Venezuela
By: Brian Cook, Madisyn Vrem, and Dakota Younger
The People
Venezuela, one of fifteen countries on the South American continent, is home to almost 26 million people. Of those 26 million, 65.7% are between the ages of 15 and 64 with a mere 5.2% above 65 years of age and 29.1% under the age of 14. Venezuela’s life expectancy rate is an average of 74 years and has an infant mortality rate of 22 deaths out of every 1,000 life births. The official language is Spanish with 93% of the population being able to read and write fluently. The main religion is Roman Catholic with 96% and the main ethnic groups are Spanish, Italian, Portuguese, Arab, German, and African.
Transportation in Venezuela is diverse between rail, car, boat, and airlines. There is approximately 682km of railway compared to 96,155km of road with only 32,308km paved. There are 370 airports with less than half of which are paved. And finally there are 13 ports and harbors.
The Economy
Venezuela’s economy is rough and has endured several issues since the turn of the century. In 2002, domestic political instability culminated in a disastrous two-month national oil strike from December to February of 2003, virtually stopping the economy. In 2004 and 2005 the economy recovered strongly aided by the high price of oil and strong consumption growth. Venezuela is an important source of crude for the United States market. However, with this said, inflation and unemployment remains a large problem for the country.
Exchange Rate
Openings in the Market
The Local 1 and Regional 1 Brand are the only competition for the economy toothpaste and Local 2 only focuses on white toothpaste claiming only 10 percent of the market share but claims 100% of the white toothpaste market. No brands have taken into the kids toothpaste market and the entire economy sums up to 35.2 million units of toothpaste sold.
Distribution
When it comes to distribution of the items sold, most items sold are through the traditional process. The self serve, hyper market, and web are small and obsolete. There are 902 traditional outlets and Local 1 and Local 2 are tied for most units sold with this method with 739 million units sold and Regional 1 claims 632 million units sold.
Pricing
Pricing for the toothpastes are pretty average for the medium size with the cheapest brand being Local 1 with a MSRP of 2,294 (VEB) or about 1.07 (US). Local 2 and Regional 1 tied for highest price with a MSRP of 2,486 (VEB) or about 1.16 (US).
The consumers base their decision makings on 48.7% price and 28.4% on effectiveness. The size, vehicle, and delivery of the product round out the bottom three criteria claiming about 23% of the weight.
Tariffs and Shipping Costs
Tariffs
Shipping (US)
Tariffs into Venezuela are extremely high. They are 23.5 percent of cost of goods sold flat across the board except for items coming in from Mexico which is free from tariffs. This makes the country a very unappealing market seeing that an average .25 (US) would go to the government for each product sold. Venezuela has mediocre shipping costs with an average of .01/unit with the exception of from a Venezuelan plant which is .005/unit or from the United States with .03/unit.
Recommendation
There is a reason why there’s only 2 local brands and a regional brand. The tariffs are extremely high and make it a very undesirable place to do business. Shipping costs are not the greatest and the economy is too unstable to establish any reasonably sized business. However, if your little heart desires, then establish a plant in either Mexico or Venezuela to escape the large costs of doing business. The kids market remains untouched and maybe the people of Venezuela will praise your company for giving them jobs.