Case report Unilever in Brazil, Part II (1997-2007) Marketing Strategies to conquer North Eastern market Group:NAKED Members:Nico Schwendinger Alexandra Klopf Konstanze Horak Elif Kurtulus David Muhr Date:28 November 2009 Table of contents 1Introduction3 2Problem Statement3 3 Alternatives3 3. 1 Turn something old into something special3 3. 2 Mix & Mingle to form something new4 3. 3Keep it simple! 5 4 Issues5 4. 1 How does the product fit the way of washing clothes? 5 4. 2 How do the products have to be promoted to best reach customers? 6 4. 3 How can Unilever best skim the market without cannibalizing its portfolio too much? 4. 4To what extent does the company have to adapt its distribution to reach low-income consumer? 7 5Conclusion7 6Appendix8 1Introduction Unilever, the market leader of detergents in Brazil, does not want to rest on its laurels. Therefore, the company’s management has decided to conquer the North Eastern market (see Unilever in Brazil, Part 1), which Unilever has not yet been able to saturate. Most of all, the low-income segment seems to offer further growth potential, which the company is willing to make use of and thus laying the foundations to prove itself ultimately as the clearly predominant market leader in Brazil.
After familiarizing the reader with the existing problem situation, this case study presents alternatives and discusses relevant issues. This approach aims to weigh the alternatives according to their strategic capability of solving the problem situation and finally recommends the most advisable way of acting in a conclusion. 2Problem Statement Admittedly, even in the North Eastern market Unilever seems to perform pretty well. On the other hand, as already mentioned, the company has still not managed to attract the local low-income customers.
This is probably not only due to the fact that Unilever Brazil lacks substantial experience in this segment as there are huge differences between its typical Brazilian customer and this low-income consumers, but also to obvious barriers in distribution and promotional activities in this market. Unilever now deals with the challenge to find the strategy that constitutes of the right balance of their marketing mix elements in order to address this customer segment appropriately and therefore represents the key to enormous future success. 3Alternatives . 1 Turn something old into something special In order to conquer the Northeastern market, Unilever may consider repositioning its cheapest brand Campeiro. Campeiro is currently not very well perceived by Northeastern Brazilians. Especially in terms of cleanliness, whitening productivity, smell and softness (the most important attributes of detergent powders for Northeastern Brazilians) Campeiro is ranked well behind other detergent brands. Therefore, an intensive new marketing campaign should be started in order to discard Campeiro’s bad image.
Campeiro’s formula may be changed slightly and scents may be improved. Although the product is changed only a little bit, „the new formula“ would be advertised aggressively. Unilever may also consider adapting the brand name to Novo Campeiro in order to emphasize the message of a new and improved Campeiro. Advertising messages would strongly promote Campeiro’s new cleaning and whitening power and its irresistible scent. New package sizes would be created in order to better fit customers’ needs. Unilever would keep Campeiro’s current retail price of $ 1. 70 also for Novo Campeiro. $ 1. 0 already is very low compared to most other detergent brands, and with its improved formula and scent, Novo Campeiro even offers (promotes) an increased value for the same price. Although this might be challenging, Unilever should distribute Novo Campeiro to all of the approximately 75,000 small outlets across the Northeast. Most of the Northeastern Brazilians shop in small stores instead of big supermarkets. Therefore, it is crucial for the success of Novo Campeiro to be sold all over the Northeast. 3. 2 Mix & Mingle to form something new Unilever may also consider creating a new detergent brand for the Northeastern market.
The detergent powder formula of the new product would be in between of Unilever’s existing brands Minerva and Campeiro. Therefore, it would be designed to appeal to customers who prefer detergents superior to Campeiro but cannot afford buying Minerva. The new brand name would be Cheivadinho, which is a combination of the words „cheiroso“ (smelling good) and „lavadinho“ (cleanly washed). By using this brand name, Unilever combines two of the most important detergent attributes for Northeastern Brazilians, namely cleanliness and good smell, in its product name.
In order to promote Cheivadinho, an extensive new advertising campaign with a strong emotional appeal would be launched. Washing clothes is sort of a social activity for many Northeastern women. They enjoy meeting and chatting with friends while doing the washing in public laundries or rivers. Therefore, a strong effort would be put on transmitting this pleasant feeling in the advertisements. Commercials may show a group of women chatting and having a good time at a local public laundry while their clothes are being washed. The initial retail price of Cheivadinho would be $ 1. 99.
Thereby targeting consumers who can but do not want to buy Campeiro ($ 1. 70), but cannot afford Minerva ($ 2. 40). As described in Alternative 1, Cheivadinho should be distributed all around the Northeast. 3. 3 Keep it simple! Instead of adding another detergent to its product range, Unilever may consider introducing a new laundry soap for the low-end market in the Northeast of Brazil. This could be a profitable option for Unilever as the Northeast of Brazil has a huge market potential for laundry soap bars. Additionally, production costs for laundry soaps are far lower compared to those of detergent powder.
The brand name of the new laundry soap would be Simlavo and it would be marketed as „Simplesmente alvo! “ (Simply clean). Therefore, the advertising campaign should be as simplistic as possible, focusing mainly on the cheap retail price with the main message: Clean clothes at the lowest price. Simlavo would be sold at $ 1. 15, meaning $ 0. 5 lower than competitive products. This extremely low retail price can be achieved by keeping everything as simple as possible Production should be quarried out quickly and efficiently, using just the necessary ingredients and discreet scents and leaving out all the rest.
Advertising costs should be kept as low as possible. Ads are designed in a simple way, just showing the product, the slogan and the price, for example. TV-commercials should be created in a similar way and may be shown only during the day. The main target group for laundry soup is housewives, who also watch TV during day quite frequently. Therefore, it is not necessary to spend money on expensive commercials during prime time. 4Issues 4. 1 How does the product fit the way of washing clothes? As the procedure of washing clothes is very particular in the Northeast, analyzing this point carefully is important.
Firstly, a main issue is that only a few households possess a washing machine. In Recife, a two-million-resident city the penetration amounts to 28%. Therefore, the procedure of washing is done in a traditional way and hence highly labour intensive: Clothes are scrubbed using laundry soap, than bleach is added to remove stains and detergent powder is only used to finish and give a good smell. Moreover, washing clothes has a social impact. First, people in the Northeast attach a symbolic value to cleanliness and it is important for their self-esteem.
As it is highly labour intensive it is seen as an indication of the dedication of the mother to the family. As well, low-income consumers own fewer clothes, so these are washed more often (up to 5 times a week). Secondly, washing is a social get-together as it is often done in a public laundry, at a river or pond and therefore perceived as pleasurable. As a matter of fact, although the penetration of detergent powder and laundry soap is almost the same in the North-eastern market, the quantity used differs tremendously. The new laundry soap Simlavo would perfectly fit the traditional procedure of washing clothes.
However, for the newly advertised Campeiro and the new detergent Cheivadinho, it is a mean barrier, that more than a quarter of the households is not equipped with washing machines. Hence, promoting the detergent in combination with washing machines will be a challenge. 4. 2 How do the products have to be promoted to best reach customers? Promoting Simlavo would be an easy task as ads and TV commercials would be designed in a simple way, not involving many costs. However, as mentioned in the issue above, communicating both detergent powders most efficiently will be complex.
But just as such a high value is attached to washing and cleanliness, consumers will be convinced that a detergent powder will better serve their needs. Campeiro or Cheivadinho will be advertised directly at the spot of consumption in public laundries and dispensers in the laundry could be filled with the product. The superior quality product Cheivadinho will be introduced in a campaign that will directly focus on the consumers needs of cleanliness, good smell and their need for washing machines. A raffle for 250 washing machines will take place. With every 500g package a lottery ticket will be included.
Thus, an awareness for the need of washing machines will be risen. 4. 3 How can Unilever best skim the market without cannibalizing its portfolio too much? A major concern that had been voiced by Unilever’s managers prior to the decision of entering the north-eastern market for low-income consumers was the possibility of cannibalising the company’s existing brands. Considering the firm’s market share of 75% in the north-eastern region it seems very likely that by repositioning an existing brand or launching a new product some cannibalisation will occur.
Nevertheless we must bear in mind that Unilever’s main goal is to reach the low-income consumers, who are predominantly using laundry soap for the main washing process at this stage, using a little detergent only at the end. Even if the laundry soap market is a very large one, profit margins are very slim and therefore not very lucrative. Consequently Unilever must try to persuade costumers to change their habits and make detergent their main cleaning product. To achieve this Unilever keeping mind following things.
First of all it is crucial to demonstrate that using detergent is actually more effective than the method that consumers have been employing hitherto. Thus extensive advertising that shows the benefits of the product will be necessary. Moreover price is a very important criterion. It must be low enough so that costumers can afford it, but high enough in order for it not to be perceived as low quality, and to prevent cannibalisation of existing brands. This suggests that the new or modified product should be cheaper than Minerva, which is too costly for low-income consumers, but slightly more expensive than Campeiro, which has a cheap appeal. . 4 To what extent does the company have to adapt its distribution to reach low-income consumer? Low-income Consumers in the Northeast rarely shop at large supermarkets like Wal-Mart and Carrefour, but rather at small outlets that are spread throughout the region. This is a big problem for Unilever who, despite having established a first-rate network of generalist wholesalers has no access to these small shops. Subsequently it seems inevitable for the company to modify its strategy and to start contracting with special distributors.
This would not only enable a more efficient and direct distribution to consumers, but would also give way to an extensive point-of-purchase activity. Not to forget that this would reduce the cost of distribution by 50%. 5Conclusion 6Appendix Exhibit 1 Unilever Advertisements 1. ) Unilever advertisement that tries to encourage people to buy washing machines 2. ) Unilever advertisement to motivate people to use washing machines by emphasizing the upcoming social interactions in launderettes whereas washing at the riverside getting rarer Where do you prefer to wash? Exhibit 2
Distribution Channel Analysis General Wholesalers Specialized Distributors Exhibit 1 The macro-environment of Unilever in Brazil: PEST-ANALYSIS * Relative political stability over the last 2 decades * Government incentives to invest in the Northeast * Influence of Mercosur (additional incentives, subventions, cross-border trade or expansion) * Cycles of deep recession and strong economic recovery in the past * New currency (the Reais, R$) since 1994 * Economic boom in the following years growing purchasing power among people * Huge potential of Brazilian economy Growing market of detergent powder in Northeast (annual rate of 17%) * Highly fragmented soap market in the Northeast * Competition through Proctor & Gamble * Women do the washing * Huge regional differences – two clusters on the Atlantic coast: Northeast| Southeast| 40% illiteracy| 15 % illiteracy|
65% mixed African and European origins| 30% mixed African and European origins| 28% of households own a washing machine| 67% of households own a washing machine| 73% of women think bleach is necessary to remove fat stains| 18% of women think bleach is necessary to remove fat stains| Clothes are washed approx. times a week| Clothes are washed approx. 3. 9 times a week| Washing as a public meeting point| Most women washing alone at home| People attach much value to cleanliness| Cleanliness less important for self-esteem and social status| * Telecommunications industry barely tapped in the Northeast * Problems regarding distribution network, supply-chain-management * Marketing difficulties to reach customers in the Northeast Exhibit 2 The micro-environment of Unilever in Brazil CUSTOMER-ANALYSIS COMPETITORS’-ANALYSIS
Exhibit 3 SWOT-ANALYSIS of Unilever Brazil Internal origin| Strengths * long presence in market, since 1929 * leadership position with 81% market share * high brand recognition * high market penetration * high media advertising * high reputation| Weaknesses * expensive products – like OMO * below national average in Northeast * internal resistance * possible effect on corporate reputation * cannibalization of high margin sales * distribution problems to small outlets| External origin|
Opportunities * not saturated Northeastern market * 48 million potential consumers * economic recovery – new currency * tax incentives through entering Northeast * more cloth washing in Northeast * symbolic values of cleanliness * growing consume of powder detergent * fragmented soap market| Threats * risk of local brands targeted at low-income consumers * less washing machines Northeast * R&D and marketing expertise of P&G * competition of P&G in Northeast * economic deterioration * socio-cultural differences between Southeast and Northeast|