Watch Out, Victoria's Secret.

Argentine lingerie maker Caro Cuore hits the road--and finds success.

ARGENTINA'S PERMISSIVE ATTITUDES TOWARD FEMALE FASHION and sex seem to have little in common with the strict religious code that governs female dress in Jeddah, Saudi Arabia. But under the Saudis' chadors and the portenas' miniskirts, there's something in common: Argentine-made lingerie.

Although underwear is hardly the stuff from which export booms are born, the experience of Argentine manufacturer Caro Cuore (Italian for "beloved heart") highlights how a well- targeted product--and a healthy dose of determination--can lead to limitless accomplishments abroad.

And in Argentina, where the peso's 1-to-1 parity with the dollar hurts the competitiveness of its exports, success in the increasingly global market is tough to achieve. That makes Caro Cuore's inroads even more impressive.

Like other successful discoveries over the course of history, Caro Cuore's 1995 foray to foreign lands was largely accidental. At the time, Argentine businesses were still reeling from the impact the Mexican peso crisis had on consumer spending. Despite strong brand-name recognition in Argentina and a loyal group of female admirers (and their mates, of course), the 20-year-old company found itself in an increasingly difficult financial situation. "To stay alive, we decided to test our luck by opening up a store in Brazil with some business contacts of mine from when I lived there," explains Adolfo Drescher, Caro Cuore's president and cofounder. "We really didn't know what to expect."

Although the devaluation of Brazil's own currency subsequently slowed the company's expansion there, Caro Cuore's tentative first steps in the neighboring country turned into what is now Argentina's best-kept export secret. The underwear manufacturer's 29 international franchises are found in 15 countries spread over Africa, Europe, the Americas, the Caribbean and the Middle East. More importantly, export sales have grown more than ten fold since 1996, to reach US$4 million last year, or about 15% of Caro Cuore's total revenue. That's an impressive feat, considering that the company's carefully designed undergarments cost more to make and are, on average, 30% more expensive than those of its domestic competitors.

The potential for continued expansion is the main reason that local private equity fund BISA (for which the Bemberg family of Quilmes brewery fame is the main shareholder) acquired a 60% stake in the company for an undisclosed amount in 1998. "Caro Cuore designs the sort of attractive and unique products that Argentine exporters need to succeed on the global market," BISA Chief Financial Officer Juan Carlos Apostolo says.

Risque without risk? Although betting on the changing winds of fashion might seem like a risky endeavor, especially in foreign markets, Apostolo says Caro Cuore's appeal is more universal than most clothiers. "Although there is definitely an element of design in their garments, the fact that they are making something as essential as underwear, which relies less on personal taste than outerwear, diminishes our risk," he explains.

That opinion is shared by Drescher, who says the company has no plans to venture far from its current product line. "We know how to make underwear that is gratifying for women to wear," he says. "Designing skirts and blouses would be too much of a stretch."

With BISA's financial backing, Caro Cuore is now gazing at Europe. It recently added nine stores to its existing five in Spain and Portugal as part of a $5 million investment that will also bring Argentine undies to France and Italy before year's end.

Although the prospect of a larger imprint on Europe is exciting, Drescher is proudest of the company's push into non-traditional markets like Saudi Arabia and Zimbabwe, exotic destinations that he never dreamed of visiting, let alone working in.

Drescher doesn't hoard the credit for these successes. Argentine supermodel Valeria Mazza, who began her career with the firm 10 years ago, played an important role in enticing would-be franchise owners, including at least one via the Internet, Drescher says. "I received an e-mail from a Saudi Arabian businessman who saw our Web page in 1998 and was so impressed that he solicited a franchise," Drescher explains. "To this day, we've never met."

In Buenos Aires, Caro Cuore's risque ads have been turning the heads of porteno pedestrians for some 16 years. But religious customs prohibit the public display of scantily clad women in Saudi Arabia. As a result, the franchise in that country relies solely on head shots of the much-revered Caro Cuore models to generate business.

Facilitating Caro Cuore's successful expansion is strong brand-name recognition--and cash flow--within its home market, where it has 23 outlets, 10 of which opened last year. In a nationwide survey conducted by market research firm Ibope, Caro Cuore was voted by consumers as the "label of the century" in its niche and one of a small handful of Argentine-owned brand names--22 out of a total of 68--preferred by status-conscious Argentines. The company's well-known September promotions around Secretary's Day are an even more telling example of its popularity among the country's well-to-do.

However, in the United States, a huge potential market for the company, Secretary's Day--celebrated in April--is not a big day for underwear sales. And, indeed, the image of lecherous executives lining up at Victoria's Secret to buy their office sweetheart a skimpy G-string probably wouldn't exactly go over well.

More modern attitudes toward sex and the workplace aside, the company's unknown brand name and expensive prices have so far frustrated its attempts to crack the important U.S. market. Indeed, Caro Cuore's one stateside store, in Miami, is tottering on the brink of extinction. Even so, the company looks with hope to the fast-growing U.S. Hispanic population, which includes shoppers from countries where leafing through a lingerie catalog is not taboo.

Drescher has other reasons to be keen about the U.S. market. "Beyond the huge profit potential the U.S. represents, our designers and marketing team take success there very personally because it is such a difficult market to penetrate," Drescher says. "We won't be satisfied with ourselves until we do."

Watch out, Victoria's Secret.