Brazil Instants Games- Breaking out of the Poverty
TrapMiami , October 25th 2012
Regulatory Framework
• Caixa Economica Federal Operates the National Lottery
• Some States are entitled to have their own lotteries (Decree of 1967).
• The state lottery of Rio de Janeiro has outsourced its operation, with active oversight
• Hebara runs Passive and Instant Games for the state of Rio de Janeiro
Sales
Source: La Fleur, IMF, Caixa, Hebara
JURISDICTION POP GDP GDP PC SALES PC SALES
(MM) (Billion) $ ($ MM) $
PUERTO RICO 4 9 26.588 72 18,00
TRINIDAD 1,3 22 17.060 17 13,08
ST LUCIA 0,2 1 7.379 1 5,00
NICARÁGUA 5,8 7 1.239 15 2,59
RIO DE JANEIRO 16 199 12.423 33 2,06
COSTA RICA 4,7 40 8.874 9 1,91
CHILE 17,1 243 14.403 30 1,75
MEXICO 113,4 1185 10.146 195 1,72
DOMINICAN REPUBLIC 9,9 54 5.545 16 1,62
ECUADOR 14,5 65 4.428 20 1,38
JAMAICA 2,7 15 5.267 2 0,74
EL SALVADOR 6,2 23 3.855 4 0,65
ARGENTINA 40,4 435 10.959 25 0,62
URUGUAY 3,4 49 13.866 2 0,59
BRAZIL 190 5469 12.789 104 0,55
PERU 29 169 5.904 8 0,28
Latam vs Top 25
0
50
100
150
200
250
300
350
400
450
500Per Capita Sales ($)
Latam vs Top 25
Massac
husetts L
ottery
Lottomati
ca S.
p.A
Georgi
a Lottery
Corp.
New Yo
rk Lo
ttery
Connecticu
t Lottery
Corp.
Pennsyl
vania
Lottery
South
Carolin
a Lottery
New Je
rsey L
ottery
Tenness
ee Lo
ttery
Arkansas
Ohio Lottery
New Ham
pshire
Florid
a Lottery
Atlantic L
ottery Corp
.
Maine L
ottery
Missouri L
ottery
Vermont L
ottery
Texa
s Lottery
Kentu
cky
Illinois L
ottery
La Fr
ança
ise des
Jeux
NICARÁGUA
Virginia
Lottery
North Caro
lina L
ottery
D.C. Lottery
Loter
ie Roman
de
TRIN
IDAD
ST LU
CIA
PUERTO
RICO
ECUADOR
DOMINICAN REP
UBLIC
COSTA RICA
MEXICO
EL SA
LVADOR
RIO DE J
ANEIRO
JAMAICA
CHILE
ARGENTIN
APER
U
BRAZIL
URUGUAY0.000%
0.200%
0.400%
0.600%
0.800%
1.000%
1.200%
Spending vs GDP PC
Poverty TrapLow Payout
Few winning experiences
Low attractivenessFor consumer
Low demand/sales
Low attractiveness
for retailer
High percentage comission
High percentage return to
stakeholders
LOW RETURN TO STAKEHOLDERS
Best Practices1. Price Points 2. Prize Payout3. Prizes4. Distribution 5. Branding
Turn Around – Jan 2011
• Collaborated with law makers showing the need to make regulatory changes to allow for an increase in payout
• Increased payout from 50% to 56% • Increased number of retailers by 50%• Introduced R$2,00 and R$ 3,00 price points• Introduced new prizes to appeal to different
consumers • Initiated Marketing Campaign – Branding
Sales Performance – Jan 2011 to Aug 2012
104% Increase
Challenge
Need to Increase Sales Still Further
Growth CycleHigh Payout
More winning
experiences
Enhance Brand
Perception
Higher price points
Appeal to broader
consumer base
High Sales
High return to
stakeholders
HIGH RETURN TO LOTTERY BENEFICIARIES
Higher Price Points – US Market
arizo
na
arkan
sas
califo
rnia
colorad
o
connecti
cut
florida
georgi
ailli
nois
indiana
iowa
kentucky
louisiana
maine
marylan
d
massach
ussets
michiga
n
minnessota
missouri
n. ham
pshire
new je
rsey
new yo
rk
n. caro
lina
ohio
oregon
pennsyl
vania
s. caro
lina
tenese
etex
as
virgin
ia
washingto
n
wisconsin
-
20
40
60
80
100
120
$ 20 e +$ 10$ 5$ 3$ 2$ 1
Source: La Fleurs
Higher Price Points –Italy
€ 0,4
€ 1,5
€ 4,0
€ 7,9
€ 8,9 € 9,3
€ 9,8 € 10,5
€ 11,0
€ -
€ 2,0
€ 4,0
€ 6,0
€ 8,0
€ 10,0
€ 12,0
2004 2005 2006 2007 2008 2009 2010 2011 2012
€ 20
€ 10
€ 5
€ 3
€ 2
€ 1
Italy
Source: Scientific Games
Increase the Reach of Instants
ODDS
PRIZES
INSTANTS
PASSIVE GAMES
JACKPOT GAMES
Expansion Plan 2012• Reduce retailer comission from 15% to 10%
o Guarantee minimum nominal average of last 3 months
• Increase payout to up to 70% (63% avg)• Introduce TBVS based on mobile technology for
ticket activation/validation• Introduce consignment• Implement a bigger product mix• Introduce R$ 5,00 ticket with 70% payout• Introduce new game mechanics
Payouts vs Sales – US examples
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 201150
52
54
56
58
60
62
64
66
68
70
-
500
1,000
1,500
2,000
2,500
57.5 57.5
56.256.7
56.1
57.2 57.5
62.8
64.4 64.3 64.4
6665.2
67.3
68.6 68.7
FLORIDA
AVG PAYOUT %SALES
Payouts vs Sales – US examples
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 -
500
1,000
1,500
2,000
2,500
50.0
52.0
54.0
56.0
58.0
60.0
62.0
64.0
66.0
68.0
70.0
72.0
56.4 57.0
58.9 60.0
62.0 62.5
63.0 63.0
66.9
68.4 68.5 68.5
67.2
68.8 69.5 69.3
PENNSYLVANIA
AVG PAYOUT %SALES
Payouts vs Sales – US examples
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 -
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
50.0
52.0
54.0
56.0
58.0
60.0
62.0
64.0
66.0
68.0
70.0
55.0 55.0 55.0 55.0
65.0 65.0 65.0 65.0
66.9 67.0 67.6 67.6 67.5 67.5
67.0
68.5
NEW YORK
AVG PAYOUT %SALES
Payouts vs Sales – US examples
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 -
200
400
600
800
1,000
1,200
1,400
50.0
52.0
54.0
56.0
58.0
60.0
62.0
64.0
66.0
68.0
70.0
58.5 58.6 59.5
59.0
60.4 61.0
63.3
62.0
63.9 63.9 64.5 64.5
67.3 67.3
68.8 68.0
ILLINIOS
AVG PAYOUT %SALES
Sales Projections
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
45
47
49
51
53
55
57
59
61
63
65
Avg Payout %SalesSa
les
Thank You!