Good afternoon and welcome to today's energy seminar. I'm very excited to introduce our speaker today, particularly after the great talk we had last last week by a clean tech entrepreneur from the US. This, this week we'll have a kind of global clean tech entrepreneur working from India. And her name is Shreira Mishra. She is the founder and CEO of solar square to give her a maximum time to talk I'll just say she was an alumni about a decade ago, the Indian Institute of Technology and Bombay and since then has become a award winning serial entrepreneur with many startup gigs to her credit and now she's keen on helping India meet its very aggressive targets for solar energy. So she's going to talk about building India's fastest growing residential solar company. And given the goals, any company that's going to grow fast and help achieve that goal will be by definition, the biggest residential solar company in a very large India. So Shreira, please take it away. Thank you so much, Professor john for having me here. Very good evening to everybody I wish I could be there in person. Very excited for this seminar. And I'd love to thank Sarah, Professor john and the niche who helped me, you know, get connected and you know be here today. Before I begin. I mean today I'm here to share the story of building solar square energy. This is my second venture. And we want to be as Professor john said India is number one residential solar company and drive master's adoption of rooftop solar in India. This seminar is very special for me, because my journey as an entrepreneur. Stanford played a very crucial role about a decade ago when I was doing my engineering. I was invited to an entrepreneurship boot camp at the Stanford campus, and I very vividly remember, you know, being so inspired by the energy in the campus and it is that moment it is at that moment that I decided to be an entrepreneur.  Today I'm here to share the story of building solar square solar square is a India based company. We want to drive the mass adoption of residential solar in India. We like to say that we want to heal this planet, one home and one rooftop at a time. The, there are several climate change technologies climate technologies there are several energy technologies that are different points in their adoption in the technology majority curve, or in their commercial adoption curve. I believe most of the attendees here would know that rooftop solar is a very mature technology it's been there solar has been there for, you know, more than 65 years. And it has reached a point where it is commercially very viable large scale production is happening so much so that one can easily say solar modules are now a commodity. So today's presentation is not is not so much about technology innovation but it is about business model innovation. We are taking a very commercially and technologically mature model, and we are working towards large scale deployment in India. And I believe that homes of reducing their reliance on on coal and thermal and other sources of power and increasing their reliance on solar will be very very crucial to combat in climate change, and in meeting India is very ambitious solar adoption solar adoption goals distributed solar holds an extraordinary promise and you know I won't spend too much time because I believe rooftop solar is a very well. Well, understood technology. If this is to help us meet our energy needs and help us keep our air clean large scale deployment of solar in India is what is required. And we will share it today I will share about my journey as an entrepreneur, building solar square, some of the early success that we have seen. And I'd love to share about what the thinking process has been in building this business.  And I like to say it, we are not only for profit business. And, you know, we, we are very passionate about solving for climate change, and we believe that, you know, being profitable being high growth is you know sort of the, the first ways, you know to sustainably build, build a business. So yeah, diving right in. I'm going to keep 40 minutes for the, for the session and then 20 minutes open for questions and answers towards the end. Before I begin about our story I just wanted to do a one on on rooftop solar economics in India. This is absolutely a no brainer for a home owner to go solar in India. On the slide here is a very simplistic representation of the economics, a three kilowatt system in India would cost about $2,000. It is cheaper in India than anywhere in the world to deploy rooftop solar. And this $2,000 system would save a home owner almost $500 every year for the next 25 years. Now, that's a fantastic four year break even for most parts of India, depending on different geographies electricity tariffs could vary and this break even could shuttle between three to six years but four years is a fairly good average to take for With that, it becomes one of the most attractive economics of rooftop solar anywhere in the world. In fact, John Kerry who's a special presidential convoy for climate change was recently in India and was quoted saying that it is most attractive and cheapest in India to deploy solar and that's that's very much true. This is one of the most attractive economics of residential solar anywhere in the world to give you a comparison it takes seven to 10 years for a solar system to break even in in the United States. Of course the second benefit of solar is that it's cleaner it had every home that we take solar helps offset about four metric tons of CO2 every year. And the third reason, you know, while it's cheaper and it's cleaner with electricity one of the main aspects that it is to be should be reliable solar. It's very very stable technology been there for ages. It's reliable it works in every season. It's one of the first questions we get from our consumers it works in rain it works in summers it works in winters. It's a fairly, it gives you power throughout the day because most of the solar systems in India are grid connected solar systems, and I'll talk a little bit more about what net metering and grid connected solar systems are. This is the opportunity of rooftop solar for homes in India it's a 90 to $100 billion market opportunity homes which require more than a three kilowatt solar system middle class to premium homes in India, almost 30 32 million addressable homes. Additionally, there are a lot of high rises in India where people live in apartments and metro cities like Mumbai Bangalore, etc, and 150,000 housing societies additionally are a part of this market segment. Now, whether this takes a decade or two decades or three decades it is still every year it's a multi billion dollar market opportunity ready to be captured. It is hired by some of the biggest corporate houses in India, and by, you know, local businessman and more organized venture entrepreneurs like myself. The, the other very interesting thing about the Indian energy demand consumption is that in this particular target group the energy consumption per capita per, you know, or per home is increasing very fast. The reason being that air conditioner penetration is very low in India right now as it's less than 5% compared to, you know, more than 50 60% in, you know, in other countries. Now, as, as air conditioners become ubiquitous in homes just like mobile phones and smart TVs, the electricity consumption of these homes will increase dramatically. And so the requirement or the consumption per home will increase and that's where rooftop solar will also play a very important part in helping people save an electricity expenses and helping India meet its energy needs. And so, while this is a 90 to 100 billion dollar market opportunity today at the rate at which per capita electricity consumption is going. The consumption size required for these homes will further increase and this market will further grow. Despite the very large market and despite having one of the best economics of rooftop solar in India, less than half a percent Indian homes have rooftop solar right now. The market is at the cusp of inflection but so far adoption has been constrained. There are three primary reasons for that. And I think organized companies have come in and solve for these problems elsewhere in the world as well. And that inflection is happening in India where the rooftop solar market will become branded and organized and, you know, top few players will take up, you know, 50 60% of the market share and will drive adoption. The first reason because why adoption is constrained is the lack of trust and transparency in buying from small contractors. India has more than 4,000 small rooftop solar companies. Every city, every geography has, you know, small entrepreneurs who are trying to install solar on homes on small commercial buildings and factories. The third most expensive purchase for our target audience after buying their home and their car. The third most expensive thing that they buy as a family is actually a rooftop solar system, which, on average, one, our consumers spend $3,000 on. When you don't buy a $500 refrigerator from an unbranded company, why would you buy a $3,000 solar system from an unbranded company where you don't have trust. When we buy cars, when we buy consumer durables, we are all looking for the trust of brand for the trust of after sale service. In fact, after sale service and the trust that this company will honor their warranties and guarantees become such a crucial part of our decision making. And that's where brands come in. That's where the trust of brands come come in, and that's where markets get, you know, from unbranded, long tail businesses having a lion's share of the market, the markets get consolidated and few brands dominate. The second reason why adoption for not just rooftop solar but for any renewable technology remains constrained anywhere in the world is because it's a while it saves you cost over a period of time. It has high upfront investment, a solar system for our consumers costs anywhere between you know $2,000 and depending on their consumption can work all the way up to 10 $15,000. Small players can't offer point of sale financing. You know, while cars were launched, you know, many decades before car financing was launched, but the consumer adoption of cars only happened when financing came into the market. Similarly, rooftop solar has been there for many years, but the consumer adoption will own will explode only with financing and that's something we believe will be a large big lever to unlock the demand. The third is that consumer awareness is limited. Solar seems like a technical purchase you can't touch it or feel it like a refrigerator or a television where, where it's been around for a long time you know what you're looking for you know the price that you're expecting to pay. Because solar is still, you know, new and you know not as widely adopted it's not fully understood it's seen the purchase process seems overwhelming. What module should I buy what inverter should I buy. Do I need after sales service. How much will a solar system save me month on month what's the economics what's the break even period. The awareness is still not reached a critical mass where everybody on the, you know, on the street knows what does it cost, how much time does it take to break even what technologies should we buy. So those are the three main reasons why believe that adoption is constrained. Our mission is very simple. We want to drive mass adoption of residential solar in India. We believe that when we enter a market, the trust and transparency and and the quality of service that solar square will bring it will bring homes. You know it will convert homes to solar faster than if you were not there in the market and I believe that's our value that's our contribution, you know, as a business to the problem of climate change. We believe that to drive adoption, it requires certain business model innovations which are not yet available in the market. And there will be millions of homes which will goes which will otherwise have not gone solar but will now go solar because of solar square. We will lead this change. I believe, and I believe that there will be many companies that will follow and it will, it will ultimately benefit the market and its maturity overall. Our mission is very simple while we drive mass adoption we want to be the number one residential solar company in India. As I said earlier, we are a climate tech business we are very passionate about solving for the climate, but we are an aggressive growth chasing venture bag for for profit business. And you know dive deeper into our business model quickly wanted to cover what we do that are residential solar companies everywhere in the world that cover different aspects of the of the value chain. What we do is we design install finance and maintain residential solar systems. We are not a manufacturer we don't make solar modules or any of the equipment that goes in a solar system. We are, you can say the retail layer in between, which takes ready made products, gives acquires customers give them choices of different products consults them in the process and then we design and install and provide them EMI is for their solar system. The system is involved is installed the life of a rooftop solar system is 25 years, and solar is purchased on the promise that it will perform your own year and that it will give you savings your own year. So maintenance is a very important aspect of residential solar that is not understood and that is something that will be very important for the trust on solar as a technology for the performance of millions of solar plants that will be installed on homes in India. India is a very dusty country unlike the US where solar systems once installed can be maintained and clean maybe once in a in in six months. India is a dusty country, and the only Achilles heel of solar model solar panels is that it, it's susceptible to dust and if dust deposits the panels cannot get enough radiation and that reduces their performance. So India has that unique problem where even cleaning of the solar panels is a very important part of plant performance and maintenance. As I said I want to spend most part of my seminar today in talking about business model and about our thinking of how we came up with the business model around this product category. In no way are we perfect. We are we've been doing residential solar for the last, you know, this month would be our 18th month. So we are still a work in progress very much a work in progress. What I'm sharing is my learnings as an entrepreneur and the thinking that went behind. You know, doing what we do and the way we do it right now at solar square, but it is still a work in progress we are still learning we're still innovating and and we will still evolve as a company. For creating a winning business in residential solar or in any space. We believe there are three or four things that matter. I think number one is timing. You can't be, you know, too many years before the market is ready to inflect and you can't be late to join the party either.  Many residential solar companies started in 2012 2014 2015 before the market was ready or you know to inflect. I think 2024 will be too late to enter the residential solar market. And we believe that one of the most important things that we think, as I said, we got right is the timing and I'll talk more about that. Second thing I love what Brian, you know Brian Chesky of Airbnb said, and you know one of the tip you always get to entrepreneurs is that you need to have some unique insight in the market and build your business model around it if you don't have it. Keep looking for it. And, you know, I will share what are what are the unique insights the unique truths that we know about this market. You know the business model what's our sales and distribution strategy how are we doing consumer financing etc. And the last is you know of course one needs to have a team which has the ability to execute. Otherwise every idea is only as good on paper. So the first question on timing, why now why now is the right time to build a residential solar company in India. And the left side is how the cost of solar, the break even of residential solar has gone so just in about 2018 you can see that the break even was as high as eight years. In the last five years from 2015 to 20 dramatic crash and prices of solar modules and solar technologies. Thanks to Chinese manufacturing and the break even periods have hit four years. Now while the life of a solar system is 25 years. Even an eight year break even is not bad for, but for a retail consumer for a homeowner, having more than a 10 year outlook on any investment was tough. So theoretically while even in 2015 residential solar should have taken off. We believe that this, you know the economics is now more in the window of decision making for consumers where 10 years feels, you know, feels predictable feels you know near term future. While the clean energy benefits of solar were always there the economics of solar has only become tremendously attractive in the last two years. And you know the unfortunate reality is that climate action is not yet mainstream but saving money is. So the primary reason why homes for solar in India is because they get to save money. And then the second reason is that there's a feel good while I can save money and also save the planet why not it gives even more push to the consumer. The second very important thing to build a business is to have a stable policy climate. Now, energy and electricity will always be something that will be regulated and there will be government policy intervention. The only policy on which rooftop solar depends is actually net metering. The net metering is basically your ability to connect a solar system to the grid, wherein the solar system generates power only during the sunshine hours, you produce sufficient power to power your home for the entire day, you know, 24 hours of the day. During the sunshine hours, pass the excess power into the grid and seamlessly take it back for your home consumption once the sun sets. This exchange of power from your solar system to the grid from the grid back for your home for electrification of your home is called net metering and this is a free for all service in most parts of the world and also in India. In fact, this policy was always seen as something that could change. You may have read in the news very recently California is in fact the biggest adopter of rooftop solar for homes has said that they are rolling back or taxing this net metering facility that's given to homeowners and it's a huge setback to the industry. Fortunately, India has taken a very bold step backing their climate ambition with real policy hard policy on the ground. Their net metering for homes has actually been made a consumer right and this consumer right the electricity right was only released in India post independence for the first time so once it is made a right. We can be very confident that at least for the next five to six decades this policy is not going to change, and that gives confidence to entrepreneurs, investors and consumers that from a policy perspective, you know they are safe. And of course is subsidies for residential solar. India has a subsidy program that's ongoing, and it will continue till December of 2020 22, and we believe that in this window there will be more consumer awareness and more adoption that will happen. Because of the economics of solar the adoption is not really dependent on subsidies with subsidies the four year goes down to three years, so it becomes ridiculously more attractive, but it's not dependent on it even without subsidies the economics of solar is is great. The second thing about, you know, building a business is is what unique truths or what unique insights do we know. I think the first one, as I've already shared is that homeowners want trust and transparency when they're buying a $2,000 rooftop solar system. Hence they will not want to buy from local contractors but from a trusted brand, where they have faith on honoring warranties guarantees after sale service and try standardization. Hence the business decision that we took basis that was to build a B2C D2C a direct to consumer brand. We toyed with the idea of being a B2B company of empowering these 4,000 smaller solar companies becoming the back end engine that fuels them. But after being in the market we discussed that that's not the right thing to do as a B2B company you are still not solving the biggest pain point which is consumer trust. You have to be direct to consumer the consumer has to know that they are buying from a reputed national brand. The second insight was that the decision to go solar will be seen at least for the next three years two to three years till the adoption reaches to millions and millions of homes in India will be seen as overwhelming. Hence people will buy want to buy through referrals through trusted members of their community through word of mouth and that will increase adoption. The business decision that we took and this was one of our most interesting business insights was that we will unlock demand demand through social selling and through referrals. India is a country of hustlers everybody likes a side income if people could earn by referring and recommending and educating their communities about solar and bringing that business to solar square. It would be a win-win for the consumer for the social sellers and for solar square and for the planet overall as adoption of solar increases. So we are actually planning to build a huge network of micro entrepreneurs who will help us drive adoption who will be our advocates and champions on the ground and help India reach the critical awareness levels. The third insight was that this is a land grab opportunity a home that goes solar today is gone for the next decade, at least for another 10 years. He is a consumer locked in with the company he will go for replacements to the same company he will go for batch adding batteries to his system for to the same company. At least for the next 10 years, he is not going to look for another service provider for his rooftop solar system, hence being early to market capturing early customers in every geography of India gives disproportionate advantage to companies for the future and replacing those companies become stuff. Hence, given this is a land grab opportunity. We believe that we need to raise capital we need to grow fast we need to get those early adopters in the market fast, and then on the back of those we will become irreplaceable and will have, you know, a very defensible business in the future. Speed can be a mode in network businesses and in land grab businesses like speed to market is a mode for a Lola or a Luba. Similarly, speed to market is a very important mode for a residential solar business. And now this beckons the question how do we know that our insights are correct and that they're working in the market.  So we took one market in Central India, and the pins that you see are all the homes in two tier one cities of India Bhopal and indoor. So how do we know that our insights are correct. How do we know that the market is getting branded how do we know that word of mouth are working social selling is working one in every three homes that went solar in the last one year. In these cities show solar square that's a 33% market share right at the get go as we entered the market. There are more than 100 operators in this market and we have already taken up 33% market share. Why because consumers wanted the trust of a brand the trust of after sale service. The second thing why we know that this is working is because of the momentum that we've had. As I say as of today we are in this fastest growing residential solar company, our first 100 homes took about 120 days to acquire. More than me about you know a year and a half ago, our latest hundred homes have taken 11 days. And we believe that very soon, you know, a home would would be, you know, within the next six months a home would be going solar with us every every hour to two hours. The third is, you know, why why we know that community trust matters every 10 homes that we acquired through digital marketing or through, you know, marketing activities. We bought us six more homes via referrals. And I think that really shows that's more than 4045% of our business coming through word of mouth and that really shows that it is these early adopters it is these solar champions who will create trust and awareness and adoption in the market. The third thing I'd like to talk about is now our business model now that we have these insights now that we know that the timing is right what's the what's the business model what are we really doing differently. There are four aspects one is the customer value proposition. Second is, what's our customer acquisition strategy, because as I said this is a land grab business. Third is consumer financing, and fourth is something that we spend a lot of time on after you've cracked product market fit is how do you scale this how do you build scalable operations in this business. If you look at the image on the right that's a typical home in India, unlike the US where we have sloping roofs because of snow India has flat roofs, and we like to use our rules kids play on our rules.  We like to fly kites on our rules. Given that there is some amount of civil work that's required to install a solar system you see the solar systems are raised solar roof in a way that we create. That creates and creates creates, you know, it's tougher than installing solar on on shingles or sloping roofs the way we have it in US, but it also has created an opportunity for solar square on how we do things differently. So in terms of customer value proposition. The first value proposition is that we're the first company in India to come out with a promise of one day solar which means we complete our installation in a day morning 9am or through hits the home and evening 5pm they're out very inspired by Jeff Bezos and his one day delivery. And that's how we came up, you know with the idea of building one day solar. Quickly, the second thing is how we install the solar systems on the roof as I said these are flat roofs and they require you to create structures and then install solar modules on top of it. Typically everywhere in the market in India or in all flat roof countries there's a lot of civil work manual welding cutting of pipes and creating that structure and then installing solar roofs. How do you do that at scale how do you customize and you know how do you have control quality if labor is installing and welding these structures on site on millions of homes. It's impossible to maintain quality it's impossible to maintain safety standards. One of the biggest you know things to note here is that each solar module waste 27 kgs and is made of glass. If there is any structural integrity issue, you know with so many extreme weather phenomena cyclones heavy wind speeds happening everywhere across the world. If even one solar panel flies off the roof it's an immediate risk to life and property. It's 27 kgs per panel and made of glass. Hence we developed prefabricated solar structures where the first company in India to do that. These are made using precision manufacturing in factories we have the scale to have invested in this product product development. These are seamlessly assembled you know our inspiration here was IKEA. Let's build something that can just be not bolted together. No welding no cutting no drilling no risk of manual error. This is all prefabricated and installed on your roof pretty seamlessly. No dependence on you know the technical skill of the person doing it per se. Now, why that is important is because as we are building a brand it gives us that trust that you know we're doing this safely and you know everywhere and quality maintaining quality standards has become you know very manageable. The third thing as I said was that residential solar was largely operated by small local players where they did not have enough scale or networks to provide after sale service which means that if your solar system went down. Four years later and you call your service provider there's a very good chance that he will not answer your call or he will not honor the warranties or he will not help you with a replacement or if he does that he will take weeks to do that. Because we are growing market after market trying to build density in every city that we operate in. We actually offer a five year comprehensive maintenance to all our consumers and because solar is what on the promise of generating savings ensuring that it performs at its maximum efficiency year on year is only possible if the company is consciously maintaining the solar system. We have in our in our head office, we actually monitor over mobile applications we actually monitor performance of every solar system regularly. And that's how we know that they're generating properly that they've been maintained well and that if that any intervention is required. So those are some of the, the things with which we are winning in the market right now now some of you may think that you know can the structures be copied can five year maintenance be copied. Yes, absolutely. But I think there are short term modes and there are long term modes, winning in the short term winning in the long term, you know it's a great articulation I recently read in the book and business model and can be short term mode for long term modes. These for now are short term modes, our scale and our micro entrepreneur or social seller network will be our long term mode. The third aspect was consumer financing. This is still something that is work in progress for us residential solar companies like Sun Run in the US and over so large city. In the US 12 solar city now Tesla solar. All of these companies have gone on the back of financing and we believe that financing will play a very very crucial role and will be a mode. You know because only the large companies can you know get financing at scale for homeowners. We believe that as I said financing will unlock demand many many fold. The choice that we are going with right now whether we should be a lending marketplace pretty much like companies like good leap or sunlight financial in the US which have banks and lenders on one side, and you know have developed a mobile application with which they match lenders to consumers. This works in more mature credit economies like the US where credit penetration credit card penetration is very high, where there are, you know where lending is very very mature. India is very credit under penetrated as a country. And so we are wondering whether we should, you know whether our market is mature enough for us to build a marketplace, or whether we should take on the challenge of building a captive city given what a crucial part of our mode and customer adoption this is so this is still work in progress. So yeah that's about that's the end of our journey at solar square and while I I thought that you know I make the last slide about challenges in India but I am truly very optimistic and I believe that there is an extraordinary promise in India and India will be an example in the world on adoption of rooftop solar for homes factories everything. I think a few things that we can do well is the government permitting process after so many years the US has now the US government has now launched an app, which allows homeowners or solar companies to do all the government residential solar very smoothly online and we believe that will happen in India very soon. Our government is very bold and ambitious about climate change and they are bringing about policy changes on the ground. We believe that right from manufacturing of solar modules to net metering policy India will be very very very promising and very very huge hotbed. Climate action will become mainstream not just in India everywhere else in the world and solar and EVs will definitely benefit from that trend where climate action and you know being living sustainably will become a trend. And yeah, I firmly believe this will be the decade of climate businesses not just in India but everywhere else in the world. And, you know, capital will flow in smart entrepreneurs will pursue a technologies are ready. So we have few years before irreversible climate change happens as we all know it up just about a decade I believe. And so this better be the decade of climate change. Thank you. Well, that was absolutely fabulous. It reminds me of a talk I heard about 25 years ago through the, what we have here a seminar still go ongoing called entrepreneurial thought leaders. There was a young kind of wild and crazy guy not your wild and crazy but he was named Jeff Bezos, who has had this little book distribution company, and he did come down very heavily as you did on what I would. What the strategy theorist would call the evolutionary theory, you do small experiments if they work you double triple multiply by 100. And if they don't, you kind of cut them up and move on to something else. So, I do see in here, at least a piece of your very detailed game plan here and thank you for sharing that with us. The reason the reason you're not afraid of giving away some of the details is you'll outpace anybody who tries to catch you now I do know a couple of companies that when you ask them. Are you afraid about being so public like your competitors could be online right now watching you that the argument is usually, we're ahead and we don't plan on losing any ground but on the target markets, market segments or areas of questions about. Do you pick, and you did give the wanting touch case example, is there a strategy for which regions to and which sub markets to expand into that you do, even before you start collecting feedback from out the market about how things are going. Right. So, right now, the scale that we've achieved is from a single market and I guess that's what we wanted to do. The depth of residential solar is so much in any city any, any geography that we get into. We picked one market and for the last almost, you know, for the 15 out of 18 months we were just in one market of India. And we really perfected while being in that market we prove the business model we raised $4 million in venture capital very recently for our business. It's our seed round, and that's what now gives us clarity of thought to proceed further. Unlike tech businesses where, where I guess speed to market is just ridiculously fast. I believe that, you know, not as many entrepreneurs are you know, out there building residential solar as you know probably they were like Ola, you know, Ubers of India or Amazon's of India, you know, there were like so many people trying it at a time. I would say we are, you know, we are sort of the category is still a bit under the radar, but holds a lot of promise. And so, we were confident that you know we could spend that one one and a half years in one market perfecting our model. And now we're ready to double down and we're ready to scale. Great. Another on the other side of the ball the another set of questions, regards your inbound because you don't make the equipment yourselves where do you get your solar cells from do in the world as we know it today, given everything including COVID and trade wars. How do you think about supply changed challenges how do they work out from your side of the business. Absolutely. So we are, when it comes to brands of solar modules and different technologies that exist on modules and inverters we are a technology and brand agnostic company, which means we help a consumer get matched to the right solution for his home, whether you know what's what technology or brand of module what technology or brand of inverters does he require for his own so we are agnostic in that sense. One of our business is that globally, for modules the world is dependent on China, you know, with the large scale production that they're doing. And we did see quite a few disruptions, you know, over the last, you know, 18 months with two waves and a third wave going on right now of COVID. Yes, there was supply chain disruptions, but I am hoping that we are at the end of COVID. I don't know if we're at the end of a trade war. But the second thing is that India, Indian manufacturing of solar modules is actually now quite, you know, quite aggressive as well and there are you know brands like Panasonic which have set ups to manufacture Panasonic modules in India in joint venture with you know some some Indian players. So there is that interest on India. And I believe that module manufacturers are not married to their domicile. I see that as India starts to tax some of the imported modules. One Indian manufacturing will get it impetus but there will be several global companies which will set up manufacturing units in India just given how large the market is and how fast you know this the solar adoption is going in India. So I don't really worry about supply chain disruptions as much. They can be a irritant in the short term but I don't see them being a deterrent in business building. Great. Another set of questions and I may actually read one of them because I think it's particularly pointed has to do with that metering and how that's going to play out in India it's from the new agro law, but it's in California that metering policies are very controversial, especially in terms of equity and accessibility how do you see that playing out in that is will solar in India be available only to those who can afford it and have their own homes, or have you already thought about the social environmental justice issues. I've been I've been a lot of money birdie thought about this but I, you didn't actually stress this in your talk so I think it's a great question. So net metering is when I shared that why now why is now the time to build a residential solar business I touched upon policy environment being stable. Now, in California, net metering is being taxed, you know, for homeowners, those who can afford, and, and I'll cover the socio economic issue later on but just firstly on the on the on the policy aspect. In India, I think, India used to have these, you know, state wise policy changes and these irregularities and net metering. One fine day, a state would wake up and say, oh, our discoms are bleeding too much let's start taxing net metering. And that could happen. You know, before 2020, but in December 2020 the Indian government released the electricity consumer rights for the first time post independence where net metering is now a consumer rights you can pretty much say it's like a constitutional right nobody can take that away. No matter who the homeowner is net metering up to 10 kilowatts is now a right so that ways policy climate is stable. Now, to the question of net metering, I mean the, you know, lower income households don't have roofs or cannot you know you need a you need a solid you know roof to be able to install a rooftop solar system. Of course in rural areas and in lower income households that you know their roofs may not support solar they may not be able to afford solar and things like that. I believe that solving in India at least electricity is highly subsidized for lower income households. So it's actually the middle income and high income households who have been paying for electricity for the lower income households. It's a huge vote subject in India. So electricity, you know, is is actually this huge problem of theft of electricity and non payment of bills and huge problem of subsidizing electricity for farmers for lower income households, and you know, for other commercial industries. I believe that the role of rooftop solar in combating climate change and climate change as a problem is way more urgent to solve and hence we must policies must enable adoption of solar in the next decade and to do however they can problems around socio economic justice can be tackled differently I think these are two conflicting forces. And one can't say one is more important than the other, but without net metering nobody will adopt solar simple as that. So we're not fighting climate change, we're not using a technology that can make us, you know, meet our energy systems that can keep our air clean that can help us solve for climate change I think it is urgent and important to do that now, and tackle the issues of lower income households and how to solarize them later on. I firmly believe there will be a huge secondary market for solar. After 10 1520 years, these homes will discard their old panels and adopt new technology what happens to those panels. Once the primary market becomes so big the secondary market will be big enough and entrepreneurs will come in and deploy these old solar panels on lower income households on government schools. And that's how the cycle, you know will sort of propagate and everybody will benefit, but for now ensuring adoption wherever it can happen, I think is important. Because I was just reading that even Tesla has put a lot of effort recently into secondary establishing secondary markets and I'm assuming it's for the same reason. One last set of questions, we evidently have some solar entrepreneurs particularly based in California in the audience here. And you did, you take a nice shout out to Stanford for inspiring your entrepreneurial spirit. Were there any particular you've mentioned a few or are there any particular companies that you thought were exemplary that you wanted to borrow some of their magic or you know put together a few of them pieces from a few different different ones. Right, so I'm actually. So when I visited for the entrepreneurship boot camp it was done by the undergrad students the master I guess the engineering undergrad students and they conducted this entrepreneurship boot camp. One of the parts of the two week boot camp was visiting startup offices. So back in 2012 not and you know that's when Airbnb was really early. The first office I vividly remember being taken to was the Airbnb office. And then Dropbox Twitter, Tesla, we did go to the Tesla office, you know, one of the speakers was the North Coast Elon Musk was there to as a speaker, and all of that you know was, you know, we learned about I heard about renewables for the first time there, and what really I took away from, you know, from my visit to Airbnb is how powerful a company can become if it, if it creates income generation opportunity for for people, the more people invested in your success, I believe the more successful company is that's where you know in any even in my previous startup and in the startup. We have this aspect of having business partners or micro entrepreneurs who can make money through our business or generate income through our business that's where the kind of social selling came in, because if we could you know just like Airbnb enables homeowners to generate income if he could enable climate champions and early adopters of rooftop solar to generate income by you know getting more people to go solar. We believe it's just such a win win and create such a positive momentum for the business. And so I guess that was one of the things that I took away. Hopefully solar square you know I think this is something I will do till I'm 7080, but in case there is a third business down the line that I built I'm pretty sure that I will again have an angle of micro entrepreneurs and business partners and having having individuals create income at solar square in the next three to four years we want these climate champions to earn 10 to 15 you know generate 10 to 15 million dollars in earnings through our platform. And I believe that's you know serious income generation for communities. Right on that note I'm sure the students watching online or the ones that are going to meet with you also online are really inspired and anxious to put you in the list of illustrious successful entrepreneurs that you mentioned just now. So thank you so much for joining us today we really appreciate it, especially at 530am folks to start to talk which probably means you got up an hour before that to get ready. There's certainly someone who seems to be well prepared at all times. Thank you so much for joining us today.


Okay, I think we are ready to start. Good afternoon, everyone. My name is Paige Jarvie, Global Marketing Assistant with PMMI. On behalf of PMMI, I want to thank you for joining the webinar today. Today our webinar is a series of webinars that we have planned for this year to help PMMI members grow their export sales. In a few short moments, we'll hear from Anon. Sorry for the pronunciation. I'm kind of bad, but Hameini, he's the managing partner at IndoBroad Consulting. And Anon will be presenting the updated findings to PMMI's report from 2015 Brazil's Competitive Intelligent Report. And you can find out other events that we have going on, like the events and services for the upcoming show in Brazil, FISPAL. You can find those at PMMI.org forward slash global. Let's see here. Quickly before we start, some of the events and services that we have at FISPAL, we will be hosting a lunch which Anon will actually be joining us for. It's on Wednesday, July, excuse me, June the 15th at 10.30 at the PMMI Pavilion booth. So 1-7-8-I. And there, again, you'll be able to meet Anon and hear more details on what's going on in Brazil. We also do have the Brazil Agent Directory available as well if you're attending something you might be interested in. The Brazil Agent Directory will give you information you need to connect with Processing and Packaging machinery agents, distributors, and reps in that target market. Also, don't forget that at PMMI's Pavilion, again, booth 1-7-8-I, we do offer complimentary services. As you can see here, interpreters, meeting rooms. We also have internet stations, a lounge area. So if you have some time, stop on by. Dolores will be there from PMMI. She'd be happy to say hello or answer any questions you may have. Let's see here. Following up, excuse me, following this webinar, I will send a follow-up email if you're interested in any of the events at FISPOL if you're attending. They'll be listed there and you can register for the lunch or answer, if you have any questions, I'd be happy to answer those for you. As I said, Anan, he is with Indobras Consulting. He's here to help us tap into the growing questions and opportunities in Brazil. Anan has extensive experience in analyzing the packaging machinery and capital goods sectors in Brazil and he's conducted many, many reports over the years, 15 plus years I should say, for PMMI members. So he is going to again present those findings to us. And the report is also available to download online at PMMI.org. Again, that will be an email when I follow up after the webinar. Just quickly, a few housekeeping items before I turn the presentation over. I do want to bring to your attention that the webinar you have entered is on muted mode. If you have any questions that you would like to ask, please type them in in the chat box on the left-hand corner there and at the end of the presentation we'll go through and answer any questions you may have. So without further ado, Anan, I present this presentation over to you. Let's see. Anan? Hey, Paige, thank you very much for that introduction. Good afternoon, everyone. The idea today is I'm going to run you through the presentation slides very briefly and hopefully be as interactive as we can be with Q&A. I tend to follow Jack Welch's maxim that anything over 12 minutes becomes a monologue that everyone sort of clicks out of. So I'll try to keep my commentary short. There is obviously a lot of additional commentary in the notes section of the slides once you do download the presentation and obviously the report is available for everyone. I'm not going to get into the weeds of the details of the reports, but I'm going to try to extricate some of the more macro issues, some of the more strategic issues, and hopefully be able to answer questions for everyone. So without further ado, let me run into the first slide, which is essentially an introduction of Brazilian macroeconomy. Now many of you, I noticed that have already participated in FISBAL and the folks that have spoken. We've had a few exchanges, and you may remember that about three years ago on one of my presentations at FISBAL, it was at a restaurant, I said, gentlemen, ladies, Brazil is not for the weak of heart. And said and done. This has been the most wildly fluctuating currency in the world over the last four years. So I'll say that again. It's been the largest number of standard deviations from the mean in any given month for the last three and a bit years now, which makes planning impossible, especially if you're exporting into the country or if you're servicing the country with either after sales technical support services or spare parts. It really becomes very, very difficult to price your products and obviously becomes very, very difficult to maintain a price once you've given a quote because three months later when your client decides that he wants to purchase it, their costing has gone up or down very significantly. So I want to stop there for a second and tell you a little bit about how these macro factors affect PMI members and other capital good manufacturers that we work with down here. And what we see a lot of folks doing to offset or to mitigate this crazy currency fluctuation. So Brazil's moved from 156 in 2010 all the way out to 371. It hit 412 earlier in the year and now it's back down to about 359, 360. So you're looking at a pretty major exchange rate devaluation. So obviously the manufacturing sector in the U.S. has gotten pretty badly affected. You'll see this in the import numbers a few slides down because in REI's terms, in our local currency terms, everything imported has become short of prohibitive, has become that much more expensive. So here we've had a few different strategies that we've seen clients adopt. One is try to put together long-term currency hedges. And that works for people that are working on a hedge for quote to delivery, three months. Anything over three months in Brazil is prohibitive. Your banks are charging you for 4.5 percent for hedging the currency one way and then another 2 percent hedging the currency the other way. So your total cost just to hedge your currency has become upwards of 6 percent for 90 days. So here you've got a situation where it may work for those of you that are fortunate enough to have phenomenal margins, but for the most of us that work on tighter margins it's not really been an option. So what's happened is that you've got a situation in Brazil which couples inflation with a reduction in consumer spending and GP growth in general. So you've had a... The government I think fudges the numbers here a little bit over the last three months, but my view is that you have real unemployment at about 16 or 17 percent. The government issuing numbers of 11 percent, which is not true because you have similar to the state you have just sort of the under employed which are just not being counted and then you have the people that are on welfare that are not being counted. So it's anywhere between 17 to 19 percent. And what's that meant? That's meant that consumer spending for the first time over the last 14 years has actually gone down in Brazil which means that you're going to see the aftermath in the packaging sector. The other thing that's happened is that because of the consumer spending reduction you've had a significant reduction in industrial activity. We're looking at an 11 percent reduction when you compare May of this year to May of last year. So it's a very significant industrial activity reduction. Commerce has only gone down by about 0.5 percent and services and commerce are still relatively... relatively speaking unscarred with the GDP reduction. So you're looking at a GDP reduction of three and a half percent to four percent cumulative. So this year and last year. So you're looking at an 8 percent GDP reduction over two years. And while a lot of the economists are talking about a v-shaped recovery, you're truly here, doesn't believe that. There's many underlying fundamentals which lead me to that conclusion. The first one being that the level of indebtedness at the public sector and at the listed company private sectors is at an all-time high. And notwithstanding this, you have the consumer indebtedness at an all-time high. So a v-shaped recovery seems a little... for lack of a better term, just overly optimistic. So I won't dwell into some of the more silent political issues in Brazil because I could probably write a PhD thesis on this at this point. But suffice to say that any of you that have not been accompanying what The New York Times now coins as the largest single corruption scandal in the history of its coverage, you should just Google Petrobras Corruption and you'll get everything you need. But what's happened is that the public sector is completely disaccredited and they're fumbling through policies that seem to backtrack half the time. So you're looking at a muddling through period for the next two years as we have this interim government in place. For those who are not aware, the president Dilma has been impeached not yet. She's been removed from office for 180 days, after which she will most likely be impeached. And her vice president, who is equally... excuse my language, as corrupt and as involved in all this stuff that she's being accused of as a baseline for her impeachment, is now the incumbent or the interim president. He's put together a pretty decent cabinet in terms of an infrastructure ministry as well as an economic and central bank team. But they just have too much to get fixed in a Congress that's not voting for anything other than themselves. So I've written a little bit about this in the political part of this update that you should have access to, but it's going to be a difficult couple of years. I don't see Brazil recovering as quickly as some of the Goldman Sachs analysts and the Macro of America analysts are saying, and I'll be very happy to be wrong, but I think that we need to brace ourselves for another at least eight quarters of the muddling through process. All right, so what does this mean for us that are trying to sell equipment in the country or do business in the country? The first thing it means is obviously that it's going to stay that much more expensive to do business down here because of the exchange rate. We don't see this exchange rate heading back down towards the 2.5 to 3 reais per dollar. So we need to be aware of that and we need to be aware of the fact that there's a lot of local industrial renaissance, if you would, folks that are just being able to meet local demand with an inferior quality product but price and reais. So it's getting difficult to compete if you are importing 100% of your value add in the country. Obviously there are exceptions. Several of you are aware that only you guys can make your product at that speed at that technical capacity and several of the Brazilian multinationals and local companies will only buy your product. So I've outlined a couple of strategies for you which I'll get into but for those that are still trying to compete against European vendors and sometimes Chinese, you now have real competition with Brazilian companies that you need to look at and that's something that you have to really address head on. Some of our clients and our folks that we're advising have started to either acquire companies down here or do third-party outsourcing of non-key components which means that they're putting together in a loose-term SKDE or CKD assembly options in Brazil so that at least some of the value is locally sourced bringing the overall product to the end client a little bit lower. So we need to obviously, it's not a one-size-fits-all but I'm going to outline a few of these strategies in a little bit. One of the things that you'll see is that the packaging, if you look at the next slide, it breaks out packaging equipment that's been imported by country over the last two years. So you'll see that there hasn't been a very, very significant reduction in overall dollars and cents. You will see a larger reduction this year because these sales are usually programmed and what we're seeing now is that people that have actually made purchasing decisions are stalling. Last year, people were still, I guess, less bearish on the country's upside. When I say people, I'm talking about decision makers at larger companies, family-owned companies that are by equipment are basically taking, okay, look, let me take a wait, let me pause here, let me see what's going to happen. Even if I do have the demand for this, I'm going to wait for six months and the six months are now becoming a year. So there's a lot of pent-up demand that's being generated. However, you don't have a lot of effective purchasing happening right now with notable exceptions which we get into, which is the very, very high, the upper end of the spectrum, the top 10 companies in each of the pharmaceutical, food, beverage, and personal care sectors are acquiring equipment, they're acquiring them because almost counter-intuitively, and this is important to note, they're just gaining market share because the smaller guys, the medium-sized companies that cater to consumer are just going out of business. They're not able to compete given the very, very high cost of capital. You would have noticed on slide number, I guess four, I've got a little slide there on how expensive capital is right now. You're looking at real rates of interest at over 10%, 11% a year. And that makes investments in planning for the long-term for a medium-sized company prohibitive. So getting back on track here, when you look at the machinery imports, you still see a pretty interesting trend line where you do have imports increasing from Europe. Unfortunately, they're reducing from the U.S. And the report that we've written breaks out the why. I think the European vendors have been a lot more, they've been better partners for the Brazilian companies. And when I talk about partners, I'm talking about they've been able to extend credit terms, they've been able to flexibilize payment terms, and they've been able to source a lot of their equipment locally allowing for the imported components to maintain with an existing installed base.  Let me make sure that you guys understand what I was referring to there. The Europeans have really been much more aggressive about going after the entire installed base of their equipment and pushing their after-sales or their after-market sales for spare parts, etc., by offering terms, almost anticipating the fact that these are going to be years of difficulty for the Brazilian clients. So they've assisted the Brazilian clients in revamping existing machinery, improving velocity of existing machinery. They've had a little bit more of a service mentality and a financially, in terms of credit terms, they've been a lot more lenient with Brazilian vendors. And there are a lot of case studies that we go into the report. I won't get into that now during this webinar, but I'll happily discuss it with you guys individually here at Facebook. So just moving on, something that's also quite interesting is the exports of Brazilian equipment, packaging equipment, has begun to make a comeback. Obviously this is aided by the foreign exchange, which obviously favors exports. But it's also largely due to the fact that the Brazilian manufacturing base is now a lot more profitable because they're able to substitute out some of the imported equipment locally, and they've been able to get global contracts. I've got a couple of friends that own packaging equipment companies down here, and they have recently signed on multi-million dollar contracts with the likes of Procter & Gamble and OLAM and Unilever for countries like Malaysia, the US, Canada, China. So you've got Brazilian equipment now being exported out. This is good and bad for you guys because the bad is obviously you've got stronger competition. The good is that you have better competition. Folks that are not out there evading taxes or doing things in a way that just make them more competitive but through incorrect channels. Remember to be an accredited exporter in Brazil, you need to have your audited balance sheets and stuff. So you have better competition. You also have better potential partners where in which you could purchase. As an investor in banking friend of mine tells me that Brazilian companies are so cheap right now that we can go and buy them with our credit cards. Brazil is cheap. If you're looking to purchase companies, this is the time to do it. As long as you're not expecting a V-shaped return as I said earlier on. But whether you're going to be purchasing these companies or even just outsourcing some manufacturing to these companies, it's an interesting new development that we've observed over the last couple of years. So that's the backdrop. I've spoken for a lot longer than I wanted to speak on the backdrop. So I'm going to be efficient with your time over the next three slides, which is four slides which I want to really zero in on. So what does this mean? Let's establish some maxims here. Action number one, and I'll just read these. Brazil's economy is fragile and the exchange rate is highly volatile, which favors local production when you compare that to imports. Number two, consumer verticals that cater to packaging equipment remain agnostic to the deeper rooted macro factors because Brazil is 220 million people with, according to the World Bank, the best demographics in the world. So you still have a lot of young people that are still picking up the flag for consumer spending. So while consumer spending is not unscarred, you do have a business here with local companies that are exporting. So companies that are in the agribusiness, in the pharma business, in the consumer product business in general, whether it be food and beverage or personal care, they're all exporting consumer products out of Brazil, not only to Latin America but to the US and to Europe and to Asia. And obviously to Africa because Brazil has had a historically very, very deep rooted connection with Africa because of the way that some of the African continent was developed by the Portuguese, Brazil was developed by the Portuguese, the Portuguese-speaking nations there. So you'll notice a lot of Brazilian cosmetics are the equivalent of L'Oreal and the higher-end cosmetics, European cosmetic companies that we perceive. The Brazilian cosmetic companies are perceived as the higher-end stuff in Africa and in parts of Asia now as well. So the consumer verticals, yes, they have taken a little bit of a hit, but you look at the numbers and you'll see that they're not actually taking as much of a hit because Brazilian companies are using the exchange rate to export, which means that they need the capital goods to enhance their production. Now the maximum number three, and this almost drives the entire conversation, is imported goods are only really competitive in higher-end niches, right? There's a natural tendency now to source locally. Every single Brazilian manufacturing company is looking to source locally. So we looked at a couple of different options. We've tried and tested a few of these and I wanted to talk to you about three of them that I think a lot of you already in the process of doing, if you haven't done so, I'll be happy to speak to you further. But one is, look, there's something called the XRIFI. I'll get into it in a second. You can structure a local limited liability company, or you can outsource, assembly, slash, purchase a company. To go into the first of the options, which is it's almost a no-brainer, it's predicated on the fact that there's no Brazilian manufacturer that can make your equipment. So if you are confident of that, you can basically apply for something that's called the XRIFARIO. It's a simple process. It takes three to four months to get through. But basically, you enhance your competitive note locally by reducing the import duty. You know, for the most part, you guys are, your harmonized code rate will yield import duty of 14%. However, you still have IPI, which in some cases is 8%. ICMS, which is 18%, which is a state-value added tax. And you have fees and costings. And these are all vested cumulatively on the import duty. So when you apply for an XRIFARIO, you actually reduce your import duty from 14% to 2%. But it's not really a 12% reduction. It's a reduction that would be closer to 15% to 16% because of the cumulative taxes that go on after that. So this is something that a lot of our clients are doing. The only thing that you need to be aware of is that each product needs one. So if you're one of the companies that have 18,000 SKUs in terms of equipment, this is not going to be a solution for you. But if you have one hot seller that you sell X off a year, you're going to be able to reduce that cost to your end customer by about 15% when all is said and done, if you apply for this thing and get it approved, which is, as I said, about a three to four month process cycle. You've got to get some of your brochures and spec sheets translated and basically apply for it. You have your distributor apply for it or even your end client apply for it. The little known thing here is that it's not only the person who can import the entity that applies for it that can import it with a duty exemption. It is also for any other company that wants to import that equipment. So the XRFR is granted to the equipment and to the vendor, meaning yourself, not to the applicant. And that's something that I've noticed. There's a lot of confusion when I speak to people about this. I just want to make that very, very clear. So that's an option. It doesn't require very, very much. These things usually get done in about $5,000 to $6,000 depending on the complexity of the equipment at hand. But it's not an expensive proposition depending on what your volumes look like. The second thing that a lot of the companies have been doing, this is something that larger manufacturing companies like Coca-Cola and GM and Ford and Volkswagen have been doing in Brazil for the last four decades. It's just establishing a local entity because you can transfer price to your equipment into your local entity and then sell to the market and you can remit your profits as dividends and those dividends are tax-free. So you can do this. It takes a little bit of legal setup to get done right but it's not something that you'd want to do unless you have recurrent revenue here. This is not a one-off sale. It's not something that if you've got a couple of different sales leads in Brazil that you would do because maintaining this costs money. It will cost you anywhere between $3,000 to $5,000 a month, just to maintain an entity here that's trading. Now you can do it for a little bit cheaper if you outsource back office and accounting functions. We've done that for a lot of clients. But the point is that you don't want to do this unless you have recurrent revenue. This is something that you would be wanting to look at if you're looking at Brazil as a little bit of a medium to longer-term play and you have either recurrent revenue with spare parts or services or just have a back order of equipment that's going into OEMs, et cetera, that you really are confident about. I won't get into the legal jargon of this but suffice to say that this is something that takes about six months to put together so it takes a little bit of time once you've actually made a decision to go ahead and you need to be aware that you're going to have a monthly fixed cost so you don't want to do this unless you're certain. The other thing is obviously the third option is really outsourcing Oakley. Which means what? I'm going to bring the part of my equipment that nobody else can make but myself and I'm going to buy the air compressor and the motors and the metal boxes that are not part of your DNA, if you will, they're not part of your secret sauce. You're going to buy them locally and have them assembled by an accredited assembler over here in Brazil. The beauty of doing this now is that because of the Brazilian industrial production being down by as much as 11%, we've got a lot of spare capacity now. So you've got guys, folks at own companies that are looking for stuff like this that are good but just have had a down take on their product demand and now they're looking at utilizing their spare capacity and I would take full advantage of that if you can establish the structural framework in which to do so and have exclusive licenses and agreements that protect you from any intellectual property that you may be showing to folks that are not yourselves. A lot of the companies that have that issue, the intellectual property issue would either establish a local company and start doing that themselves here so that you're bringing this in locally or as several of the clients have been doing lately is just purchasing an existing company in Brazil. Having said that, I'll repeat my original thing that Brazil is not for the weak of heart and buying companies locally here is while cheap in dollar terms today is also fraught with dangers in that because the economy has been so weak over the last couple of years, a lot of the companies have been less efficient about paying all their taxes and labor. So there's a lot of contingent liabilities in looking at assets down here which you'd be very well versed to take good guidance on. Anyway, so those are some of the options, strategic options that we've been noticing. I've hit on them perhaps not as structurally as I have now in this presentation but I've hit on these a few times over the course of the last few years where I've seen like, hey, company X and Y is doing this but now it's just everyone's doing one of the three things now. I see very few companies that are not doing one of the three things and I would say fourth if you include acquisitions because they just realize they're not going to be competitive in Brazil and the exchange rate is going to be a little depreciated over the medium term. It's not the long term I think. When you look at the verticals, I've outlined some of the 10 largest food companies and the 10 largest beverage companies and given a little bit of top line annotations as to how these companies are doing. But you'll notice that the food industry in Brazil is obviously growing incredibly but the growth is not local, the growth is for exports. And you're looking at huge Brazilian nationals, right, JBS, BRF, are folks that have been purchasing companies in the US and Canada and across Europe and Asia and they're just growing tremendously. If you're doing business with them, you're going to be doing business with them globally. So these are nice clients to have globally. From experience, we have a trading arm ourselves and we do quite a lot of work with three of these companies. They're bureaucratic to do business with but once you're in, you usually expect into every single bit that they put out there. The food business in Brazil is actually doing very, very well, largely fueled by exports. Beverages, again, you've got a few large companies that have just been buying up a lot of the medium-sized companies. So it's becoming a target, in terms of number of targets, it's becoming smaller but these guys have an incredible amount of bargaining power. I'll be very, very, just a word to the wise is when you're selling to folks like Ambev, you've got to be very careful because they extend trade terms like nobody's business. There's some difficulty doing business with some of these companies because of the sheer size that they've gotten to at this point. Having said that, I've always been a big advocate of going to the medium-sized markets in Brazil. I'm telling you now that you want to focus on the top of the pyramid unfortunately because they're the only guys that are really doing business and buying equipment and purchasing some of these smaller guys. The industry has gotten a lot more concentrated which arguably is not great for you guys. But the personal care, Brazil is still growing. It's also been very positively affected by import substitution. So you've got large national champions again, Natura, Boticario. They're doing very well. If you look at the revenues and you look at their asset bases, these are interesting companies to get on your client rosters. Looking for increasing speed, increasing labor substitution, becoming a big, big issue for these guys. Trying to automate, especially the end-of-line packaging is something that the personal care industry has been very, very aggressive about the last year and will be over the next year as well. Regional expansion into the northeast of Brazil has been a big, big thing for these guys as well, sort of following what's happened in the beverage sector a couple of years ago. And pharmaceuticals, I'm not going to really talk too much about that, but pharmaceuticals, I feel, is going to be the sector that's actually most affected by this negative GDP growth, which is almost counterintuitive when you think about it because it should be a much more inelastic demand. But what I see happening is, and the media is not picking up on this yet, but you'll see this. I'm telling you what I'm projecting is that you're going to see a reduction in pharmaceutical growth because the government spending, which accounts for over 40% of the sector's spend, is going to get reduced. And that's just inequivocal. It's something that's going to happen.  So the next few slides I'm not going to go into. This is really a summary of the end users we've interviewed and their perception of US, European, Chinese, and domestic equipment manufacturing pros and cons. This is nothing new under the sun. This is basically a brief update on the large report that PMMI had commissioned from us a year before last, or actually, sorry, last year. So we've already covered this during the last few slides on the last webinar, so I won't go into this again. Suffice to say that the Europeans have actually gained ground, which is unfortunate for you guys that are listening in on this webinar, but it's interesting to study their strategies. It's always nice to be able to copy as opposed to create, and they've actually been doing quite well. With that, I've gone well. It's now in my clock at 3.40, so I have actually more than tripled my 12-minute rule, and I'm going to leave the monologue aside and hopefully be able to take any questions that you may have. Again, thank you so much for the opportunity to speaking to you, and I hope that what I've exposed has been intelligible. Thank you, Anand. And like he said, we will open the floor up for questions. The box on the left-hand side of your screen on the bottom, you are able to chat your questions in there, and Anand would be happy, I'm sure, to answer those for you. Don't be shy. I know he gave a lot of great information, but we would appreciate interaction from you, the audience here. So please feel free. While we wait for questions to – oh, we won't wait. Question one for you, Anand, is what is your expectation on how long the economy will take to recover? Jorge, I'm looking at end of 2017, 2018. There's an election year taking place, a municipal election this year. So you'll see a little bit of an uptick on the third quarter this year, but it's not going to be anything meaningful. Next year is going to be a muddling through the year, in my opinion. So I'm sorry for being a little bit more cynical than most pundits or analysts, but that's my take. 2018 would be where I would look at structural growth, not a politically induced uptick. Okay. Does anyone else have questions? Are we thinking of questions? Are we taking an app? I will – Have I made everyone give up on Brazil yet? No, of course not. You gave great information. Oh, here we go. Will you be at the FISBAL PMMI booth? I'm actually traveling that evening. So I'm off to Europe, in fact, that evening, but I will be at the PMMI booth during the morning time and then during my presentation, obviously. But I'll probably have to head out to the airport at about 4 p.m. Okay. Again, Anand will be presenting on Wednesday. So you will have an opportunity if you are going to FISBAL to meet Anand. And again, hear a little bit more information in depth. Let's see. We also have a question – In terms of the dollar exchange, I make projections and I always make projections in scenarios. So my scenario – and it's actually a little off the beaten path. A lot of the analysts, if you look at the guys at Credit Suisse, at Goldman Sachs, at Bank of America, Merrill, are saying they're looking at a projection of 3.6, 3.7. But these guys change it every week. They'll change it by 20%, which makes no sense to me. So my scenario – and I'm sorry for bashing my investment banking friends – my scenario is 380. I feel that Brazil at 360, which is right now, it's not reflecting fundamentals. I think that the market has overpriced in the potential improvement of the economy because of the political leaders that are here. And honestly, I'd love it if I'm wrong, but I'm projecting 380. Okay. And the industries where I expect more export growth are going to be food and personal care. Wonderful. So for those that are just listening, the question is, can you repeat the industries with more export growth and potential opportunities? And Anand said personal care and food would be the industries where he expects more growth. I don't see any other questions coming in. So we'll move right along here. I won't keep anybody too much longer. Just quickly letting everybody else – or excuse me, letting everyone know what PMMI is up to. Running simultaneous with FISPAL, PMMI will also be at Propac Asia in Bangkok, where we do also have a webinar next week, if anybody's interested, as well as market research and pavilion there. We're also in China, Shanghai in July, and then further on down in the year, we are at PAKX India in September. Again, we have a lot of market research, a lot of different opportunities for you, the members, to really find a market that works well for you. Please feel free to email me if you have any questions or information. Again, I will send a follow-up email with everything that we discussed. Anand, I want to thank you again for such a great presentation. I'm sure everybody that's going to FISPAL will be excited to meet you and for our participants. On behalf of PMMI, thank you for participating. And like I said, as a final note, you'll receive an email with the links to any events or the Brazilian report that Anand touched on if you're interested in that. There will also be an evaluation on today's webinar. It would be greatly appreciated if you took the time to take the survey. It is no more than six questions. It'll take you probably two minutes. So again, if you could let us know how we did. We ask for feedback and suggestions on that. We would really appreciate that. So again, thank you. And I hope everybody has a great rest of the day. Enjoy. Hopefully you guys have a great day.