Case study: Unilever in Brazil Team: MAKING A MARKETER Chiara Arduini -1751213 Marta Beccari - 1746965 Ilaria Bravin - 1751593 Anna Claudia Valerio - 1755842 Marta De Vivo – 1712470
“Saia do esfrega, esfrega! Limpe com Limpex.”
Executive Summary Being already a leader in the detergent industry in Brazil, Unilever aims at further growth by targeting the Northeast region. After analyzing the peculiarities of the market, the company seeks to address the low-income consumers segment, proposing a low-price laundry detergent. This marketing plan aims at introducing a moderate quality detergent with an affordable price for low-income consumers. It has been suggested to introduce a product already marketed in other countries and present in Unilever’s portfolio, Surf, with the new name “Limpex”, which satisfies the principal needs of the target consumers.
Company Description Unilever is an Anglo-Dutch multinational company, founded in 1929 by a merger of the operations of the British soapmaker Lever Brothers and the Dutch Margarine Unie. Today, it’s among the largest consumer goods companies after P&G and Nestlé. In 1996 it had a portfolio of over 1600 brands worldwide, offering a wide range of products (food, beverages, cleaning and personal care products). Unilever has operated all over the world also with research laboratories and it is organized into four main divisions based on the products it offers. Unilever is a pioneer of the consumer goods industry in Brazil. Operations there started back in 1929; the first Unilever plant opened in Saõ Paulo in 1930 to manufacture Sunlight soap. Omo, launched in 1957 in Brazil, was the first detergent powder in the country and it still is the most successful brand in Brazil. Since 1996 there are three divisions in this country: Lever for home care, Elida Gibbs for personal care, and Van den Bergh for foods. Detergents remain the cash cow of Unilever Brazil, but the company has been recently focusing on understanding emerging markets in order to transform cash cows into products with potential for growth. Unilever is already the leader in the detergent powder category in Brazil (81% market share) with three brands: Omo, Minerva and Campeiro.
Company goals and strategic focus Unilever main goal is to make sustainable living commonplace, and recently is seeking to create new markets where none existed before and selling to some of the world’s poorest consumers. The Everyman Project was launched in India and is now being tried in Brazil, with the future aim to reach Africa and the rest of Latin America next. This way, Unilever can make money out of these products today and at the same time it can develop future customers of higher priced goods. This is a shift for the company, that has developed its strategy over time: from making a product appropriate for any average consumer, it is now trying to reach different income levels. More specifically, Unilever’s Home Care division in Brazil is considering growth opportunities in the marketing of detergents to low-income consumers living in the Northeast of Brazil. Unilever, though, has no knowledge of lowincome consumers in this country or first-hand experience of the kind of marketing strategy that would work for this segment. For this reason, Laercio Cardoso, a Brazilian working for the Personal Care division of Unilever in Pakistan, has been chosen in order to be the head of a team working on the Everyman Project in Brazil, a team composed of Sales, Finance and Manufacturing experts. They focus on understanding the features of the low-income consumers: their lifestyle, aspirations, and shopping and laundry habits. The success of the project is given by the real effort to understand consumers. The team directly interacts with consumers, like Maria Conceição, which can give to Laercio insights of Brazilian customers habits: Brazilians would love to buy Omo (Unilever’s flagship brand), but their tight budget brings them to opt for cheaper local brands. Some believe that Unilever should not fight in the lower-end of the market, where even small, local entrepreneurs with a lower cost structure struggle to break even. This concern, though, can be well addressed by Laercio, who is aware of the threat posed by local brands targeted at low-income consumers, thanks to his experience in India. Others, on the other hand, see growth opportunities and sustain that it is necessary to increase the customer base of detergent users in Brazil. The issue is how to justify diverting money from Omo to invest in a lower-margin segment. The strategic focus hence goes to how to change Unilever’s
current marketing and branding strategy, by choosing either to extend or reposition its existing brands, or by constituting a new brand, and by finding the ideal positioning and marketing mix of a Unilever brand.
Situation Analysis A.
Competition Analysis
A better understanding of the competitive forces playing in the Brazilian detergent market is achieved by separating competition between the “Laundry Soap” market and the “Detergent Powder” market within the Northeast region of Brazil. P&G is globally recognized as the closest Unilever competitor in terms of Home Care products; nevertheless, if we consider that P&G doesn’t produce laundry soap, its threat shrinks to the detergent powder market in NE Brazil. As for detergent powders, Unilever offers “Campeiro” which is its cheapest brand, affordable for low-income consumers; in parallel, P&G and the Brazilian enterprise ASA offer their low-cost brands, respectively “Pop” and ”Invicto” at the same wholesale price as Campeiro ($1.70). Invicto is actually the key competitor of Campeiro in terms of sales (Exhibit 1). At the time of evaluating strengths and weaknesses of each of these three competing brands, we can claim that Pop and Invicto are well known brands, but Campeiro enjoys a slightly higher brand knowledge. Pop has very low market penetration, due to the minimum level of market share that P&G has in NE Brazil. On the other hand, Invicto enjoys the highest level of market penetration, positioning itself even above Campeiro, probably because of its long-term establishment as a Brazilian firm. As regarding brand awareness, low income consumers position both Invicto and Campeiro quite on the same level, while leaving Pop further behind, with a 0% of consumers citing the brand (Exhibit 2). Threat in the “Laundry Soap” market is solely represented by ASA with its brand “Bem-te-vi” which brings about emotional appeal (traditional and regional values) and has multiple uses. Summing up, this market is characterized by oligopolistic competition since the main detergent sellers are only three, trying to grab as many buyers as possible.
B. Company Analysis Unilever is a multinational enterprise, with production facilities in nearly 190 countries around the world, a deep and broad portfolio of brands belonging to different product categories, thus enjoying benefits from both brand knowledge and brand awareness among people worldwide. As an example, Unilever holds a leading position in the cleaning sector market in Brazil with its flagship brand “Omo”. The company finds its strengths over competition in its flexible pricing strategy and in the expertise in distribution channels which are able to reach any kind of consumer around the globe. Additionally, Unilever is able to give to globally marketed products a local flavour, so as to create an emotional appeal that makes the difference in consumers’ choices. However, being it a MNE, its dominance is threatened anytime, on any front, by competition (both global and local) which is always trying to master more and more segments of the market. In addition, competitors bring about threats of substitution, by producing products which can easily replace Unilever’s one. This represents a major threat particularly in emerging markets where rural consumers are affected by traditional and natural alternatives during their purchasing decisions. Unilever has the opportunity though, through its numerous facilities around the world, to better understand customer’s purchasing habits and preferences, in order to offer them products that would fit their peculiar needs. Also, the fact that customers in emerging countries seek to reach a “western lifestyle”, represents an advantage for such an enterprise. In fact, Unilever took advantage of the change of currency implemented in Brazil, which led to a strong economic recovery that boosted the purchasing power of lower-income consumers. Nevertheless, a peculiarity of the Brazilian market is that it has been unstable over time and it will probably continue to be, due to weaknesses in the political system and to a volatile inflation. If we take a wider look, the global economic crisis is also a threat to take into consideration for Unilever’s business.
C. Customer Analysis As the weak global economy has slowed down growth in emerging middle-class markets, companies are increasingly addressing bottom of the pyramid consumers, which surprisingly represent a $5
trillion in annual purchasing power. Thus the bottom of the pyramid offers huge growth opportunities for Unilever, provided that the company proposes right products at right prices. In our case, since Brazilians living in the NE attach an important symbolic value to cleanliness (self-esteem and social status) and wash more often than Brazilian in the SE regions, Unilever aims at delivering products to this consumer target in this exact region. It has been demonstrated that, even though low income consumers have less money to spend, their WTP is higher than average consumers for something that they retain valuable and needful.
Product - market focus A.
Segmentation Analysis
To better address the needs of Brazilian customers, Unilever divided the market into smaller segments with distinct characteristics, so as to implement different and more focused marketing strategies. First of all, the firm made a geographic segmentation, distinguishing the Northeast from the Southeast of the country and looking at differences among the citizens of the two areas. On the demographic side, North-eastern GDP per capita is approximately one third of that of Southeast, and 40% of people in the NE are illiterate, but in both the areas women are the customer target, as they are the ones who take care of the family and houseworks. After a psychographic analysis, however, it is clear that the female lifestyle is different in these two segments. In the NE indeed, washing clothes is seen as something pleasant, since it happens in public places, where women meet and chat. In the SE instead, they usually do it alone at home, and they want to make the task as easy as possible. Finally, the segments differ also on the behavioural side. The frequency of washing, is higher in the NE, because, beyond the fact that people here have more free time, they also own less clothes and need to clean them more often. Also, the kind of usage of laundry products is divergent, since in the NE soap is utilized much more than detergent powder, opposite to what happens in the SE. All these dissimilarities demonstrate the necessity for differentiated marketing programs, since the consumers
belonging to these two different segments would not respond in the same way to the same marketing efforts.
B. Target markets After studying the NE Brazilian consumers features, Unilever decides to enter this segment, even though to some employees it may seem a hazard for a large multinational firm, with a rather important cost structure. The reasons for this move come from an evaluation of this segment, performed by looking at three main factors: its size, its attractiveness, and the company objectives and resources. First of all, Unilever already has a 81% market share of the detergent powder market category in Brazil, therefore, by targeting the NE segment, it may have a fresh opportunity to grow. This area is in fact the second most populated cluster of the country, with 48 million predominantly low-income consumers (28% of total population). Given the size of this segment, being able to capture its consumers’ demand can increase a lot Unilever’s revenues and its overall importance in Brazil. Secondly, the Northeast is part of the so called “bottom of the pyramid”, i.e. those countries in the world where low-income consumers live, and because of the low purchasing power of the citizens, they are unexplored markets. However, as a group, they represent a vast segment which is largely untapped, therefore it can be attractive given the low level of competition. Moreover, detergent usage is increasing in the NE, thus making this move even more appealing. Finally, the entry in this market may be successful also because it meshes with the objective of Unilever, which is to “make sustainable living commonplace”. The company, being a large one, owns the necessary resources to be able to target this segment, without divesting from its more traditional businesses, thus making a differentiated marketing.
C. Positioning To address this new market, Unilever should place its product between its lowest brand, Campeiro, and the middle one, Minerva, staying closer to the former (Exhibit 3). There may be a worry concerning cannibalization of these two brands, but Minerva is actually positioned in a rather higher
price and quality range, therefore its customers should not be much interested in the new product, while Campeiro is in the very cheap price category, and its market share is not very wide because it targets the poorest people. These are not likely to change their purchasing habits as they can’t afford to incur even in a small price increase and, even if this happened, it would not be so harmful for the company, since Campeiro’s slice of market is not wide. Unilever’s new product, instead, should target those customers who can’t afford Minerva or Omo (Unilever’s highest detergent brand), but who neither want to be seen as low-income citizens, because they have a slightly higher purchasing power, therefore they may be interested in buying a better product, even by spending a little bit more. Thus, the aim of Unilever is to capture those customers who are currently purchasing local competitors’ products, so as to avoid cannibalization. To occupy a distinctive place with respect to its competitors in the minds of the consumers, Unilever should take into account what are the needs of low-income citizens of the NE. In particular, it should give importance mainly to the perceived power of the product, which must be able to produce a relevant quantity of foam, and they should deliver a detergent with a very good smell.
Marketing Program A.
Product strategy
To convince our target consumers to buy the new product, we should mainly address the most wanted features in laundry detergent: cleaning power, indicated by foam production, a pleasant smell, and the ability to efficiently remove tough stains. This will be the principal characteristic of the new laundry detergent. Given the fact that Unilever is actively trying to reduce its brand portfolio, creating a new brand would go against the company’s aims; moreover, the R&D investment needed would add considerable costs, which should be avoided considering the need to market a low-cost, low-price detergent. Repositioning the brand or making a brand extension could avoid these problems, but would run the risk of dragging people’s perception of the old brand to the new one. The move that
seems to be the most effective one would be to take into account a brand of laundry detergent already existing in Unilever’s portfolio, but currently distributed to different countries. This would have the positive effect of surprising Brazilian consumers with a new product, without the additional costs of creating a new formula. The brand that appears to be the most suitable one to address the needs of the target consumers is “Surf” (Exhibit 4), a laundry detergent already marketed in other continents such as Asia or Oceania, where it is placed on the low end of the price range (Exhibit 5). The product will keep the formula and the aesthetic characteristics of the brand, with a change of name, typical of Unilever’s practices: Limpex. Limpex presents all the characteristics needed in the new detergent as for cleaning power and efficiency in stain removal; furthermore, it is especially known for its strong and pleasant fragrances, which will especially appeal to North East Brazilian women who highly value this characteristic. The first kind to be marketed will be a “roses and cherry flowers” fragrance. The product will be packaged in a cardboard box to satisfy local consumers’ preferences and to fight off humidity. There will be two packaging formats according to the quantity of powder: a pack of 500 gr and one of 1kg. Taking advantage of economies of scale, the bigger packages will drive down the cost per kilo, which will benefit consumers in the end. The package will have the blue logo of the Surf/Limpex brand highly visible in the centre, on a light-blue and bright pink background in order to be easily recognizable and to remind the consumer of its strong flower fragrances. For the same reasons, some flower patterns will be added as decoration, mainly the roses and cherry blossoms that give the product its distinctive smell.
B. Price strategy To effectively attract the target consumer base, the new detergent shall have a competitive price, but not as low as to be considered a low-quality product. The ideal price will be set between Minerva’s price and Campeiro’s, but slightly closer to the last one in order to be affordable by low-income consumers. The price to retailers will be set at 115% of Campeiro’s price, which is $1.95 approximately. In order to have some degree of control on the final price presented to consumers, an
RRP (Recommended Retail Price) clause will be included in the contract with retailers, which will suggest to sell Limpex at $2.25. This would allow to retailers a 15% margin over the product.
C. Promotion strategy Given that the launch of a new product needs extensive informative pioneering advertising, contacting directly the end consumer, the allocation of communication expenditure will be 40% below-the linecommunication and 60% above-the-line. Although above-the-line advertising reduces the cost-percontact, the traditional Unilever mix of 30%-70% will be slightly modified in order to make the product be known to the majority of people with free samples and in-store point-of-purchase displays, which can be very effective in the first weeks of the life-cycle of a new product. A special discount will be applied in the first four months of the life of the product, but not to the price addressed to final consumers. Instead, the discount will be applied to the wholesale price, the one small market owners will pay in order to get the product on their shelves. This would initially encourage minimarket owners to energetically promote the product to their habitual clients, given the fact that it will be one of the products to give them the highest margins of profit in that period. Once the discount period is over, consumers will have experienced the effectiveness of the new low-cost detergent, and will be attached to the brand. Sales will then continue to grow thanks to word-of-mouth publicity from satisfied customers, made especially in public laundries, rivers and ponds where women meet to chat with friends while doing laundry. Additionally, for the first six weeks, an additional 200 gr of product will be given for free with the purchase of one package of Limpex, to further encourage its purchase with persuasive promotion. As for above-the-line communication, the best way to make the target consumers feel connected to the new brand is through a television advertisement, which will be the main media responsible for the spread of the advertising message: “Saia do esfrega, esfrega! Limpe com Limpex.” (Stop scrubbing so much! Clean with Limpex), which will highlight its cleaning power compared to other low-cost detergents. In order for the advertisement to be engaging, the great forrò singer Frank Aguiar will act as a personality symbol. Forrò is a popular dance among low-income consumers in the north-
east of Brazil, very upbeat and cheerful, danced and loved by all. The advertisement will present a group of common women, both young and older, dressed simply, rinsing their clothes at a public laundry. They will be using Limpex, singing together with Frank Aguiar his very popular song “Morango do Nordeste”, giving off happy and relaxed vibes. The singer will, at the end, refer directly to the camera with the slogan, and adding with a smile “Não custa nada!” (It costs nothing!). Along with the TV advertisement, giant posters will be exposed in tactical locations with Frank holding a box
of
Limpex,
with
the
slogan
written
on
the
side.
D. Distribution strategy The newly introduced product will be sold not in wholesales retailer chains, not in big supermarkets, which are difficult to reach for the target customers selected, but in small local shops. The main reason to consider this distribution channel is related to the fact that North-east consumers prefer to buy in local shops, given the fact that locals are used to interact with shopkeepers, who often provide them microfinance loans. Considering also the economic situation of the area, consumers might prefer to support local shops and local communities. From the point of view of the local retailers, considering the discount they receive, they might have incentives to promote Limpex, leveraging on the direct relationships with clients. Obviously, this strategy has some costs that Unilever needs to consider. While it already has many contracts with bigger wholesalers due to its leading position in the sector, making agreements with local suppliers will mean high transaction costs. Also, poor roads, harder communication channels and few electricity infrastructures must be considered, given that it will make transportation more difficult and costly.
Sources
http://www.managementtoday.co.uk/news/548024/South-American-Soap-Opera---Unilever-BrazilMarketing-Strategies-Low-income-Countries/%3FDCMP%3DILC-SEARCH
"The Everyman Project." Forbes. Forbes Magazine, n.d. Web. 10 May 2016.
Insead, and N.b.: T. O. Unilever in Brazil (1997-2007): (n.d.): n. pag. Web.
www.unilever.com
Exhibits Exhibit 1
Exhibit 2
Exhibit 3
Exhibit 4
Exhibit 5
