Unilever in brazil

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Unilever in brazil

  1. 1. 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 andsales of Unilever detergent brands available in the Brazilian market.We will explain in a little introduction Unilever the company, its competitor and its performances in the detergent market.Finally, we will present a proposal on what can be done in the North East of Brazil to efficiently perform and get the bestout of the low income consumers.UNILEVERS PRINCIPLESMission StatementOur mission is to add vitality to life.We meet the every day needs for nutrition, hygiene and personal care with brands that help people feel good, look good andget more out of lifeUNILEVER : THE COMPANYUnilever was created in 1929 by the merger of the Margarie Unie company of the Netherlands and Lever Brothers of theUK.At that time of the merger , these companies already had substantial international presence through trading and supplyoperations.One Key reason for the merger was to combine their supply of oils and fats.Unilever is the worlds second largest consumer goods business after Phillip Morris.Unilever has achieved a market capitalization of 64 Billion $ ranks 43 on the list of fortune global 1000 multinationals.It manufactures and sells over 1800 different brands through 300 subsidiary companies in 88 different countries worldwideand employs more than 270,000 people.Unilever expanded from being essentially a laundry soap and margarine business into other mass-market consumercategories such as frozen foods , ice cream, tea, package soups and personal care hygiene.Unilever also followed a strategy of vertical integration to secure key raw inputs and services and entered into operationssuch as oil milling, plantations, chemicals and packaging. They alsa expanded into new countries in Africa, Asia, TheMiddle East and Latin America.Every day, all around the world , 150 Million people choose to make Unilever products part of their lives.Unilevers brands are regrouped into 2 main categories :1- Food category2- Home and Personal CareThe Food category, includes brands such as Flora, Bertolli, Heart, walls ,Amora, Knorr, Lipton, Slim Fast etc...The Home and Personal care category includes Axe, Comfort, Cif, Domestos, Dove, Lux, Omo, Ponds, Rexona, Signal,Close-up, Sunsilk, Organics, Vaseline etc...
  2. 2. As of the year 2000, Unilever decided to reduce its number of brands from 1600 to 400 leading brands, under a strategycalled "The Path to Growth"This will enable the company to concentrate its resources by focusing on producing exciting innovations and imaginativeways to capture the attention of the customers and the consumers.Unilever has many big and serious competitors in its field but the most close and aggressive is Procter and Gamble.Question1Outline the challenge facing Unilevers home care division in relation to the North East region in the late 1990s.Unilever home care division is facing many challenges concerning their ability of growing and sustaining actual marketshare of 86% whereby Cordoso must decide:1- Whether Unilever should divert money from its premium brands to target the lower - margin segment of low incomeconsumers2- Whether Unilever can reposition or extend one of its existing brands to avoid launching a new brand3- What price, product, promotion, and distribution strategy would allow Unilever to deliver value to low incomeconsumers without cannibalizing its own premium brands too heavily .The question of whether marketing and brandingcreate value for really poor consumers. It can therefore be used to illustrate the value of marketing and the marketingapproach, or to explore the frontiers of branding. This can also be in a consumer behavior in order to examine themotivation and decision -making process of low-income consumers. Alternatively it can be used in a global marketing orglobal strategy and management to see how multinational companies adapt their strategy to compete in an emergingcountry.These 3 factors would be faced with certain challenges:1- Unfavorable macroeconomic environment2- Emerging trade agreements3- Regulatory environment uncertaintyTheses challenges would be necessary to face in order promote growth and profitability according to the market structure:Local, Regional, and Global.Our objective is to: Penetrate other segment and leverage market understanding, Gain defensible scale in some regional orglobal segment and consolidate the local MNC.Unilever must deal with the competition available in the market on the 2 sides:-Laundry powder: with P&G Ace product.-Laundry Soap bars: with ASA Brazilian company.Finally when the company identifies its challenges it can put the right solution to be able to reach its long-term goals.Question 2Analyze the market opportunity offered by the low-income segment relevant and describe the relevant consumer behaviorof consumers in this segment.65% of the worlds population earns less than $2000 each per year thats around 4 billion people. But despite the vastness ofthis market, it remains largely untapped by multinational companies .The reluctance to invest is easy to understand.Companies assume that people with such low incomes have little to spend on goods and services and that what they dospend goes to basic needs like food and shelter. But the buying power of poor communities is actually quite large. China,India, Brazil, and gradually South Africa become new engines of global economic growth, promoting prosperity around theworld .The resulting decrease in poverty produces a range of social benefits, helping to stabilize many developing regionsand reduce civil and cross border conflicts.This is achievable through stimulating commerce and development at the bottom of the economic pyramid, MNCs couldradically improve the lives of billions of people and help bring into being a more stable, less dangerous world .Bigcompanies are not going to solve the economic ills of developing countries by themselves of course. But they will be acatalyst that will help bring economic development to the country.Consumer behavior can be summarized by:-Sensitive to price and high degree of economic rationality.-Low family budget, with higher participation in the " informal economy "
  3. 3. -Psychographic factor are present and very relevant.Markets at the bottom of the economic pyramid are fundamentally new sources of growth for multinationals. And becausethese markets are in the earliest stages, growth can be extremely rapid.Unilever still reluctant and uncertain whether it should enter to the low-income segment or not. And this reluctanceaccording to Fernanda is related to the fear of directing money from their premium brands to invest it on a low price brandwhereby in the short term this would cannibalize their high margin sales with lower margin ones .On the other hand Laerciodefend his point of view of investing in the lower income segment by focusing on their past experience in India when theylost their positions for their competitors (P&G) only because they didnt think in a good strategy concerning the low incomesegment which is different to what P&G did .Question 3What options does Unilever home care division face at the end of the 1990s in relation to the low income segment in Brazil?Analyze the pro and cons of each of the options in terms of both its marketing and financial implications.Unilever Company faces 4 options:A-Develop a cheaper version of the Omo brand.B- Repositioning Minerva further down market in relation to OmoC-Re launch Campeiro as a low-cost brandD-Develop a new brandOption "a" cannot be implemented since Omo is perceived as a high quality high price product, the company cannotdevelop a cheaper version since consumer will start confusing between the 2 version, thus Omo product will not be that veryhigh perceived.Option "b" It might be a less costly option to implement since it is already present in the mind of people but the negativeside is since already Minerva product is not perceived very good as being a medium quality and not very well positionedand repositioning it further down will reduce its market share from 11% to even lower thus allowing competitive P&Gproduct higher perceived to take its place (Ace and Bold).Option "c" will be very costly and ineffective since already it is perceived as a low cost and low quality thus changing thisimage in people mind will take a long time to achieveOption "d" develop a new product that will be targeted to the low income consumer that will be based on the following swotanalysis of the company:SWOT ANALYSIS1- Strenghts:- Leadership positions in the Detergent powder segment:With 75 % of the market, Unilever brands (Omo, Minerva and Campeiro are ranked first , second and fourth respective interms of Market Share)- Growth rate : The Detergent Market segment is registering a 17% annual growth- Brand Recognition:Unilever brands are well known and perceived by Brazilians.Most of Brazilian have either seen or tried one of Unilever brands in this segment.We have good rates of Top of Mind, Brand knowledge and Market penetration2- Weaknesses :- Distribution: Unilever is facing a big Distribution issue in the NE; Unilever detergent skus, are not present on shelves inapproximately 75,000 small outlets.Knowing that Northeasterns are not fund on going to big accounts such as Wal mart, Carrefour or Tesco, but prefer going tosmall stores, the lack of Distribution is an extremely serious issue- Price : Unilever premium brand, Omo, is perceived as a very expensive product, while the alternatives presented byUnilever are perceived as having a lower quality- Consumer Expectations : Excluding Omo, other Unilever skus have problems in perception, and are depasse by P&Gbrands (Ace and Bold)3- Opportunities:- The Northeastern market is not saturated yet: There is a big possibility of Growth
  4. 4. - Purchasing power of the low income has increased by 27%- The North East is a 48 M market ===) Big Potential81,250 Tons of soap used versus 42,000 tons of Detergents- Brazilian government encouraging investments in NE , by providing tax incentives.- Frequency of Wash : Northeastern women wash frequently (Every day). Cleanliness is part of their culture- 28% of Northeasterns have washing machines4- Threats:- Economic situation: Brazils economy is facing big problems in terms of Unemployment rate, reaching its peak (12.2%),and the decrease of the avg wage:These key factors will deffinetly influence the purchasing power of a group of Brazilian- Socio-Cultural differences too strong to standardize:With differents GDPs , perceptions, habits, norms , needs and with a rate of illetrate variying from a region to another,standardizing seems to be impossible.The solution is to Tailor-made strategies and operations , depending on the situation and need of each region- Home made detergents very cheap- Ace, serious P&G competitor, ranked third in the Detergent market, with good distribution and constant marketingactivitiesPros* 83% of the NE population (43 M) are low income consumer == 40 M* Low per Capita usage of detergents (11.4 kg vs 12.9 kg)* Pre-empt competition* Acquire skills to use elsewhereCons* Potential of Cannibalization in Unilever sales* Lack of Success of Campeiro === Poor image* Average margin of Campeiro is 0.15 $/ pc vs. 0.55 $ for OmoSummary of the pro and consQuestion 4Give details of the marketing mix that needs to be implemented in order for the launch of a Unilever brand targeted at low-income consumers in Brazil to succeed.First of all, speed is the name of the game (as you said Dr.Touma), and Unilever, being the master of the game, should notallow its competitors to lead the detergent category.Unilever should lead the way, and others must follow.In, the case of the North East, we are in a middle of a low Income consumer, who, in Marketing terms represent greatopportunity for a big and quick growth.Therefore, Unilever must optimize its chances in order to gain that consumer of low income, who is likely to invest on.Many alternatives or questions can be studied and discussed:* Should Unilever create a new Brand that should satisfy the low income consumer?* Should Unilever revue its positioning regarding its 3 detergents SKUs ?* Should Unilever develop a new value proposition?* Is there any cannibalization within its actual brands?* Can the Detergent powder market be extended?* Is the Marketing Mix done accurately and respected on the field?* Is there any actual opportunity on the market that can be beneficial to Unilevers detergents?
  5. 5. Finally, last but not least:Is Unilever doing its home work properly, and in line with its Motoie Is Unilever responding to its consumer needs ?Are Unilever consumers satisfied ?Therefore, two possibles strategies can be considered :1-The Push strategy (Pushing the product to the consumer)2-The Pull strategy (Pulling the consumer to the product)4.1 )The Push strategy :Brazilians are convinced that the best detergent available on their market is Omo.There is no competitor for this brand image and perception wise.However, Omo is perceived to be very expensive by low income consumers, who cant afford buying it .Therefore, the main focus or objective should be to create for these low income consumers their own version of Omo.Knowing the big portfolio of Unilever worldwide, two options are to be considered :a) Unilever can create a new Brandb) Unilever can launch a new brand from its portfolio in BrazilTaking into consideration the cost of the R & D for creating a new brand, it will be wiser to launch in Brazil, a brand whichsatisfy the most the needs of low income consumer.The best alternative is to select a brand already listed and established in a neighboring country (In Latin America) withsimilar culture and needsViewing Unilever detergent brands in Latin America, we must select a brand which is perceived between Omo andCampeiro.Thus, either Nevex or Ala must be selected.Taking into consideration that Ala was selected, the following Marketing Mix must be implemented :Alas target group are consumers who buy local brands, and detergents filled into bootles.Product :Packaging in two sizes 1 Kg and 500 Gr in the plastic bottles, with an attractive designPrice :
  6. 6. Of course cheaper than Omo, but even cheaper than Campeiro.Having a cheaper packaging formula than Campeiro and targeting the consumers of local or non-branded products, Alasprice must be between 1.4 and 1.6 $ as a wholesaler pricePromotion :The main focus should be on the below the line concept.Unilever should focus on having Instore promotions and a good visibility through extra and secondary locations in the mostimportant SMALL stores.Each and every consumers who enters into a small store must realize that Unilever has created for him, his own version ofOmo.Nonetheless, a studied Atl campaign will help to deliver the right message for the low Income consumers throughoutBillboard and TV ads.Low Income consumers must see Ala as being an Omo in a plastic bottle consees just for them.The ATL / BTL ratio would be 40 / 60(40 for the ATL and 60 for the BTL)Place :One of the major weaknesses of Unilever in NE was Distribution.Unilever was focusing on implementing and displaying their brands in big accounts and forgetting about small stores (kindof outlets where low income consumers shop)Therefore, an exclusive and specialized distribution must be implemented in ALL the small stores of the NE region for thedetergents category.NB : ALA should be also distributed in the small stores of the SE of Brazil, because we must not forget that 20% of thepopulation of the SE are class "E" people4.2 )The Pull strategy :.The detergent powder market consists of 7 players, including 3 Unilever brands which are Omo, Minerva and Campeiro,having 75% of market share all combined.Any additional Unilever sku would definitely create cannibalization, since Unilever covers the whole market with :1-One brand for high income consumer, which is Omo2-Another one for Middle income consumer, which is Minerva3-Last one for low income consumer, which is CampeiroWith one reference / Level of Income, cannibalization will be avoidedThe Pull alternative is the following :First of all, Unilever must look for extending and enlarging the Detergent powder market.This can be done, only by influencing new users, i e , Unilever must upgrade the users of Laundry soap for becomingdetergent usersThe following chain must be adopted:Laundry soap ===) DetergentUser UserOnce the consumer becomes a detergent powder user, Unilever must focus on upgrading his needs, in order to match its
  7. 7. profitability and sales targets:The following chain must be adopted :Campeiro ===) Minerva === ) OmoAs a summary, Unilevers aim will be to bring the low income consumer, from being a laundry soap user, into an Omo user,of course this is a long term strategy that may take time, but it is feasible.Therefore, the key to succsess depends on a single major fact which is :THE WASHING MACHINE.Without a washing machine, consumer will never ask for a detergent: He will stick to the traditional way of washingclothes.Once washing machines are available in their domiciles, the presence of a detergent will become a need , and more than thata primary need, knowing how much importance low income consumers attribute to cleanliness.The whole idea, can be concretized through an ATL campaign, which intitles the advantages of the washing machines interms of Time, prestige and of course a better resultAlong with this campaign, we can include as well a message communicating the added value of our product.Therefore, what should be done is a Billboard campaign, since we can control it geografically (North East) with a messagesaying that :A Washing machine saves you from scrapping and gives you timeAnd Campeiro saves you money and gives you better resultsNB: Never use in an ATL communication the term of "LOW INCOME", because it gives the purchaser a sentiment ofinferiorityWe can use instead " Campeiro, a detergent for every body" for exampleIn parallel to this ATL, a BTL program should be conducted in order to get the best out of this campaign.In store promotions are indispensable for the success of this campaign.Since low income consumers are very price sensitive, Unilever can propose its consumers to buy more for a cheaper amountof money:Example : Buy one Campeiro 1 KG, get one additional 500 gr FOCBuy one Campeiro 1 KG at a discounted priceIn this case, Campeiro will earn the sales of its direct competitors which are Pop and Invicto, who have the same whole saleprice, and will of course attract the new comers to buy it.In addition, Unilever can agree with the best known Washing machine dealers to implement in their show rooms anexclusive stand for its detergents where will be displayed Omo, Minerva and Campeiro.Therefore, whenever someone buys a washing machine, the seller would advise him to use one of Unilever brands, directlyon the spot.Once we create the need of a detergent powder, we must assure distribution.Distribution is THE big weakness of Unilever in the detergent segment.Knowing that North Easterns are not favorable on going to shop from big outlets and chaines, they prefer going to smallstores.But the big issue is that Unilever detergents are absent from 75,000 stores.In other words, there are 75,000 stores where are available P&G brands as well as local brands and Unilever is absent.The solution is to cover all these small stores within the shortest period of time.Unilever should deal with specialized distributors, or have its own units of vans, visiting every single store trying to list allUnilever detergent brands.
  8. 8. If he is not capable on introducing all 3 , he must list Campeiro which is the cheapest.But one thing is certan : If ACE is available in a small store, we must list all three brands, since the positioning of Ace issimilar to Minerva, as well as its price.Regarding Omo, it must be present wherever Ace is available in order to allow the consumer to upgrade its detergent .NB : If Ace or Minerva is available in a small store, that means that there is a demand for such brands = Consumers canallow themselves to pay more than 1.7$ for a detergent(1.7 $ is the price of Campeiro, Pop, Invicto)In addition, Unilever should use its portfolio sometimes, to pressure the store manager to have the exclusivity in thedetergent section, in other terms, the detergent section will include only 3 references which are Omo, Minerva andCampeiro.In that case, the consumer wont have the choice but to buy one of Unilever products.Regarding the price, Campeiro is our focus brand for the low income consumerThe details of pricing of Campeiro are as follows:Formulation cost0.9$Packaging cost0.35$Promotional cost0.2$Total cost 1.45$:Unilever is selling Campeiro at a whole sale price of 1.7 $ which gives them 17.5% of marginIn our specific case, Unilever should invest more in terms of Promotional cost but without increasing its Whole sale price1.7$ is a very strategic price we must never decrease or increase.== Unilever should cover the additional amount of promotional expensesKnowing that this operation is limited in time (One year strategy) it should not consist a problem for Unilever, especiallythat the results on a long term are extremely favorable.

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