Heilind Electronics’ 2012 purchase of Brazilian distributor Kotek Eletro Electronica gave the interconnect specialist immediate access to hundreds of new customers and entry into a growing economy that company leaders say is a key part of their global growth strategy, which began in earnest in 2011. Kotek’s 10-year history serving customers throughout Brazil meant immediate insight on navigating the country’s complex regulatory and tax environment, ensuring a profitable business model from the start, says Brandon Clountz, Heilind’s South regional manager, covering the southern United States, Mexico and South America. That kind of insight can mean the difference between success and failure in a region where knowledge of local rules, regulations and business culture is at a premium.
“Listening very carefully to our customers and supplier partners over the past several years was foundational in developing our strategic expansion plans, including our entrance into Brazil,” says Clountz, pointing to an underlying message that the company’s service model, interconnect focus and commitment to inventory in North America would fill a void in the Brazilian marketplace. “[Brazil] is a tight-knit market; you really need a localized, incorporated company to do business there. Kotek gave us that. Their team has expertise in importing product and building that into their cost model. We needed somebody that had a formula in place that was built along [Brazil’s] taxation laws.”
Business leaders agree that Brazil’s complex import/export and tax structure is a challenge to doing business in the country, pointing to how quickly those rules can change, in particular. And although all the major large distributors do business in the region, many go to market as exporters, serving the region from locations elsewhere in Latin America or the United States. Those with local offices and warehouses have done so largely by acquisition, or by pursuing value-added strategies that help ease the financial burden of importing products—services such as repair, refurbishment and recycling; supply chain management; testing; system configuration and more. Avnet Electronics Marketing, a prime example, has been expanding steadily in Brazil. Last year, it added a service-based technology integration center in the region that serves its embedded business customers as well as original equipment manufacturers and others.
Despite the challenges of doing business in South America, electronics distributors remain focused on the opportunities of the Brazilian marketplace, in particular. Heilind’s recent move to grow in the region is a pointed example, but others are finding new reason to enhance their presence there as well. Clountz points to the country’s growing middle class and the resulting need for the infrastructure and technological comforts to support it. He says he expects Brazil to provide a steady source of growth for Heilind now and down the road.
A return to growth
Growth in the Brazilian economy slowed last year, but local officials say the country is poised for more growth in 2013, with government leaders promising late in 2012 to take action that will assure more sustainable growth going forward. Growth slowed to around 1% last year, following nearly 3% expansion in 2011, when the country surpassed the United Kingdom to become the sixth largest economy in the world, a milestone for the South American nation.
Heilind wanted a piece of that action and put South America at the top of its aggressive global expansion strategy. In addition to Brazil, the company has expanded in China recently, looking to bring its interconnect expertise to a worldwide audience. The company is projecting healthy growth in Brazil this year, buoyed by the addition of new connector products to a previously limited line card in the region, an expanded sales force and larger warehouse space.
“If you stock the product, the customers are going to come,” says Clountz, adding that Brazilian customers are no different than those they serve elsewhere in the world with their need for good service and reliable delivery. “We serve second-, third- and fourth-tier customers really well. They look for service and inventory at a relatively competitive price. They need inventory, and we have the ability to do that for them.”
Clountz says local customers are also looking for advice on design and sourcing options.
“That allows us, as a specialist, to utilize and harness the technical support we have to make those recommendations,” he adds.
Kotek-Heilind sells to a wide range of customers in Brazil, including industrial, consumer electronics, telecommunications and the automotive industry—all of which are new to Heilind and local to the Brazilian economy.
“These are Brazilian customers, designing and building products for the Brazilian market,” he says. “Prior to the past year, the Brazilian economy had been exploding. If they can continue to add jobs and rework some of their tax laws, we expect solid growth in this market for the next five to 10 years. We are very enthusiastic about Brazil.”
The Web’s the answer
In evaluating the competitive landscape, Clountz puts it at 50-50: 50% local distribution, 50% traditional competition that Heilind comes up against in North America and elsewhere. What’s more, industry watchers say online strategies are winning big with Brazilian customers as large catalog houses like Digi-Key and Mouser Electronics continue to invest heavily in their Web sites to reach customers around the world. Mouser, in particular, has a steady focus on Brazil with its Portuguese-language customer service program. The distributor has a team of native Portuguese speakers—all Brazilian—who work out of the United States to support its Brazilian customers. The program complements the distributor’s Portuguese-language Web site.
Although South America represents a small portion of Mouser’s overall business, it is a fast-growing segment, says Steve Newland, the company’s vice president of sales and service for the Americas.
“There really is an unmet demand in those markets for our value proposition,” says Newland, pointing to Mouser’s focus on getting design engineers the newest and widest variety of products in no-minimum order quantities. “That message really resounds with that group as it does in other regions.”
Mouser serves South American customers from branches in Mexico and the United States, but is investigating the possibility of opening branches in Argentina and Brazil as well. Newland says most customers in the region come to Mouser via the Web, however, so the current local-language Web site and complementary Portuguese-language customer service aspects of the business model continue to make sense. Going forward, Newland and U.S.-based Latin American sales manager Mauro Salomao say they expect the Web to continue to drive growth, especially as electronics-related business increases in the region.
“The globalization of the economy is bringing new projects into the territory,” says Salomao, a native Brazilian who has worked with Latin American customers for 20 years.
But just how much of that new business will turn into design opportunity remains a question. The design engineering market in South America is smaller than it is in Europe and Asia, Newland says, although he points to large pockets of opportunity in Brazil. The design engineering community remains Mouser’s focus, so the company continues to follow that business wherever it grows.
“The driver for us is new design and development in the region,” says Newland. “Brazil is a multi-national economy, so there’s a lot of design activity that goes on there, but there’s an equal amount that goes on outside of Brazil as well.
“There is opportunity there. It’s a little harder to get at than other regions of the world, but we’re not afraid of it. You need to get in there, target the market and get to know it to succeed. And all told, we have quite a bit of resources focused on that part of the world.”