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Toothpaste is available in a number of sizes, delivery systems, textures (paste or gel), and formulations. The basic toothpaste product is a paste or gel with flavoring and one or more active ingredients that provide specific benefits to consumers. Research has identified four key consumer segments in markets around the world based on benefits sought:

1) Economy: basic cavity protection at a low price 2) White: seeks whiter teeth 3) Healthy: tartar control and disease prevention for healthy teeth 4) Kids: seeks a good tasting product that appeals to children

—16— CountryManager Student Manual

Consumers purchase different formulations based on the benefits they seek and their purchasing ability. The benefit segments also link to demographics. For example, families with children often focus on decay prevention; young singles are typically more interested in whiteness; those in middle age are concerned with tartar and gingivitis; and children find taste of the toothpaste to be a primary feature. Similarly, the appeal of certain attributes may differ among consumer groups. For example, pump dispensers add convenience and may be a novelty for children but are more expensive to produce than tubes. Also, single people might prefer the convenience of smaller package sizes, whereas families may prefer a larger package which is typically more economical on a cost per gram basis. A general description of these variations in the United States market is listed below. Not all companies produce all possible combinations. Table 2: Toothpaste Packaging and Formulation Variations

Sizes Delivery Systems Texture Descriptions (Benefit /Ingredient)*

Small (25g) Tube Paste Economy is a basic formulation for prevention of dental cavities.

Medium (75g) Pump Gel White formulation contains hydrogen peroxide for whitening and prevention of gingivitis.

Large (150g) Healthy contains baking soda for tartar control.

Kids contains special flavorings to appeal to children.

*All formulations contain fluoride. Country Analysis Latin America is a region of great potential. Its population of over 500 million is 50 percent larger than that of the United States and Canada combined. The region has a history of having been politically unstable and has had many weak economies characterized by low growth, high inflation, and a reluctance to take tough economic actions to correct these problems. The dominant national language across Mexico and Central and South America is Spanish, except for Brazil, where the primary language is Portuguese. Some portions of the population in many South American countries speak one or more native Indian languages. Kay’s team scoured the Internet for additional sources of data and came across a site maintained by the CIA. "Our tax dollars at work!" Kay exclaimed. Tables 3 and 4 (shown next) compare economic and social characteristics of the home market and the scenario markets under consideration.

Latin America Case —17—

Table 3: Market Comparison on Economic Considerations*

COUNTRY Pop (Mill) GDP

(Bill $)** GDP/Capita

($)** GDP

Growth CPI

Increase % Below

Poverty Line Argentina 43.0 771 17,900 3.5% 20.8% 30.0% Brazil 202.7 2,422 11,900 2.5% 6.2% 21.4% Chile 17.4 335 19,300 4.4% 1.7% 15.1% Colombia 46.2 526 11,400 4.2% 2.2% 32.7% Mexico 120.3 1,845 15,300 1.2% 4.0% 52.3% Peru 30.1 344 11,400 5.1% 2.9% 25.8% Venezuela 28.9 407 14,100 1.6% 56.2% 31.6% Home 318.8 16,720 52,400 1.6% 1.5% 15.1%

**Purchasing Power Parity *Source: CIA World Factbook 2014 Table 4: Market Comparison on Social Characteristics*

COUNTRY Pop Aged 65+ Urban Pop.

Pop. in 3 Largest Cities

Pop. Avg. Growth

% Pop. w/access to Safe Water

Infant Mortality

/1000 births Argentina 11.3% 92% 37.7% 1.0% 99% 10.2 Brazil 7.3% 87% 18.5% 0.8% 97% 19.2 Chile 9.7% 89% 44.7% 0.8% 99% 7.0 Colombia 6.5% 75% 32.2% 1.1% 91% 15.0 Mexico 6.9% 78% 22.9% 1.2% 94% 12.6 Peru 6.7% 77% 38.4% 1.0% 85% 20.2 Venezuela 5.8% 93% 24.0% 1.4% 93% 19.3 Home 13.9% 82% 12.9% 0.8% 99% 6.2

*Source: CIA World Factbook 2014 A variety of trade enhancement actions have been struck in recent years. For example, Mexico was signatory of the NAFTA agreement, along with the United States and Canada. This agreement reduces trade barriers among the three countries and has encouraged a variety of companies to establish production in Mexico to take advantage of low labor costs and fairly seamless access to the United States and Canadian markets. The MERCOSUR agreement provides similar linkages among the South American countries of Argentina, Brazil, Paraguay, and Uruguay, including association agreements (but not membership) with Bolivia and Chile. The Andean Community links Bolivia, Colombia, Ecuador, and Peru. Most recently, Mexico, Colombia, Peru and Chile formed the Pacific Alliance. Numerous bilateral agreements also exist.

—18— CountryManager Student Manual

Toothpaste sales in the region have been growing in recent years. The trends by country are shown in the table below. Amounts in the table are shown in dollars. Table 5: Manufacturer Toothpaste Sales by Country Market, last six years (Millions of $)

COUNTRY 5 Years Ago 4 Years

Ago 3 Years

Ago 2 Years

Ago Previous

Year Current

Year Sales per Capita ($)

Argentina 131.1 135.1 139.4 144.8 149.5 155.4 3.65 Brazil 376.2 397.5 408.1 415.0 437.7 482.6 2.40 Chile 77.7 81.9 86.4 90.6 95.2 100.5 5.86 Colombia 34.1 40.8 45.0 54.8 63.3 70.5 1.54 Mexico 233.6 247.1 259.3 268.0 282.3 296.3 2.49 Peru 27.5 29.9 32.9 36.3 41.2 46.2 1.55 Venezuela 35.2 34.4 35.7 36.1 33.5 32.0 1.13

Although the numbers in the table show the underlying change in demand, some fluctuations are caused by changes in currency exchange rates. The relative value of different currencies affects many of the decisions facing Kay's team, as well as the data used in their analysis. For accounting purposes at Allstar’s corporate offices, revenues and costs are converted into dollars. Therefore, fluctuations in the exchange rate will affect consolidated reports directly. However, pricing and spending budgets are set in local currency, so Kay’s team must manage in the local culture and currency but remain aware of the effects of exchange rates. Table 6 shows the current rate of exchange for each country in the region. Table 6: Currency Exchange Rates