Marketing Strategies for Low Income Consumers Unilever Brazil
1. MG506
Global Marketing
Unilever in Brazil (1997-2007)
‘Marketing Strategies for Low-
Income Consumers’
Lecturer: X
Date: X
Group E:
Cian Corbett xxx
David Mc Weeney xxx
Seánpaul Walsh xxx
3. 1 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 the detergent 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 and Gamble 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.
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4. 2 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
that particularly 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,
Technological - 72% of NE Brazilians don’t own a washing machine compared to 33% who
don’t have one in the South East.
Political Economic
PEST
Social Legal
4
5. 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 high
context cultures “use and interpret more
of the elements surrounding a message to
develop their understanding of that
message” (Hollenson, 2007; P221).
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 (Fournier, 1998).
.
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6. 3 Northeast Market Attractiveness
An analysis of the Northeast versus the Southeast of Brazil can highlight the attractiveness
of the region for Unilever.
Min Monthly Percentage of Population # of Monthly Yearly MW Yearly
Wages Population Figure Monthly MW in $ 1996 MW in
(MMW) MW's 1995
Income Class 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% 4,320,000 7.5 $525.00 $6,300.00
B 5% 2,400,000 15 $1,050.00 $12,600.00
A 3% 1,440,000 20 $1,400.00 $16,800.00
Table 1 - Income Analysis Northeast Brazil
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 Detergent @ $1.70 as % of Yearly Wage Detergent @ $1.70 as % of
1996 income 1995 income
$840.00 2.31% $661.42 2.93%
Table 2 - Percentage of spend on cleaning agents
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.
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7. Market Values
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, (See Table 9 - Calculations for SE market value) the reason for such
variation is down to regional differences in laundry habits. In the north soap
Forecast 1996 1997 1998 1999
Detergent Market (volume in 42,000 49,140 57,494 67,268
tonnes)
Detergent Market $ Value $106,000,000 $124,020,000 $145,103,400 $169,770,978
Growth Rate 17%
Soap Market (volume in 81,250 86,125 91,293 96,770
tonnes)
Soap Market $ Value 102,000,000 108,120,000 114,607,200 121,483,632
Growth rate 6%
Table 3 - 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. See Error! Reference source not
found. -shows the same forecasts applied to all of the existing brands in the Unilever
portfolio. Some of the main findings from that analysis included the relatively poor showing
of the 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 Selling Price $1.70
Campeiro Market Share 6%
Campeiro (volume in tonnes) 2,520 2,948 3,450 4,036
Campeiro per KG $0.25
Campeiro Profit after Costs $630,000 $737,100 $862,407 $1,009,016
Table 4 - Campeiro Sales Forecast
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.
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8. 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 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.
However, their current low income brand Campeiro is performing poorly as indicated by
Table 4 - Campeiro Sales Forecast. Exhibit 5 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. The issue of launching a new brand will be relooked at in section 5 of the
report where the reasons for doing so are discussed in greater detail. Price is set at $2.10
with a margin of $0.20. Details on pricing can be found under the pricing aspect of the
marketing mix, Section 7. 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 it is 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. See pricing section of Marketing Mix for more information on the
pricing issues for a new brand in the soap market e.g. Table 8- Pricing and Brand Profit
Margin Analysis for Soap Market.
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.
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9. Detergent Market 1996 1997 1998 1999
New Brand Profit 0 $393,120 $919,900 $1,479,890
Market Share 0% 4% 8% 11%
Campeiro Market Share (inclu new brand) 6% 4% 2% 0%
Percentage Decrease from Cannibalization 0% 33% 66% 100%
Profit (incl new brand) $630,000 $493,857 $293,218 $0
Profit (not incl new brand) $630,000 $737,100 $862,407 $1,009,016
Profit level of Campeiro and New Brand $630,000 $886,977 $1,213,119 $1,479,890
Table 5 - Financial Results of Targeting NE with New Brand
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 years the financial input will shift from Campeiro to the new brand and
eventually all income from the low income consumer market will be as a result of the new
brand.
Long Term
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 can be seen from Table 5, there is long term financial growth in the strategy with the new
brand 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
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10. figure has the potential to be even higher should the purchasing power of low income
consumers increase even further.
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11. 4 Brand Portfolio
WP
Market Brand Market Mind
Brand Type Price/per
Share Knowledge Penetration Awareness
KG
OMO .52 Detergent 100% 97% 72% 3.00
Minerva .17 Detergent/Soap 100% 91% 16% 2.40
Campeiro .06 Detergent 99% 66% 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. It is important
to note that Campeiro would appear to be a struggling brand. The brand is established
however has been recognised for being price competitive. This indicates to Unilever that
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12. any change in market share will be difficult to achieve for this brand as price is the
competing variable and not quality. We believe that from our research that Campeiro will
continue to struggle in growing within the competitive environment and Unilever must act
now in order to protect its cumulative market share. See forecasts below.
Forecast 1996 1997 1998 1999
Detergent Market (volume in 42,000 49,140 57,494 67,268
tonnes)
Total Market Value $106,000,000 $124,020,000 $145,103,400 $169,770,978
Growth Rate 17%
NE Share 75%
OMO Selling Price $3.00
OMO Market Share 52%
OMO (volume in tonnes) 21,840 25,553 29,897 34,979
OMO Margin per KG $0.65
OMO Profit after Costs $14,196,000.00 $16,609,320.00 $19,432,904.40 $22,736,498.15
Minerva Selling Price $2.40
Minerva Market Share 17%
Minerva (volume in tonnes) 7,140 8,354 9,774 11,436
Minerva margin per KG $0.35
Minerva Profit after Costs $2,499,000 $2,923,830 $3,420,881 $4,002,431
Campeiro Selling Price $1.70
Campeiro Market Share 6%
Campeiro (volume in tonnes) 2,520 2,948 3,450 4,036
Campeiro per KG $0.25
Campeiro Profit after Costs $630,000 $737,100 $862,407 $1,009,016
Unilever Actual Revenue $86,940,000.00 $101,719,800.00 $119,012,166.00 $139,244,234.22
(Detergent)
Unilever Total Profits $17,325,000.00 $20,270,250.00 $23,716,192.50 $27,747,945.23
(Detergent)
Soap Market (volume in 81,250 86,125 91,293 96,770
tonnes)
Soap Market Total Value 102,000,000 108,120,000 114,607,200 121,483,632
Growth rate 6%
Minerva Selling Price $1.70
Minerva Market Share 19%
Minerva (volume in tonnes) 15,438 16,364 17,346 18,386
Minerva Revenue $26,243,750 $27,818,375 $29,487,478 $31,256,726
Minerva Margin per KG $0.30
Minerva Profit after Costs $4,631,250 $4,909,125 $5,203,673 $5,515,893
Table 6 - Sales Forecasts Northeast Brazil
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13. The above table illustrates the forecast sales over the next three years of all existing brands
in both the soap and detergent market of the Northeast.
As highlighted earlier Campeiro is yielding a small return and given the nature f the
competing variable, price, it is hard to see where they will pick up ground if or maintain if
new entrants come in with a better offer at low price. As OMO and Minerva are competing
in higher segments they are sustainable and do not need to alter their product.
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14. 5 Options
There are three options open to Unilever.
Brand Extension
Brand Repositioning
New Brand
Brand Extension
A well planned and well implemented extension of one of their three brands could offer
Unilever a number of advantages. As we are targeting the low income segment and OMO
and Minerva are higher priced it would be foolish to tamper with those brands as they have
a good audience also. 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
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15. 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:
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
In this case there is a cost to operating an extension. Please see breakdowns below of each
option.
Current Margin OMO Minerva Campeiro In-between
Formula Formula
FC $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
(WP)
Margin per KG $0.65 $0.35 $0.25 $0.35
New Brand Viver
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 per KG - $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
Brand Extension
Incremental PC - $0.05 $0.05 $0.05
Distribution - $0.05 $0.05 $0.05
New Cost - $2.15 $1.55 $1.85
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16. New Margin per KG $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
Brand Reposition
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 per KG $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
Table 7 - Brand Profit Margin Analysis Detergent
The above highlights the different margins that can be charged if a new brand, brand
reposition or brand extension were chosen. An additional $0.05 can be removed from the
margin if the alternate distribution strategy of generalist wholesaler was chosen.
Below is the breakdown for the soaps market.
Soap Margin Minerva New
Formula
FC $1.00 $0.82
PKC $0.15 $0.15
PC $0.25 $0.25
Total Cost $1.40 $1.22
Wholesale Price $1.70 $1.40
(WP)
Margin per KG $0.30 $0.18
New Brand
Incremental PC - $0.10
Distribution - $0.05
New Cost $1.40 $1.37
New Margin per KG $0.30 $0.03
Year 1 Sales in KG 15,437,500 3,445,000
Yearly Profit $4,631,250 $98,428.57
Brand Extension
Incremental PC $0.05
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17. Distribution $0.05
New Cost $1.50
New Margin per KG $0.20
Year 1 Sales in KG 3,445,000
Yearly Profit $689,000
Brand Reposition
Incremental PC $0.00
Distribution $0.05
New Cost $1.45
New Margin per KG $0.25
Year 1 Sales in KG 3,445,000
Yearly Profit $861,250
Table 8- Pricing and Brand Profit Margin Analysis for Soap Market
The formulation price of $0.82 is derived from calculating the percentage difference in Formulation
cost for the Minerva brand ($1.40) and the new formula for Viver ($1.15) and taking this percentage
of the formulation cost for Minerva Soap ($1). Incremental promotion costs and distribution costs
put the margin for a new brand at $0.03. The profit resulting from this can be seen as $98,428.57 a
sum which due to the low growth rate of 6% in the soap market does not increase at a satisfactory
level and is tiny in comparison to the profits generated by the Minerva brand of soap.
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
Changed market conditions
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
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18. this up as even a successful reposition may not yield significant returns over another strategic option
i.e. New Brand.
New Brand-Viver
We believe that the most profitable strategy for breaking into the
low cost market segment is to launch a new brand. We propose
Viver. At present our low income brand Campeiro is simply 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 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 Viver 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. 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. As seen above we have valued Campeiro and projected that
Viver will exceed the old brand.
Regi Population Unique SE KG per customer SE Yearly Cost per Value of SE
on Customers per per year customer market
year
SE 73,000,000 5,603,070 12.9 $27.09 $151,787,171
6.8 $8.16 $45,721,052
Detergent Market (volume in tonnes) 42,000
Consumption NE KG # of people buying detergent in NE # of people buying soap in NE
Detergent 11.4 3,684,211 3,982,843
Soap 20.4 8% 8%
Table 9 - Calculations for SE market value
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19. The market value of South East Brazil is obtained by calculating the number of unique
buyers in the NE market. This is done by dividing the number of KG sold in the market
(detergent and soap) and dividing by the average KG usage per customer, given in the case.
The figure resulting from this is the percentage of the population who serve as the
purchasers of the product in the northeast.
This percentage is then applied to the Southeast and the reverse procedure is carried out.
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20. 6 Marketing Mix
Product: Vivar, Brazilian term for Life.
Viver 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 Viver will be in line with Attributes that are most important to NE
consumers.
1) Cleanliness, whitening, Productivity
2) Smell, softness
3) Ability to remove stains
With this in mind Unilever’s formula for Viver will be priced half way between Minerva and
Campiero. To avoid cannibalisation of Minerva, Viver would omit lesser demanded
attributes such as Dissolving Power and Harm to Colours which will be decreased to an
acceptable level. The strategic map would look as follows:
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21. Packaging:
While Viver is pursuing a low cost strategy, the long term
strategic aim is to dominate 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, Viver will forego the 30%
saving that would accompany a plastic sachet package as LIC’s
regard anything not in a cardboard package to be second rate.
Considerations have also been made for the weekly budget of
the LIC and consequently Viver 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 Viver 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 core competency of
Unilever that could be leveraged in other markets.
While the cost of a specialised dealership is 5c per kg lower than a Generalist Wholesaler
distribution agreement, there is a distribution exclusivity clause for negotiation in the
contract. This would be reviewed with the core issue of protecting the distribution network
of Unilever’s primary brands OMO and Minerva. If this distribution agreement threatened
the market share of these brands then the company would have no choice but to pursue
distribution through General Wholesaler which would have a less focused strategy and
would 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”.
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22. 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.
Viver would seek to emphasise this in the promotional strategy in an extremely positive
message: “Viver, Vida Parece Brillhante”, (Viver, 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 Viver. The imagery would
communicate health, happiness and pride in a job well done reiterating that Viver is the
perfect brand partner in the pursuit of resolving the life theme of dedicated mother
(Fournier, 1998).
As detailed in the Price section, 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 per KG $0.35
Promotional Costs per KG $0.25
Total Cost $1.75
Wholesale Price (WP) $2.10
Margin per KG $0.35
New Brand Viver
Incremental Promotional Costs per KG $0.10
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23. Distribution Costs per KG $0.05
New Cost $1.90
New Margin per KG $0.20
Table 10 - Pricing Structure
The formulation cost is derived from ingredients providing a product that is in-between Cambeiro
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 in Table 5 - 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.
Yearly Detergent @ Soap @ $1.20 Yearly Detergent @ Soap @ $1.20
Wage $2.10 as % of as % of income Wage $1.70 as % of as % of income
1996 income 1995 income
$840.00 2.85% 2.91% $661.42 2.93% 3.70%
Table 11 - Change in percentage of consumers income spent on laundry products
The above table illustrates how the price of $2.10 is still value for money for the customer. At this
price a customer’s yearly spend on detergent is still at a lower percentage than it was in 1995 at the
lower price of $1.70. By pricing the detergent at this level it is allowing customers access to a higher
quality product at the same real time value. The higher cost is justified by the ingredients in the
product which meet customers’ needs.
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24. 7 Conclusion
The team recommend that Unilever enter the NE Brazil market to target LIC’s with a new
brand Viver. In the short term Viver 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.
There arises the issue that a new brand will cannibalise other brands. Upon financial
investigation of the Unilever portfolio, the team have found that the Campiero brand is not
delivering on capturing value for the consumer and creating value for Unilever. Campiero is
estimated to make $630,000 at the end of year 1. The team contend that Viver, if marketed
and executed correctly could earn $1,479,890 at the end of year 1. Therefore, the team
stress that not only is product cannibalisation possible but it is necessary if Unilever are to
successfully market to LIC’s in NE Brazil.
Once Viver has made successful wins in the NE 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 NE 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 Viver
can successfully secure the LIC segment forming a barrier to entry for any potential new
entrant or current competitor. Secondly, the team concur with Laercio’s assertion that NE
Brazil Detergent market presents Unilever with the 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.
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25. Bibliography
Books:
Hollenson 2007, Global Marketing, 4th Edition, Prentice Hall.
Dess G.; Lumkin G. & Taylor L. 2004. Strategic Management, Text and Cases, McGraw-Hill.
Doyle & Stern, (2006), ‘Marketing Management and Strategy’, 4th Ed., Prentice Hall.
Keller, (2008), ‘Strategic Brand Management’, 3rd Ed., Pearson Education.
Hollenson 2007, Global Marketing, 4 th Edition, Prentice Hall.
Murray & O’Driscoll, (1996), ‘Strategy and Process in Marketing’, Prentice Hall.
Ries,A. and Trout, J., (2001), The marketing classic positioning: the battle for your mind,
McGraw Hill.
West, Ford & Ibrahim, (2006). ‘Strategic Marketing’, Oxford Publishing.
Wilson, R. And Gilligan,C., (2005), Strategic Marketing Management (3rd Edition), England:
Elsevier Butterworth-Heinemann.
Journals:
Fournier, S. (1998), “Consumers and their brands; developing relationship theory in
consumer research”, Journal of Consumer Research, vol. 24, no.4, March, p.343-373.
Websites:
IBGE online, Brazilian Statistics Office Online. Available at:
http://www.ibge.gov.br/english/estatistica/populacao/contagem/defaulttabelas1.shtm
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