Uniliver in Brazil_essay

8/3/2019 Uniliver in Brazil_essay

http://slidepdf.com/reader/full/uniliver-in-brazilessay 1/21

Marketing Management

Case Analysis

Unilever in Brazil



Contents

Executive Summary ............................................................................................... 3

Introduction ............................................................................................................ 4

Brazil ..................................................................................................................... 4

North East Marked Attractiveness .......................................................................... 5

Brand Portfolio ....................................................................................................... 6

Options ................................................................................................................... 7

Ansoof’s Matrix .................................................................................................... 7

Issues to be Addressed ......................................................................................... 11

Go/No Go Decision ............................................................................................ 11

Marketing Mix .................................................................................................... 15

Brand and Marketing Decisions ......................................................................... 19

2



Executive Summary

The case centres on the decision of Unilever in Brazil as to whether to introduce a

new low cost washing powder in a market where it already holds the

predominant share of washing powders. It is about Unilever´s highly ambitious

“Everyman” project of the mid-90s which began with extensive field studies to

help determine whether it was in the corporation´s interests to enter the lower

end of the domestic market. This case deals with Unilever home care division and

in specific the detergent brands in the two major regions in Brazil: The North East

and the South East. Major differences exist between these two regions in terms

of wealth, culture and needs that influence the performances and sales of

Unilever detergent brands available in the Brazilian market.

Laercio Cardoso was called to lead the project whose mission was to explore the

growth opportunities in the marketing of detergents to low income consumers in

the North East of Brazil. Cardoso became increasingly convinced over time that,in light of its massive market dominance, pursuing the lower end of the

detergents market was Unilever´s only clear opportunity for domestic growth. He

was extremely wary of seeing the company lose out to cheaper local brands, as

had recently been the case in India and in Pakistan, from where he had just

transferred. Cardoso soon faced stiff resistance from many colleagues, who felt

that the premium brands Unilever already offered were the reason behind its

enviable domestic position.

The case cites the major marketing challenges that entry into such a market will

near-inevitably present. The months spent living in the favelas slums with low-

income consumers had taught Unilever that the attitudes and behaviour of this

segment of consumers were very different from what they were used to.

The rivals had quite different statures within Brazil at the time. Unilever had

achieved a quite remarkable 81% market share in the washing powder sector

and was a consumer goods pioneer in the country. P&G was a very distant

second and had entered the local market far later. However, it had a much-

envied R&D unit as well as extensive marketing experience worldwide. Its

potential long-term threat to Unilever was obvious.

3



Introduction

Unilever have a long and profitable history in Brazil. After setting up in Brazil in

1929, Unilever set up their first plant in 1930 to manufacture Sunlight Soap. In

1957 OMO, the countries first detergent, was launched and grew to be Unilever’s

most successful brand commanding 52% of the market share. Completing thedetergent portfolio are Minerva, which is sold as both soap and detergent powder

and Campeiro, their price based brand. Together the Unilever portfolio

commands 81% of the market.

Upon review of the company’s strategic options positive economic forces in Brazil

have presented Unilever with the viable option of pursuing the low income

consumer market. Currently their price based brand Campeiro is priced

affordably but does not meet low income needs for perceived product attributes

and as such only retains 6% of the market. Management are concerned this

presents a chink in Unilever’s armour presenting an opportunity for Proctor andGamble to attack and grow in this segment. Unilever had fallen victim to this

strategy in India whereby a low priced detergent “Nirma” was developed and

targeted at low income consumers and quickly gained 48% of the market.

Brazil

Brazil is a country with a population of approximately 170m. It’s predominately

split into two regions, the northeast with a population of 48m and the southeast

with a population of 73m. The northeast and the southeast regions vary greatly

with regards to a number of issues related to the detergent and soap markets.Firstly income and education levels vary, as do cultural values and norms.

A Pest analysis of the North East can highlight some of the implications of these

differences.

Political – N/A

Economic – Brazil is said to have experienced cycles of recessions and

recoveries over the past 30 years. The country made a significant

economic leap with the Plano Real which saw the introduction of a new

currency, the Reais which controlled inflation leading to a boom thatparticularly benefitted low income consumers boosting their purchasing

power by 27%.

However, while Brazil’s per capita income was €4420, this was significantly

lower in North Eastern Brazil at €2250 reflecting the developmental and

economic divide between North and South.

Socio-Cultural – The illiteracy levels in North Eastern Brazil are high

above the national average at 40% which will impact communication and

promotional strategies. <<something about high context,

4



Technological - 72% of NE Brazilians don’t own a washing machine

compared to 33% who don’t have one in the South East.

Countries can be classified by their characteristics of culture. From examining the

contextual continuum of differing cultures, left, we can see that Brazil has a high

context culture. This something a company should be careful about as highcontext cultures “use and interpret more of the elements surrounding a message

to develop their understanding of that message”

Low Income Consumer Behaviour in Northeast Brazil

NE Brazilians view issues relating to laundry very differently when compared to

the South East. Firstly, low income consumers wash their clothes more frequently

in the NE (5 times versus 3.9 times a week) as LIC’s own fewer clothes and have

more free time. This poses the opportunity of a 48 million consumer market that

consumes a significant weekly amount of detergent/ laundry soap.

Secondly, NE women view washing clothes as a social and enjoyable experience

as opposed to SE women who view laundry as a chore. There is an opportunity

for Unilever to exploit the social aspect of clothes washing in North East Brazil.

Thirdly, and most importantly, NE and SE differ in the symbolic value they attach

to cleanliness. Poor North easterners pride themselves in the level of cleanliness

they can sustain despite their low income. Cleanliness, due to the labour

intensiveness, is worn like a badge of honour and is seen as a dedication of the

mother to her family. Alternatively, cleanliness, or lack thereof, can often be the

source of gossip in the community. If marketed and branded appropriately, the

team assert that Unilever can offer a brand to LIC’s that validate those

consumers’ life-theme as good mothers

North East Marked Attractiveness

An analysis of the Northeast versus the Southeast of Brazil can highlight the

attractiveness of the region for Unilever.

MinMonthlyWages(MMW)

Percentage of Population

PopulationFigure

# of MonthlyMW's

MonthlyMW in $

YearlyMW1996

YearlyMW in1995

IncomeClass

100% 48,000,000

$70.00

E- 33% 15,840,000

1 $70.00 $840.00 $661.42

E+ 20% 9,600,000

1.5 $105.00 $1,260.00

D 30% 14,400,000

3.5 $245.00 $2,940.00

C 9% 4,320,00

0

7.5 $525.00 $6,300.0

0

5



B 5% 2,400,000

15 $1,050.00

$12,600.00

A 3% 1,440,000

20 $1,400.00

$16,800.00

The above table highlights some the variances in income levels across Northeast

Brazil. As the case states, income among the lowest 10% of the population is up

27%. This equates to an increase in minimum yearly wage from $661.42 in 1995

to $840 in 1996; a real dollar increase of $178.58. This highlights the additional

spending power available to the lowest income consumers.

Yearly Wage

1996

Detergent @$1.70 as % of income

Yearly Wage

1995

Detergent @ $1.70as % of income

$840.00 2.31% $661.42 2.93%

The above table illustrates the percentage saving for the lowest income

consumers that result from the 27% income rise. Note the decrease in yearly

spending on detergent and soap as a percentage of overall income. This further

emphasises the better value of detergent and soap in low income consumer’s

eyes.

Brand Portfolio

Brand MarketShare Type BrandKnowle

dge

MarketPenetrat

ion

MindAwaren

ess

PricePer/Kg

OMO .52 Detergent 100% 9 7 % 7 2 % 3.00

Minerva .17Detergent/Soa

p 100% 9 1 % 1 6 % 2.40

Campeiro .06 Detergent 9 9 % 6 6 % 4% 1.70

If we examine Unilever’s brand portfolio we can see that they have three healthy

operating brands in the market; OMO, Minerva and Campeiro. Cumulatively they

make up 73% of the Detergent Market share. Each brand is very well developed

and has over 95% brand knowledge among customers. Both OMO and Minerva

have achieved relatively high penetration rates with 97% and 91% respectively

but there is still room for more penetration for Campeiro. Interestingly in a

consumer top mind awareness survey, OMO is the most recognised detergent

brand in the northeast with 72% way ahead of any other brand in the market.

This is a key indicator of the strength of the OMO brand. Campeiro despite of

being a established brand, has been recognized for being price competitive. This

indicates to Unilever that any change in market share will be difficult to achieve

for this brand as price is the competing variable and not quality.

6



Options

There are three options open to Unilever.

Brand Extension Brand Repositioning

New Brand

Ansoof’s Matrix

Brand Extension

A well planned and well implemented extension of one of their three brands

could offer Unilever a number of advantages. As Unilever is targeting the low

income segment and OMO, Minerva are higher priced, it would be foolish to

tamper with those. Extending those to a lower cost consumer would only damage

the original. Therefore if any extension were to take place it would have to take

place with Campeiro.

Advantages of using an extension could be:

Facilitate new product acceptance Reduce risk perceived by customer Increase efficiency in promotional expenditures

Reduce costs of introductory market programmes Avoid cost of developing a new brand Packaging efficiencies

Permit customer variety seeking

Disadvantages of using an extension be:

7



Confuse and frustrate consumers

Damage existing brand image

Cannibalize parent brand

Damage image of parent brand

Dilute brand meaning

Cause Unilever forgoe chance to develop new brand

Brand Repositioning

Unilever have the option to reposition a current brand in order to gain these low

cost customers. In order to do this effectively they will need to establish more

compelling points of difference. As OMO and Minerva already have strong points

of difference it is therefore Campeiro that would be repositioned. Unilever can

reposition in order to:

Increasing relevance to the consumer

Increasing occasions for use

Making the brand more serious

Improve falling sales

Bringing in new customers

Differentiate from other brands

However having acknowledged the Campeiro brand’s existing knowledge within

the market amongst consumers we feel it would be very difficult to reposition as

they are already known as the price competing brand with low quality and that

perception would be difficult to change. We also back this up as even asuccessful reposition may not yield significant returns over another strategic

option i.e. New Brand.

New Brand - Brancura

Another strategy for breaking into the low cost market segment is to launch a

new brand. We propose Brancura (Portuguese meaning of Whiteness). At present

Unilever low income brand Campeiro is not providing the attributes e.g. quality,

that is demanded by the low income consumers. It is part of Unilever’s mission

statement to add vitality to life through their products so by bringing more to the

customers is a fit with their overall strategy. Consumers have stated that they

8



want cleanliness, whitening, productivity, Smell, softness, ability to remove stains

according to surveys in exhibit 5 of the case.

While Campeiro is positioned solely as a cut price brand the new brand Brancura

will be positioned as a higher quality low cost detergent. It will be positioned as a

middle ground to Campeiro and Minerva. It will deliver the demanded attributesat low cost to low cost consumers whilst maintaining a reasonable margin. Rather

than be positioned on price or cost it will be sold on the quality of the product.

We feel that positioning the product on quality and just below Minerva can avoid

cannibalization of Minerva, gain market share from competitors below Campeiro,

defend Unilever’s position to outside competitor’s and all whilst growing overall

market share in the Brazilian market. The foreseeable future is that it will replace

Campeiro.

Costing breakdown of all the three options discussed above is given below-

Current Margin OMO Minerva Campeiro In-betweenFC $1.65 $1.40 $0.90 $1.15

PKC $0.35 $0.35 $0.35 $0.35

PC $0.35 $0.30 $0.20 $0.25

Total Cost $2.35 $2.05 $1.45 $1.75

Wholesale Price $3.00 $2.40 $1.70 $2.10

Margin per KG $0.65 $0.35 $0.25 $0.35

Brand Extension

Incremental PC - $0.05 $0.05 $0.05

Distribution - $0.05 $0.05 $0.05

New Cost - $2.15 $1.55 $1.85New Margin perKG

$0.25 $0.15 $0.25

Year 1 Sales in KG 1,965,600 1,965,600 1,965,600

Yearly Profit $491,400.00 $294,840.00 $491,400.00

BrandReposition

Incremental PC - $0.00 $0.00 $0.00

Distribution - $0.05 $0.05 $0.05

New Cost - $2.10 $1.50 $1.80

New Margin perKG $0.30 $0.20 $0.30

Year 1 Sales in KG 1,965,600 1,965,600 1,965,600

Yearly Profit $589,680.00 $393,120.00 $589,680.00

New BrandBrancura

Incremental PC - $0.10 $0.10 $0.10

Distribution - $0.05 $0.05 $0.05

New Cost - $2.20 $1.60 $1.90

New Margin perKG

- $0.20 $0.10 $0.20

Year 1 Sales in KG 1,965,600 1,965,600 1,965,600 Yearly Profit $393,120.00 $196,560.00 $393,120.00

9





Issues to be Addressed

Go/No Go Decision

Issue -At what cannibalization rate (percentage of new sales coming

from other Unilever brands) would Unilever start losing money?Whether, Unilever had the right skills and organization to compete inthis market?

In the long run, what exactly would Unilever gain and what would it risk if things went wrong?

Response -The detergent and soap markets in the northeast are valued at $106m

and $102m respectively. In the southeast the values are different, with estimates

attained of $123m and 46m respectively, the reason for such variation is down to

regional differences in laundry habits.

Forecast 1996 1997 1998 1999

Detergent Market(volume in tones)

42,000 49,140 57,494 67,268

DetergentMarket $ Value

$106,000,000 $124,020,000

$145,103,400

$169,770,978

Growth Rate 17%

Soap Market(volume in tones)

81,250 86,125 91,293 96,770

Soap Market $Value

102,000,000 108,120,000 114,607,200 121,483,632

Growth rate 6% Table- Market Size forecast

The above tables show the estimated increase in size of the detergent and soap

markets over the next three years assuming the growth rates remain constant.

This presents Unilever with a major opportunity for increased revenue. However,

if we apply the same forecasts applied to all of the existing brands in the Unilever

portfolio; we find the relatively poor performance of Campeiro brand which as of

1996 only contributes $630,000 in profits to Unilever and is expected to

contribute a little over $1m within three years.

Forecast 1996 1997 1998 1999

Campeiro SellingPrice

$1.70

Campeiro MarketShare

6%

Campeiro (volumein tones)

2,520 2,948 3,450 4,036

Margin per KG $0.25

Campeiro Profitafter Costs

$630,000 $737,100

$862,407

$1,009,016

Table – Campeiro Sales Forecast

11



A potential reason for this poor performance from Campeiro may be down to the

fact that consumer expectations of their performance are low, as indicated by

Exhibit 5 in the case. Based on the above analysis Unilever should target the low-

income segment of consumers in the Northeast. Unilever currently hold a market

share of 75% here, below the national average of 81%. Both markets of

detergent and soap are growing in the NE and the lowest income consumers areexperiencing an increase in purchasing power. The economic boom that has hit

the country is at its most powerful in this region and represents a substantial

opportunity for Unilever to take advantage of. Additionally there is a risk that if

Unilever do not target this market that another company may do so, resulting in

a similar situation to that in India.

However, their current low income brand Campeiro is performing poorly as

indicated in Campeiro Sales Forecast analysis. Moreover, Exhibit 5 of the case

has indicated that, Campeiro is perceived as a below adequate in terms of

performance on the six major categories of expectations.

For this reason it is intended to launch a new brand when targeting the detergent

market of the northeast. Group recommends the Unilever to launch the new

brand Brancura, with the suggested positioning, discussed in different available

options section. In that case, Price would be set at $2.10 with a margin of $0.20.

Market share is expected to grow from 4% in the first year, to 11% in year 3. This

market share will be taken from the competitors Pop, Invicto as well as

cannibalizing sales from Campeiro.

Financial analysis has ruled out the possibility of targeting the soap market in

addition to the detergent market with the new brand. Using similar pricing logic itis impossible to keep costs down to an acceptable level and if wholesale price is

to be kept at a price competitive enough to challenge for market share in the low

income consumer market it would result in too small of a margin.

Short Term Financial Results

At this price point the forecast profits over the next three years can be seen

below for the detergent market. The table below also highlights the expected

cannibalization rate of the Campeiro brand whose sales will continue for the next

three years

Detergent Market 1996 1997 1998 1999

New Brand –Brancura Profit

0 $393,120 $919,900 $1,479,890

Market Share 0% 4% 8% 11%

Campeiro MarketShare (includingnew brand-Brancura)

6% 4% 2% 0%

% Decrease from

Cannibalization

0% 33% 66% 100%

12



Profit (includingnew brand-Brancura)

$630,000 $493,857 $293,218 $0

Profit (notincluding newbrand-Brancura)

$630,000 $737,100 $862,407 $1,009,016

Profit level of Campeiro and NewBrand

$630,000 $886,977 $1,213,119 $1,479,890

The financials to be taken from this table are that for the first two years Unilever

will benefit from the two brands income, shown in the bottom row of cells. From

the initial year of launch the financial output from targeting the low income

market in this way is greater than leaving Campeiro to continue in the market. In

the short term, 1997 combined profit from both brands will be equal to $886,997

as opposed to $737,100 from just Campeiro if left alone. This increase in profits

rises year on year as can be seen from the table. Over the period of three yearsthe financial input will shift from Campeiro to the new brand - Brancura and

eventually all income from the low income consumer market will be as a result of

the new brand.

Long Term Financial Results

Strategically, Unilever will be replacing the Campeiro brand that exists in the low

income market at the moment. The reasons for this are due to the fact that the

brand is underperforming and is viewed as poor by the consumers. The new

brand will be better quality and in turn fit in with Unilever’s mission and vision of

delivering consumer led products. The company are pre-empting any potential

move from a competitor to target the market. This will secure the longer term

future of Unilever and allow them to continue operating in the market.

As calculated above, there is long term financial growth in the strategy with the

new brand – Brancura, generating a higher amount of revenue than the existing

short term brand Campeiro.

The move will also result in higher market share on behalf of Unilever with the

company holding 11% share by 1999 equalling a total market share of 80% in the

Northeast. This figure has the potential to be even higher should the purchasingpower of low income consumers increase even further.

Once Brancura has made successful wins in the North East Detergent and Soap

market Unilever would then be in a prominent position to launch into the SE

Market which is valued at $123m for detergent and $46m for soap. Not only does

the North East LIC market financially make sense, it also has significantly positive

strategic implications. Firstly, by growing their market share in the LIC segment,

Unilever will aggressively defend against a competitor growing and presenting a

credible threat as was seen with Nirma in India. The team propose that Brancura

can successfully secure the LIC segment forming a barrier to entry for any

potential new entrant or current competitor. Secondly, the team concur withLaercio’s assertion that NE Brazil Detergent market presents Unilever with the

13



opportunity to perfect the art of marketing to LIC’s. This capability could become

a Unilever core competency which could be translated firstly to the Brazilian

market beyond Detergent and Soap and into the Homecare, Personal Care and

Food markets.

Organization Capabilities - In order to analyze –“whether, Unilever had theright skills and organization to compete in this market”; let us analyze the major

strengths and weakness of Unilever -

Strengths-

Leadership position – Unilever brands are enjoying leadership positionsin the Detergent powder segment: With 75 % of the market, Unileverbrands (Omo, Minerva and Campeiro are ranked first, second and fourthrespective in terms of Market Share)

Brand Recognition: Unilever brands are well known and perceived byBrazilians. Most of Brazilian have either seen or tried one of Unilever

brands in this segment. Experience and skill set in Detergents- Unilever is a US $56 billion

company with a portfolio of 1,600 brands worldwide, including 45 keydetergent brands. Two of their brands are already enjoying first andsecond rank in terms of market share.

Weaknesses-

Distribution -Unilever is facing a big Distribution issue in the NE; Unileverdetergent SKUS, are not present on shelves in approximately 75,000 smalloutlets. Knowing that Northeasterns are not fund on going to big accountssuch as Wal mart, Carrefour or Tesco, but prefer going to small stores, thelack of Distribution is an extremely serious issue

Consumer Expectations - Excluding Omo, other Unilever SKUS haveproblems in perception, and are depasse by P&G brands (Ace and Bold)

Lack of experience in LIC segment – Unilever don’t have much

experience in LIC detergent segment. Unilever was already experience

failure in this, where a low priced detergent “Nirma” had gained 48% of

market.

In our opinion, distribution will, going to be one of the major challenges for

Unilever. LIC’s do rarely shop in large supermarkets such as Walmart or

Carrefour. This means the chosen distribution strategy must include 75,000

small outlet stores spread over the NE. However, Unilever do not have theability to distribute to these stores which suggests a partnership could be the

most economical way forward.

What if things went wrong – In case the things went wrong – it can hit the

market share and brand value of Minerva, Campeiro as well the new brand

Brancura. In case, Brancura is placed wrongly – it will not only cannibalize

Campeiro, but can eat the market share of Minerva as well. However, in this

complete process, all this will not create any monetary benefit for the firm.

We have proposed, new brand Brancura to be positioned as a middle ground toCampeiro and Minerva. It will deliver the demanded attributes at low cost to low

14



cost consumers whilst maintaining a reasonable margin. Rather than be

positioned on price or cost it will be sold on the quality of the product.

We feel that in case the quality of the product is at par with Minerva, it will

cannibalize Minerva, as well as Campeiro. Despite of, increase in volumes this

positioning will not going to be, financially beneficial for Unilever. In case theprice of the product is below Campeiro, it will again perceived as low quality

product and will not going to succeed defend Unilever’s position. In the same

way, if the new brand is priced above Minerva with low quality, no market share

will be gained. Moreover, a long delay in the process, will invite P&G and other

competitors to tap the market and again, the result will be similar to India.

Marketing Mix

Issue - Should Unilever change its current marketing and branding

strategy? For example, could Unilever extend or reposition its existing

cheaper brands, Minerva and Campeiro, or would a new brand benecessary? What would be the ideal positioning and marketing mix of a

Unilever brand targeted at low-income consumers?

Response -If we examine Unilever’s brand portfolio we can see that they have

three healthy operating brands in the market; OMO, Minerva and Campeiro.

Cumulatively they make up 73% of the Detergent Market share. Each brand is

very well developed and has over 95% brand knowledge among customers. Both

OMO and Minerva have achieved relatively high penetration rates with 97% and

91% respectively but there is still room for more penetration for Campeiro.

Interestingly in a consumer top mind awareness survey, OMO is the mostrecognised detergent brand in the northeast with 72% way ahead of any other

brand in the market. This is a key indicator of the strength of the OMO brand.

However, the mind awareness of Minerva and Campeiro is just 4% whereas

market penetration is only 66%. All this, indicates Campeiro a struggling brand ,

that has been recognized for being price competitive. Further, it is mentioned in

the case that Campeiro is perceived as low quality product by consumers and

hence, indicates, the failure of marketing and branding strategy in case of this

particular brand.

As discussed earlier, three options open to Unilever –

Brand Extension

Brand Repositioning

New Brand

The team recommend that Unilever should enter the North East Brazil market to

target LIC’s with a new brand Brancura. Brancura would be formulated and

available in both Detergent and Laundry Soap granting access to two growing

markets with one branding strategy. The primary benefits of Brancura will be in

line with Attributes that are most important to NE consumers.

Cleanliness, whitening, Productivity Smell, softness

15



Ability to remove stains

With this in mind Unilever’s formula for Brancura will be priced half way between

Minerva and Campiero. To avoid cannibalisation of Minerva, Brancura would omit

lesser demanded attributes such as Dissolving Power and Harm to Colours which

will be decreased to an acceptable level. We contend that Brancura, if marketedand executed correctly could earn $1,479,890 at the end of first year. The ideal

positioning statement and marketing mix for Brancura are discussed below-

Positioning Statement

“For the women, who gives highest priority to quality. Brancura is a detergent

powder which gives you a better cleaning power with much less effort than the

similar priced competitors”

Packaging

While Brancura is pursuing a low cost strategy, the long term strategic aim is todominate the LIC market share. Therefore, it is critical the perceived quality of the product is higher than that of Pop and Invito. With this in mind, Brancura willforego the 30% saving that would accompany a plastic sachet package as LIC’sregard anything not in a cardboard package to be second rate.Considerations have also been made for the weekly budget of the LIC andconsequently Brancura will be sold in 1kg and 500g cardboard packaging.

Place

Distributing to NE Brazil does not come without its challenges. We are told that

LIC’s do rarely shop in large supermarkets such as Walmart or Carrefour. This

means the chosen distribution strategy must include 75,000 small outlet stores

spread over the NE. However, Unilever do not have the ability to distribute to

these stores which suggests a partnership could be the most economical way

forward.

The team suggest contracting with Specialised Dealers who would have the

necessary focused reach to distribute Brancura to LIC’s. The benefits include 24-

40 SKU’s as opposed to hundreds which are available in Generalist Wholesalers

meaning more favourable shelf space, category management, merchandising

and extensive point of purchase activity. With the basis of the distribution

relationship being that of a partnership, a free flow of information would be

available increasing Unilever’s knowledge of marketing to and accessing LIC’s

which is an attractive learning outcome of developing the LIC brand.

Developing this marketing strategy has the potential to become a corecompetency of Unilever that could be leveraged in other markets. While thecost of a specialised dealership is 5c per kg lower than a GeneralistWholesaler distribution agreement, there is a distribution exclusivity clausefor negotiation in the contract. This would be reviewed with the core issue of

protecting the distribution network of Unilever’s primary brands OMO andMinerva. If this distribution agreement threatened the market share of these

16



brands then the company would have no choice but to pursue distributionthrough General Wholesaler which would have a less focused strategy andwould cost an additional 10c per kg.

Promotion

As mentioned in the case, the key message of the promotional strategy would

need to take into consideration that marketing a brand that is overtly

communicating “low-income product” would almost certainly communicate “low-

quality product”.

With this in mind, the team propose that the promotional strategy instead

focus on the positive lifestyle of LIC’s in regards to washing clothes as opposed

to being price based. As stated in the LIC behaviour analysis, washing clothes

is seen as a social and pleasurable task. Brancura would seek to emphasise

this in the promotional strategy in an extremely positive message: “ Brancura

, Vida Parece Brillhante”, ( Brancura , Life looks bright). The team assert

that the tagline would imply wholesome, positive energy resulting in a clean

bright washing.

The promotional campaign will rely heavily on imagery to communicate the

key messages to overcome the challenges posed by the NE’s high illiteracy

rates of 40%. The chosen imagery used would feature mothers talking and

laughing while using Brancura . The imagery would communicate health,

happiness and pride in a job, reiterating that Brancura is the perfect brand

partner in the pursuit of resolving the life theme of dedicated mother.

Also, as discussed earlier new brand introductions will cost an additional $0.10

per kg in incremental marketing costs. This will practice Unilever’s established

communication plan of 70% above the line and 30% below the line marketing

expenditure. The 70% above the line advertising will rely on television

segmented towards female LIC’s and image intense billboard and print

advertising. The 30% below-the-line will include point-of-purchase marketing

and on-trade promotions facilitated by the Specialised Distributor partnership.

The team feel that the closest the product can get to the consumer is on the

shop floor where the critical first purchase can be won by introductory

promotion and category management.

Price

Current Margin In-between

Formulation Costs $1.15

Packaging Costs perKG

$0.35

Promotional Costsper KG

$0.25

Total Cost $1.75Wholesale Price $2.10

17



(WP)

Margin per KG $0.35

New Brand Brancura

IncrementalPromotional Costs

per KG

$0.10

Distribution Costsper KG

$0.05

New Cost $1.90

New Margin per KG $0.20

The formulation cost is derived from ingredients providing a product that is in-

between Campeiro and Minerva in terms of Quality. Packaging costs are the

same as all products

Promotional costs are the same, but because of the need for additional marketing

for a new brand there is an incremental cost calculated at $0.10 per KG.

Distribution costs are at $0.05 per KG due to selecting specialized distributors.

The margin of $0.20 was decided upon after profit level analysis. This is the

margin required to obtain the profits shown, Financial Results of Targeting NE

with New Brand

The cost was set at $2.10 in order to facilitate this margin as well as take

advantage of the increasing purchasing power of the low income consumers in

the Northeast. Although higher than competitors who charge a wholesale price of

$1.70 the price of $2.10 still represents value for money for the Northeasters.

Issue - Unilever could produce a product comparable to Campeiro, its

cheapest product, but would it deliver the benefits that low-income

consumers wanted?

Response- Upon financial investigation of the Unilever portfolio, we have found

that the Campeiro brand is not delivering on capturing value for the consumer

and not creating value for Unilever. We recommend that Unilever should enter

the NE Brazil market to target LIC’s with a new brand Brancura (Portuguese

meaning of Whiteness). At present Unilever low income brand Campeiro is notproviding the attributes e.g. quality, that is demanded by the low income

consumers. It is part of Unilever’s mission statement to add vitality to life through

their products so by bringing more to the customers is a fit with their overall

strategy. Consumers have stated that they want cleanliness, whitening,

productivity, Smell, softness, ability to remove stains according to surveys in

exhibit 5 of the case.

While Campeiro is positioned solely as a cut price brand the new brand Brancura

will be positioned as a higher quality low cost detergent. It will be positioned as a

middle ground to Campeiro and Minerva. It will deliver the demanded attributes

at low cost to low cost consumers whilst maintaining a reasonable margin. Rather

than be positioned on price or cost it will be sold on the quality of the product.

18



We feel that positioning the product on quality and just below Minerva can avoid

cannibalization of Minerva, gain market share from competitors below Campeiro,

defend Unilever’s position to outside competitor’s and all whilst growing overall

market share in the Brazilian market. The foreseeable future is that it will replace

Campeiro.

Issue -Should Unilever use coupons or other means to reduce the cost

of the product for low income consumers? Should it change the price of

Omo, Minerva and Campeiro?

Response- We recommends that, Unilever should not use coupons or other

means to reduce the cost for low income consumers – as cutting down the price

can signal the poor quality of product. Moreover, Omo and Minerva are already

market leader in their segment and there is no need to disturb the equilibrium.

However, their current low income brand Campeiro is not performing well.

Currently the price of Campeiro is in the purchasing range of poor North Eastershowever, it does not meet LIC segment needs for perceived product attributes

and as such only retains 6% of the market. Further cutting down the price of this

product will not help as along with price, primarily low-income consumers of the

Northeast evaluate detergents on six key attributes. The most important

attribute is the perceived power of the detergent followed by smell and ability to

remove stains. Many poor North Easterners are proud of the fact that they keep

themselves and their families spotlessly clean despite their low income. Because

it is so labour intensive, many women see the cleanliness of clothes as an

indication of the dedication of the mother to her family. Personal and home

cleanliness is a main subject of gossip.

We recommend that Unilever should enter the NE Brazil market to target LIC’s

with a new brand Brancura. While Campeiro is positioned solely as a cut price

brand the new brand Brancura will be positioned as a higher quality low cost

detergent. It will be positioned as a middle ground to Campeiro and Minerva. It

will deliver the demanded attributes at low cost to low cost consumers whilst

maintaining a reasonable margin. Rather than be positioned on price or cost it

will be sold on the quality of the product.

Issue -What about packaging and point-of purchase displays? Should

they use the same slogan as the television commercial? Finally, what

should Unilever tell the owners of the small stores where most low-

income consumers shopped?

Response-

Brand and Marketing Decisions

Issue -Was there something wrong with the existing positioning of

Unilever’s three detergent brands? Would it be really necessary to

develop a new value proposition? If so, what should it be?

Response—Competitive positioning of Unilever detergent portfolio is give below-

19



Positioning Unilever Products

Omo Minerva Campeiro

Importance High perceivedquality

Good perceivedquality

Low price

Superior Removes stains

with low quantityof product

Delivers a

pleasant perfumeand softness to

your clothes

Cost reduction

across alldimensions valued

by consumers

If we examine Unilever’s brand portfolio, we can see that they have three healthy

operating brands in the market; OMO, Minerva and Campeiro. Cumulatively they

make up 73% of the Detergent Market share. Each brand is very well developed

and has over 95% brand knowledge among customers. Both OMO and Minerva

have achieved relatively high penetration rates with 97% and 91% respectively

but there is still room for more penetration for Campeiro. Interestingly in a

consumer top mind awareness survey, OMO is the most recognised detergentbrand in the northeast with 72% way ahead of any other brand in the market.

This is a key indicator of the strength of the OMO brand. However, the mind

awareness of Campeiro is just 4% whereas market penetration is only 66%. All

this, indicates Campeiro a struggling brand that has been recognized for being

price competitive. Further, it is mentioned in the case that Campeiro is perceived

as low quality product by consumers and hence, indicates, the failure of

marketing and branding strategy in case of this particular brand. Also, upon

financial investigation of the Unilever portfolio, the team have found that the

Campeiro brand is not delivering on capturing value for the consumer and not

creating value for Unilever. All this indicates the failure of marketing positioningof Campeiro brand.

Unilever currently hold a market share of 75% here, below the national average

of 81%. Both markets of detergent and soap are growing in the NE and the

lowest income consumers are experiencing an increase in purchasing power. The

economic boom that has hit the country is at its most powerful in this region and

represents a substantial opportunity for Unilever to take advantage of.

Additionally there is a risk that if Unilever do not target this market that another

company may do so, resulting in a similar situation to that in India.

In this scenario, as discussed earlier, three options open to Unilever –

Brand Extension

Brand Repositioning

New Brand

Out of above mentioned options, our team recommends that Unilever should

target North Eastern LIC segment with a new brand Brancura . In the short term

Brancura will make $393,120 and will combine with Campeiro to generate

$886,977. This is equal to a 20% increase in profits for the first year. The team

20



contend that Brancura , if marketed and executed correctly could earn

$1,479,890 at the end of first year.

Issue -Could Unilever deliver the desired value proposition with one of

its three existing brands, or with a brand extension? Would Unilever

really have to develop a new brand from scratch? Could it use a brand from its large international portfolio?

Response – As discussed earlier, in the option section, three options are open to

Unilever

Brand Extension

Brand Repositioning

New Brand

21

Documents

Uniliver in Brazil_essay