Sample Case Analysis on Unilever in Brazil

Consumers in North East (NE) Brazil are predominantly low-income earning households. As per the “Everyman” report findings, only 28% of households in Recife (NE Brazil) own washing machines (Guimaraes and Chandon, 2008). As such, Unilever aims to establish itself as an all-inclusive household brand irrespective of a household’s income status. The findings from the “Everyman” project also highlight a huge market gap between the usage of laundry soap and detergent powder. Since the washing patterns in Brazil differ along with income categories, the launch of a handwashing detergent will effectively cover the market gap by providing an affordable detergent powder to even the low-income earners, and effectively allow Unilever to reach its intended target, that is, low-income earners in NE Brazil. Therefore, the launch of a new product combining characteristics of both laundry soap and detergent powder is deemed feasible in penetrating low-income households in Recife. Additionally, the initiative will enable Unilever to maintain its market share, and avoid cannibalization while promoting consumer’s sovereignty through the provision of alternative detergent options to different categories of consumers.

Case Analysis: Unilever in Brazil

Unilever is a household name in the detergent market. However, the company still faces severe barriers in penetrating the market in North East Brazil because of the rampant use of laundry soap in washing clothes. Moreover, the company specializes in the manufacturing of detergent powder, and as such seeks to produce a detergent powder that can effectively compete with local brands in the lower segment of the detergent market.

Background

The findings of the “Everyman” project portray a distinctive background of the consumer base in North East Brazil. First, the majority of households prefer laundry soap to detergent powder based on income constraints. This is evidence by the response given by Maria Conceição that she can only afford the cheap local brands in relation to purchasing OMO due to financial limitations (Guimaraes and Chandon, 2008). Secondly, the company’s three products; OMO, Minerva, and Campeiro each have had limitations in attracting low-income consumers in NE Brazil. OMO is viewed by such consumers to be beyond their price range. Minerva laundry soap also faces stiff competition from local brands despite the product leading in market share. Lastly, Campeiro is affordable to the low-income earners but it does not offer the luxury of the premium brand as shown in exhibit 5 of the “Everyman” report. Hence the company should launch a handwashing detergent priced midway between Minerva and Campeiro.

Marketing Mix

Product: Unilever should reposition its existing Campeiro detergent because the brand has dismal performance in both market share (Exhibit 7) and consumer expectation (exhibit 5). In doing so, the company will be able to launch a new product at minimum cost. Per Guimaraes and Chandon (2008) developing a new brand would result in a $0.10 incremental marketing cost per kilogram whereas launching a brand extension would lead to $0.05 marketing cost per kg, but repositioning existing rand results in no incremental costs. The product to be launched should be named “Campeiro Plus” because the repositioned product will combine the attributes of laundry soap and a detergent powder in easing the washing of clothes mainly for the low-income earners.

Packaging: The product should be packed in different sixes taking into consideration that low-income earners in Recife prefer simple packaging that helps to store products against humidity. As such, plastic wrapping is more effective than cardboard in minimizing costs, and protecting against humidity. The plastic wrapping costs $0.15 packaging cost per kg whereas the cardboard wrappings cost $0.35 packaging cost per kg (Exhibit 10). Since the target population are low-income households, the production of Campeiro plus should be at minimal operating costs so as to have affordable pricing to the target market.

Price: From exhibit 5 in the report, Campeiro’s attributes perform poorly against consumers’ expectations. On the other hand, Minerva’s attributes perfume extremely well against consumers’ expectations. However, the price of Minerva is regarded to be relatively expensive to low-income earners. Therefore by mixing Campeiro and Minerva attributes in developing Campeiro Plus’ formula, the pricing of Campeiro Plus will also be in between that of Minerva and Campeiro’s prices. Per the Research findings, Minerva costs 82% of OMO whereas Campeiro costs 57% of OMO. The price of “Campeiro Plus” will be an average of Minerva and Campeiro at approximately 66% of OMO’s Price. Therefore, the product to be affordable to all households as “Campeiro Plus” will be cheaper in comparison to other detergent powders shown in Exhibit 7. The price determination of Campeiro plus enables the related perceived quality of the product to be higher than Campeiro detergent as illustrated in Exhibit 9.

Promotion: Campeiro Plus will be promoted using both media advertising and point-of-sale marketing. Media advertisement will be the main promotion strategy. Hence a 70% above-the-line expenditure plan will be applied. The approach is relatively expensive in comparison to non-media advertisements. Nonetheless, promotion via media will ultimately reach the majority of the population as almost all Brazilians are eager television watchers. Furthermore, the target population in Recife comprises approximately 60% illiteracy level; the use of radio will be effective in promoting the product. As such the cost-per contact will be reduced resulting in reduced advertisement costs.

Distribution. The company should use specialized distributors to create and maintain customer loyalty. The approach is also effective compared to the use of generalist wholesalers due to a less variable cost of $0.05 per kg against $0.10 kg to reach the small stores as shown in Exhibit 13. (Guimaraes and Chandon, 2008). Alternatively, the company can incorporate the buy-in strategy to promote brand awareness by using local stores. The majority of Brazilians seek advice on product quality from local store owners. As such, the provision of product coupons and giveaways at local stores will pave way for improved brand awareness.

Campeiro plus is aimed at improving the washing experience, especially for low-income households. Moreover, since Campeiro plus is a mixture of two distinctive products, the company’s goal of tapping into the lower segment of NE Brazil will be realized with minimal cost of production. As a result, the company can apply a similar marketing technique to different categories of income earners.

 

 

Reference

Guimaraes, P. P. & Chandon, P. (2008). Unilever in Brazil (1997-2007): Marketing Strategies for low-Income Consumers. INSEAD: The Business School for the World.