing our
formula was a real saga of trial and error. Rogerio went bald a couple of times because he was our
guinea pig,” Velez recalled. They knew they were on to something when, at a certain point in
their experimentation, Velez and Assis were constantly being stopped on the streets in their
favelas. Women were dying to know how they got their curls so long and well-defined (see
Exhibit 2). Their hair looked so good that others could hardly believe it was real and not mega.
Shortly thereafter the three pooled their small savings along with the proceeds from selling
Assis’s husband’s taxi cab. With R$10,000, they opened their first salon in a garage in Rio in
1993 and called it Instituto Beleza Natural: the Institute for Natural Beauty.
Over the next two decades, Beleza Natural grew from a garage in the favelas of Rio to a
national chain of twenty-six institutes in five of Brazil’s twenty-six states. By 2014, the company
2
KELLOGG SCHOOL OF MANAGEMENT
5-116-002
BELEZA NATURAL
had more than 3,000 employees serving 100,000 clients per month, an excess of R$166 million in
annual revenues, and a factory near Rio that monthly produced 300 tons7 of Beleza Natural’s
proprietary creams, shampoos, and follicle treatments—available for purchase only at Beleza
Natural institutes. The company was poised to grow with the recent backing of GP Investments,
one of Latin America’s leading investment firms.8
Beleza Natural’s Customers
Brazil’s social structure was defined by a socioeconomic stratification, with the members of
different socioeconomic classes tending to vary dramatically in the way they lived. The most
common stratification used by government agencies, academics, and market researchers classified
different social groups using the letters A through E. This classification was based primarily on
household gross monthly income:9
•
Class A included households with a gross monthly income of more than R$9,745. The
majority of individuals in this class had completed a university degree and held
occupations such as business owners, landowners, and investors.
•
Class B included households with a gross monthly income of R$7,475–9,745. The
majority of individuals in this class had completed their secondary education (up to
twelfth grade) and some had a university degree. They held occupations such as business
managers, professors, and doctors.
•
Class C included households with a gross monthly income of R$1,734–7,475. Very few
of the wide variety of individuals in this class held a university degree. The majority were
a mixture of those who had completed some primary school or secondary school. They
held occupations that provided services directly to the wealthier classes, such as
mechanics, nurses, and electricians.
•
Class D included households with a gross monthly income of R$1,085–1,734. Very few
of the individuals in this class had completed secondary school, and the majority had not
completed their education beyond the fourth grade. They also held occupations that
provided services to the wealthier classes, such as housemaids, nannies, bricklayers, and
taxi drivers.
•
Class E included households with a gross monthly income of less than R$1,085. Almost
none of the individuals in this class had completed secondary school, and the vast
majority had not studied beyond the fourth grade. They earned less than minimum wage
or were unemployed.
During the economic boom of the 2000s, the most significant upward mobility was seen from
classes E to D and D to C (see Exhibit 3), forming the new lower middle class.
Beleza Natural’s customers were women from 25–45 years of age, predominantly from the C
and D socioeconomic classes. They visited a Beleza Natural institute approximately once per
month to receive a hair treatment and used Beleza Natural’s maintenance products at home
between visits. Beleza Natural customers, who typically held service jobs, had one day off per
week. On that day they cleaned their homes, prepared food for their families for the week, and
often tended to themselves while doing household chores.
KELLOGG SCHOOL OF MANAGEMENT
3
BELEZA NATURAL
5-116-002
Velez and Assis worked tirelessly to ensure that their products and services met the afroBrazilian needs they felt others in the beauty industry lacked the sensitivity to meet. To better
understand their clients, Velez and Assis, who both had the personal experience of growing up in
a favela, made monthly home visits to check in with their customers. There they gained a wealth
of knowledge about how their products were used.
The cofounders felt a sense of pride about serving this clientele. They believed that hair had
much to do with how a woman wanted the world to perceive her. Embracing and enhancing her
natural hair, they felt, was a dignifying experience for a client, one they witnessed in their
institutes every day. Women who entered the institutes often feeling ashamed of their hair or of
themselves took a final look in the mirror at the end of the treatment process and felt transformed.
“We have a lot of clients coming to us and saying, ‘Now I can try to interview for that better
job. I can change my life. I can go back to school.’ And even husbands come to us saying, ‘What
have you done to my wife? She behaves differently now,” Velez explained.
She continued:
Most of our clients face a lot of social challenges. They’re not well paid; they live in
favelas; and they are not used to feeling like they are the protagonists in whatever scene
they’re in. Normally, they are treated like they are not important, like they are ordinary
people who are just there to help, to clean, or to serve someone else. They are invisible.
In Brazil we have this culture—we were a country where we had slaves for many
centuries. But now we are a melting pot, and black and brown people are my clients. And
when they come to Beleza Natural, they feel like queens, like they are special. We show
them that here you will be served, and we’re all pleased to serve you.
Designing the Customer Experience from the Inside Out
Seventy percent of Beleza Natural’s employees were former clients before becoming stylists.
Velez believed it was important that her employees understood her customers and were able to
establish an emotional connection with them. Indeed, for most of her customers, the experience
was not just about having their hair done but also about having a meaningful experience that
made them feel appreciated and important, albeit for only a few hours.
Shared Velez:
Curly-haired women are not upscale salons’ most welcomed customers . . . Curly hair is
complicated, and most hairdressers are not used to focusing their techniques on it, so it’s
more difficult for them to do. Plus, their commission is the same whether they spend two
hours blow-drying someone with very curly hair or twenty minutes on someone with
straight hair. Add to that the social issues, the fact that C- and D-class women dress
simply and don’t know how to communicate in sophisticated ways. If they feel they are
not welcomed in a typical salon and that their hairdresser is judging them, they’ll leave
because they don’t want to be treated that way. Beleza Natural is the opposite. When our
customers arrive, we welcome them. We have our own techniques, and the products and
services are totally focused on curly-hair needs. So, they feel like: This is my place. I
4
KELLOGG SCHOOL OF MANAGEMENT
5-116-002
BELEZA NATURAL
belong here. Everybody here understands my problems, understands my hair, and I can
afford the treatment. This is great for me.
Because of the unique traits it sought in employees, Beleza Natural hired young and aspiring
women from favelas, often those who had just finished high school. The company required no
beauty school experience and instead pursued candidates who exhibited a strong sense of
empathy. Beleza Natural trained new employees in its proprietary hair treatment methods. It also
provided training more broadly on workplace professionalism, teamwork, and leadership. Velez
and Assis offered health benefits from the first day of employment and had negotiated 30 to 50
percent tuition discounts at local universities for their employees’ professional development.
Through these development opportunities, most of the institutes’ current managers had worked
their way up from being stylists. Unsurprisingly, for every stylist job Beleza Natural posted, it
typically received up to 100 applicants.
“When I choose the right person to serve my clients, I’m halfway to success,” explained
Velez. “We like to say that the right employees are those who have curly hearts, curly souls.
Hiring and training the right employees is a main concern in our expansion plan.”
Velez inspired employees with her mantra: Your road does not end here. If we could do it,
you can too.10 She explained:
Most of our employees are young women with one or two children, and most of them
have the responsibility to support their whole family. When they come to us, they not only
have a job, they have a chance to change their lives, to change their communities, to
change their careers, to have a chance to be more . . . We are their first job experience,
and we try to teach them that . . . the technique is important, but what is more important
is the way people are treated, the way you should see yourself as an important individual,
and the way you show that you are there for your community . . . This is really
transformative and something really powerful and important. I see many of our
employees starting to believe and to change a chip in their brains and say, “I can go to
university. I will be the first in my family to do that, and I believe I can be different.”
Managing the Hair Treatment Process
On a typical Saturday, Beleza Natural’s peak day, caravans of buses arrived early in the
morning from surrounding towns and villages. Nearly three-fourths of the company’s customers
came from these caravans. Explained Velez:
These are not the company’s buses. They are buses organized by a woman who, say,
came to Rio for the weekend, got her hair treated at Beleza Natural, and went home to
her community excited about her results. The next time she comes to Rio, she comes in a
neighbor’s van, bringing friends and family members who want to try our treatment. In
Rio, our popularity spread through word of mouth, from friend to friend and mother to
daughter. Soon, she doesn’t have enough room in the van for all who want to go, so she
begins organizing large groups of women, collecting money, and renting a bus. We see
many young women making a living chartering monthly buses to Beleza Natural.
Women disembarked and got in line to enter a clean and stylish salon, with signature white
and pink walls and inspirational décor (see Exhibit 4). The salon was covered in oversized
KELLOGG SCHOOL OF MANAGEMENT
5
BELEZA NATURAL
5-116-002
images of beautiful women with afro-Brazilian hair, including placards of Zica Assis herself that
told the story of the company’s founding. Also prominently displayed were Beleza Natural’s core
values, which spelled out Zica’s initials—Zelo, Inovação, Competência, Ambiente (zeal,
innovation, competence, and environment).11
Beleza Natural institutes did not take appointments. Instead, customers simply waited their
turn. Waits ranged from zero to six hours at peak times. The treatment process then took an
additional hour and twenty minutes.12 In the waiting room, women talked with one another and
enjoyed the social scene. Velez and Assis’s institutes mimicked the entertainment found in lines
at Disney theme parks (another company they admired) and offered their clients “infotainment”—
from live speakers discussing women’s health issues to child-rearing videos on the institute’s
television screens—along with free coffee and magazines.
When it came time to receive the hair treatment, clients moved from room to room, working
their way through the entire institute (see Exhibit 5). The model was inspired by the station-like
processes Velez learned at McDonald’s.
Beleza Natural’s treatment was designed for efficiency in order to keep prices affordable for
the institute’s clientele. Each stylist was trained to specialize in a specific task. Water was
recycled from shampooing stations to fill the toilets in the institute’s bathrooms, and skylights
helped cut down institutes’ energy bills in addition to enhancing the ambience of the space. A
full-service treatment plus one month’s worth of maintenance products cost $R100‒120, or about
20 percent of the monthly salary of Beleza Natural’s target customers. Beleza Natural gave
customers the option to pay their bill in three installments.13
The Growth Challenge
As Velez sat on her flight to São Paulo, she thought about her ambitious expansion goal of
growing company revenues from R$166 million in 2014 to over R$1 billion in 2018. So far,
Beleza Natural had been growing by opening new institutes in different cities one at a time and
relying on word of mouth to generate traffic. The question was whether this was enough to enable
her to achieve her expansion goals. Based on the advice Velez had received from some of the
investors, she was contemplating several additional strategies for growth:
1. Engage in a mass-media advertising campaign promoting the company’s products and
services to its target customers. The goal would be to make potential customers aware of
Beleza Natural and visually demonstrate what their hair would look like after Beleza’s
treatment. The idea was to run the campaign in large cities (such as São Paulo and Rio de
Janeiro) in which Beleza had already established a presence as well as in cities in which
Beleza had just entered the market.
2. Offer promotional discounts. Beleza Natural would offer 20-percent-off specials to attract
new customers and encourage existing customers to come back during non-peak times. The
rationale was that because most of Beleza’s customers were low income, lowering the price
by offering discounts would make them more likely to consider Beleza’s services and/or use
them more often.
3. Start promoting Beleza’s services to men with afro hair. Given that Beleza’s proprietary
technology worked effectively on all afro hair, regardless of gender, expanding the customer
6
KELLOGG SCHOOL OF MANAGEMENT
5-116-002
BELEZA NATURAL
base to men with curly hair seemed a logical next step to grow the business. This would also
help preempt competitors from entering the men’s market and using it as a springboard for
expanding to the women’s market that was currently Beleza’s core business.
4. Begin offering a broader range of services, including straightening of curly hair. Styling
straight hair is one of the most popular styling services and could help increase consumer
demand as well as boost Beleza’s profit margins. An added benefit of this option is that hair
straightening has to be repeated in the salon more frequently than treating curly hair.
5. Streamline the scheduling and treatment processes to reduce the waiting time to less than five
minutes. Indeed, time was a scarce commodity for many of Beleza Natural’s customers, many
of whom ended up using half a day or even longer to receive the treatment. Shortening the
wait could be a way for Beleza to show that it cared about its customers and understood their
needs.
6. Offer Beleza Natural’s proprietary products outside the institutes in retail stores. Beleza
Natural’s maintenance kits were designed to last one month, but clients often ran out of their
maintenance products because they shared them with other female family members and
friends who did not have the means to visit an institute. Offering Beleza Natural’s products in
a variety of distribution outlets could help attenuate this problem and bring in new revenue.
7. Introduce franchising as an alternative to the company-owned institutes. The franchising
strategy would ensure much faster growth than Beleza Natural would be able to achieve by
establishing its own institutes. This option appealed to Velez because franchising was one of
the keys to McDonald’s success.
As Velez considered these options, she knew her decisions would be crucial in charting the
path for Beleza Natural’s future growth.
KELLOGG SCHOOL OF MANAGEMENT
7
BELEZA NATURAL
5-116-002
Exhibit 1: Afro Hair
NATURAL AFRO HAIR
Source: “Beauty Review: KeraStraight Intense Boost: Will It
Work On Afro Hair?” Black Ballad, November 13, 2014,
http://www.blackballad.co.uk/kerastraight-intense-boost-willwork-afro-hair.
8
STRAIGHTENED AFRO HAIR
Source: “Do You Want Straighter Hair?” Afrotherapy
Salon, http://www.afrotherapysalon.com/news/do-youwant-straighter-hair (accessed January 7, 2016).
KELLOGG SCHOOL OF MANAGEMENT
5-116-002
BELEZA NATURAL
Exhibit 2: Zica Assis and Leila Velez
Source: “Zica Assis Fala Sobre o Lançamento do Salão Beleza Natural em BH,” Café com Notícias, June 9, 2014,
http://www.cafecomnoticias.com/2014/06/zica-assis-fala-sobre-o-lancamento-do.html.
KELLOGG SCHOOL OF MANAGEMENT
9
BELEZA NATURAL
5-116-002
Exhibit 3: Distribution of Brazilian Population by Socioeconomic Class (millions)
Source: “Dividing the Pie: Income Distribution, Social Policies and the New Middle Class,” OECD Economic Surveys:
Brazil 2013.
10
KELLOGG SCHOOL OF MANAGEMENT
5-116-002
BELEZA NATURAL
Exhibit 4: Beleza Natural Institute
FACADE
CHECKOUT COUNTER
KELLOGG SCHOOL OF MANAGEMENT
11
BELEZA NATURAL
5-116-002
Exhibit 4 (continued)
WASHING STATION
STYLING STATION
12
KELLOGG SCHOOL OF MANAGEMENT
5-116-002
BELEZA NATURAL
RETAIL AREA
Sources: Evelyn Regly, “Nova Unidade do Instituto Beleza Natural No Cachambi,” É do Babado! (blog), March 26, 2013,
http://www.edobabado.com.br/nova-unidade-do-instituto-beleza-natural-no-cachambi and Carolina Romanini, “Salão
Beleza Natural Chega a São Paulo,” Beleza de Blog (blog), Veja São Paulo, November 6, 2013,
http://vejasp.abril.com.br/blogs/beleza-de-blog/2013/11/06/beleza-natural-sp-dicas-para-cuidar-dos-cachos-em-casa.
Exhibit 5: Beleza Natural’s Salon Treatment Process
STATION 1: THE INTERVIEW
The first step in the process is for a client to meet for a one-on-one consultation with a Beleza
Natural employee to discuss the history (e.g., past chemical treatments) and current state of the
client’s hair.
STATION 2: HAIR ANALYSIS AND TECHNICAL PREPARATION
At the next station, a Beleza Natural stylist analyzes the client’s capillary density across sixteen
quadrants of her head because curly hair often exhibits different textures and densities on
different parts of the head. The hair is divided into sections by the stylist in preparation for the
chemical treatment.
STATION 3: THE TREATMENT
The next station was Beleza Natural’s flagship Super-Relaxante treatment, which the company
had refined through R&D collaborations with nanotechnology and biotechnology departments at
universities in Rio. The proprietary treatment, which contained extracts of acai and cocoa,
fundamentally changed the structure of curls to make them more soft, malleable, and well-defined
without damaging the hair. It was applied from root to tip by a Beleza Natural stylist who had
been trained on how to apply the treatment properly. Clients were advised to return for treatment
KELLOGG SCHOOL OF MANAGEMENT
13
BELEZA NATURAL
5-116-002
once per month, as their roots would visibly grow out within four weeks. The super-relaxer
treatment alone cost R$89.90
STATION 4: MOISTURIZING WASH
Next, the client’s hair is given a moisturizing wash. As a stylist washes the client’s hair,
television screens at this station play silent films of hair maintenance tips for the client to watch
while the friendly stylist verbally explains what is being demonstrated on the screen and answers
any questions the client has.
STATION 5: HAIRCUT
After hair has been treated and washed, the client is ready for a haircut. She selects a style from
Beleza Natural’s catalogue of thirty possible options, which are based on geometric head shape.
Stylists are thoroughly trained for consistency and have been given explicit instructions, down to
the angle to hold the scissors and the proper hairbrush to use for different hair styles.
STATION 6: STYLING
The client’s hair is styled with Beleza Natural products as the stylist explains what she is doing
step by step so the client can achieve the same look when styling her hair at home. “It’s important
to us that our clients be able to achieve the same beautiful look at home, not just on the day that
they leave our institute,” explained Velez.
STATION 7: RETAIL AND CHECKOUT
Last, the client checks out at the front of the institute, in a retail space that sells Beleza Natural’s
proprietary maintenance products. “We are committed to recommending maintenance products
that we believe will give each client her best results. That means we will even suggest a cheaper
product from our line if that’s what we believe will work best for the client’s hair, and we don’t
try to sell clients what they don’t truly need,” shared Velez. Velez and Assis were also in the
process of adding catwalks—a red carpet walkway between the styling station and the retail area
with lights, music, and a full-body mirror to make clients feel like supermodels.
Notes
1
At the end of 2014, 1 BRL (R$) equaled about 0.38 USD ($).
Christiana Sciaudone, “Gisele Bundchen Not a Model for Beleza Natural Hair Salon,” Bloomberg, May 22, 2014.
IBGE (The Brazilian Institute of Geography and Statistics), “Consumption and Socioeconomic Classification in Brazil: A Study
Based on the Brazilian Family Expenditure Survey,” 2013.
4
Sciaudone, “Gisele Bundchen Not a Model for Beleza.”
5
Hy Mariampolski et al., “Beleza Natural: Expanding From the Base of the Pyramid,” ESOMAR, Latin America: Part 2, Beyond the
Crisis, 2010, p. 7.
6
Unless otherwise cited, all quotations from Leila Velez are from an interview with the authors, January 27, 2015.
7
Julie Ruvolo, “Bye-Bye Brazilian Blowouts: The Next Big Brazilian Hair Trend Is Beleza Natural,” Forbes, January 23, 2012.
8
“GP Investments Announces an Investment in Beleza Natural, a Beauty Institute Chain Specializing in Solutions for Curly Hair,”
press release, June 30, 2013.
9
Compiled from IBGE, “Consumption and Socioeconomic Classification in Brazil,” and from Andréa Novais, “Social Classes in
Brazil,” The Brazil Business, October 7, 2011, http://thebrazilbusiness.com/article/social-classes-in-brazil.
10
Ruvolo, “Bye-Bye Brazilian Blowouts.”
11
Mariampolski et al., “Beleza Natural.”
12
Ibid.
13
Ibid.
2
3
14
KELLOGG SCHOOL OF MANAGEMENT