Gold Rush - luxury brands pour into Brazil

The sun is shining. The breeze is blowing. The caipirinhas are flowing. Ever since Brazil’s footballers left Wembley and its dancers sambaed off the Stratford stage behind the folk singer Seu Jorge and the supermodel Alessandra Ambrosio, Brazilians have been getting ready to party like never before. Blame it on Rio — or Rio 2014 and Rio 2016 to use the full names. Work on the new Maracana stadium and everything that goes with hosting the two biggest sporting events in the world, the 2014 football World Cup and the 2016 Olympics, has cranked up to a pace previously unheard of in laid-back Brazil.

Why? Because sport sells. More than one million visitors are expected to travel to Rio and São Paulo for each event. And Brazil wants to sell them more than just the gold and green shirts of its most famous cultural export: its football team. The world’s biggest brands want to be ready to open their doors to Brazilians and visitors alike to sell them the pure gold of luxury goods. ‘There’s a wealth of potential,’ says John Hooks, president of Ralph Lauren and former deputy chairman of Giorgio Armani and commercial director of Jil Sander.

Brazil, the ‘B’ in the so-called emerging BRIC economies — the others are Russia, India and China — has been slow to enjoy the luxury consumer boom that has remained remarkably resilient, in spite of the global recession. Until recently, many Brazilians travelled abroad to buy luxury goods or asked friends to bring them home for them. The growth in luxury sales at home was as skimpy as the swimsuits on Ipanema beach.

But that’s all changing, as Emanuel Chirico, chairman and chief executive of Phillips-Van Heusen, in charge of Tommy Hilfiger and Calvin Klein, knows well: ‘Brazilian consumers are increasingly interested in global brands. We see this in our growth there, as well as in the US, where Brazilian consumers are our number one international shopper.’ Rivals agree. Louis Vuitton has reported its biggest profits per square foot in its São Paulo stores.

Here’s why. Brazil is now the world’s eighth-largest national economy, ahead of France and just a whisker behind Britain in terms of GDP. An estimated 30 million people have entered the middle class in the past decade. Unlike Europe or Japan, Brazil has an enviable demographic profile, with only 6.7 per cent of the population over 65 and an average age of 30 or below.

But it is the top of the pyramid that has the luxury goods industry in a state of breathlessness. Consultants McKinsey estimate that about three million Brazilians can afford luxury goods. There are 24 billionaires and some 155,000 millionaires, according to the 2011 Global Wealth Report. One third of these millionaires are under 35. If the dry numbers don’t paint the picture, look around. São Paulo has more helicopters than any other city in the world (for many it is the preferred method of getting around the city). Brasilia, the nation’s capital, is a major yacht market — even though it’s landlocked.

For luxury brands, São Paulo, the biggest city in Brazil and the unofficial capital of South America, is the place to start. Cariocas (people from Rio de Janeiro) joke that Paulistanos (people from São Paulo) love to shop so much because they have no beach. It certainly looks that way. Whether in the Iguatemi or Cidade Jardim shopping malls, the Daslu department store or the luxury boutiques on streets such as Lorena and Haddock Lobo in the Jardins district, most of the world’s leading luxury brands are on show. Chanel has three stores, Tiffany has two, with more in Brasilia and Rio, Prada has one store plus one for its sister brand Miu Miu, and Gucci and Armani have several boutiques each. Those that aren’t already there are looking for a home. More than 100 new malls are on course to open by 2014, at a cost of almost £2 billion.

It’s more about the mall in Brazil than in most markets because there is no tradition of upscale department stores and street crime is rife. Even the coffee shops in São Paulo have security guards. Hermès, which attracted attention for opening India’s first freestanding luxury boutique in Mumbai’s Horniman Circle when it entered the India market, opened its first Brazil store inside the Cidade Jardim mall.

The malls may look like the kind of cathedrals to Mammon you find across all the emerging markets — glass, steel, marble, clicking heels, orchids for the five-star brands, and models self-consciously prancing and preening, the wind in their hair (the climate means the malls are open-air). But woe betide the retailer that does not do its homework. Because Brazil is different.

It has a rich tradition of fashion itself. It is the world’s fifth-largest textile producer. Vogue Brasil, read by 345,000 Brazilians, and Vogue Passarelas, a biannual magazine presenting the new season collections, with a readership of 78,000, don’t just feature top-tier international labels such as Chanel, Dior and Lanvin. OK, you’ve heard of Havaianas, makers of flip-flops for the Hollywood set. But what about Alexandre Herchcovitch, Maria Bonita, Richard’s, H Stern, Salinas or Osklen? These labels are valued at more than £40 billion and growing — offering gilt-edged competition to incoming foreign brands.