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Marketing Strategies for Low Income Consumers Unilever Brazil


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Marketing Strategies for Low Income Consumers Unilever Brazil

  1. 1. MG506Global MarketingUnilever in Brazil (1997-2007)‘Marketing Strategies for Low-Income Consumers’Lecturer: XDate: XGroup E:Cian Corbett xxxDavid Mc Weeney xxxSeánpaul Walsh xxx
  2. 2. Contents:1. Introduction 32. Brazil 43. North-East Market Attractiveness 64. Brand Portfolio 115. Options 146. Marketing Mix 207. Conclusion 24Bibliography25 2
  3. 3. 1 IntroductionUnilever 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, thecountries first detergent, was launched and grew to be Unilever’s most successful brandcommanding 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 havepresented 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 lowincome 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 anopportunity for Proctor and Gamble to attack and grow in this segment. Unilever had fallenvictim to this strategy in India whereby a low priced detergent “Nirma” was developed andtargeted at low income consumers and quickly gained 48% of the market. 3
  4. 4. 2 BrazilBrazil is a country with a population ofapproximately 170m. It’s predominately split intotwo regions, the northeast with a population of 48mand the southeast with a population of 73m. Thenortheast and the southeast regions vary greatlywith regards to a number of issues related to thedetergent and soap markets. Firstly income andeducation levels vary, as do cultural values andnorms.A Pest analysis of the North East can highlight some of the implications of these differences.Political – N/AEconomic – Brazil is said to have experienced cycles of recessions and recoveries over thepast 30 years. The country made a significant economic leap with the Plano Real which sawthe introduction of a new currency, the Reais which controlled inflation leading to a boomthat 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 NorthEastern Brazil at €2250 reflecting the developmental and economic divide between Northand South.Socio-Cultural – The illiteracy levels in North Eastern Brazil are high above the nationalaverage at 40% which will impact communication and promotional strategies. <<somethingabout high context,Technological - 72% of NE Brazilians don’t own a washing machine compared to 33% whodon’t have one in the South East. Political Economic PEST Social Legal 4
  5. 5. Countries can be classified by theircharacteristics of culture. From examiningthe contextual continuum of differingcultures, left, we can see that Brazil has ahigh context culture. This something acompany should be careful about as highcontext cultures “use and interpret moreof the elements surrounding a message todevelop their understanding of thatmessage” (Hollenson, 2007; P221).Low Income Consumer Behaviour in Northeast BrazilNE Brazilians view issues relating to laundry very differently when compared to the SouthEast. Firstly, low income consumers wash their clothes more frequently in the NE (5 timesversus 3.9 times a week) as LIC’s own fewer clothes and have more free time. This poses theopportunity of a 48 million consumer market that consumes a significant weekly amount ofdetergent/ laundry soap.Secondly, NE women view washing clothes as a social and enjoyable experience as opposedto SE women who view laundry as a chore. There is an opportunity for Unilever to exploitthe social aspect of clothes washing in North East Brazil.Thirdly, and most importantly, NE and SE differ in the symbolic value they attach tocleanliness. Poor North easterners pride themselves in the level of cleanliness they cansustain despite their low income. Cleanliness, due to the labour intensiveness, is worn like abadge 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 marketedand branded appropriately, the team assert that Unilever can offer a brand to LIC’s thatvalidate those consumers’ life-theme as good mothers (Fournier, 1998).. 5
  6. 6. 3 Northeast Market AttractivenessAn analysis of the Northeast versus the Southeast of Brazil can highlight the attractivenessof the region for Unilever.Min Monthly Percentage of Population # of Monthly Yearly MW YearlyWages Population Figure Monthly MW in $ 1996 MW in(MMW) MWs 1995Income Class 100% 48,000,000 $70.00E- 33% 15,840,000 1 $70.00 $840.00 $661.42E+ 20% 9,600,000 1.5 $105.00 $1,260.00D 30% 14,400,000 3.5 $245.00 $2,940.00C 9% 4,320,000 7.5 $525.00 $6,300.00B 5% 2,400,000 15 $1,050.00 $12,600.00A 3% 1,440,000 20 $1,400.00 $16,800.00Table 1 - Income Analysis Northeast BrazilThe above table highlights some the variances in income levels across Northeast Brazil. Asthe case states, income among the lowest 10% of the population is up 27%. This equates toan increase in minimum yearly wage from $661.42 in 1995 to $840 in 1996; a real dollarincrease of $178.58. This highlights the additional spending power available to the lowestincome consumers.Yearly Wage Detergent @ $1.70 as % of Yearly Wage Detergent @ $1.70 as % of1996 income 1995 income$840.00 2.31% $661.42 2.93%Table 2 - Percentage of spend on cleaning agentsThe above table illustrates the percentage saving for the lowest income consumers thatresult from the 27% income rise. Note the decrease in yearly spending on detergent andsoap as a percentage of overall income. This further emphasises the better value ofdetergent and soap in low income consumer’s eyes. 6
  7. 7. Market ValuesThe detergent and soap markets in the northeast are valued at $106m and $102mrespectively. In the southeast the values are different, with estimates attained of $123mand 46m respectively, (See Table 9 - Calculations for SE market value) the reason for suchvariation is down to regional differences in laundry habits. In the north soapForecast 1996 1997 1998 1999Detergent Market (volume in 42,000 49,140 57,494 67,268tonnes)Detergent Market $ Value $106,000,000 $124,020,000 $145,103,400 $169,770,978Growth Rate 17%Soap Market (volume in 81,250 86,125 91,293 96,770tonnes)Soap Market $ Value 102,000,000 108,120,000 114,607,200 121,483,632Growth rate 6%Table 3 - Market Size ForecastThe above tables show the estimated increase in size of the detergent and soap marketsover the next three years assuming the growth rates remain constant. This presentsUnilever with a major opportunity for increased revenue. See Error! Reference source notfound. -shows the same forecasts applied to all of the existing brands in the Unileverportfolio. Some of the main findings from that analysis included the relatively poor showingof the Campeiro brand which as of 1996 only contributes $630,000 in profits to Unilever andis expected to contribute a little over $1m within three years.Forecast 1996 1997 1998 1999Campeiro Selling Price $1.70Campeiro Market Share 6%Campeiro (volume in tonnes) 2,520 2,948 3,450 4,036Campeiro per KG $0.25Campeiro Profit after Costs $630,000 $737,100 $862,407 $1,009,016Table 4 - Campeiro Sales ForecastA potential reason for this poor performance from Campeiro may be down to the fact thatconsumer expectations of their performance are low, as indicated by Exhibit 5 in the case. 7
  8. 8. Based on the above analysis Unilever should target the low-income segment of consumersin the Northeast. Unilever currently hold a market share of 75% here, below the nationalaverage of 81%. Both markets of detergent and soap are growing in the NE and the lowestincome consumers are experiencing an increase in purchasing power. The economic boomthat has hit the country is at its most powerful in this region and represents a substantialopportunity for Unilever to take advantage of. Additionally there is a risk that if Unilever donot target this market that another company may do so, resulting in a similar situation tothat in India.However, their current low income brand Campeiro is performing poorly as indicated byTable 4 - Campeiro Sales Forecast. Exhibit 5 has indicated that Campeiro is perceived as abelow 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 ofthe northeast. The issue of launching a new brand will be relooked at in section 5 of thereport where the reasons for doing so are discussed in greater detail. Price is set at $2.10with a margin of $0.20. Details on pricing can be found under the pricing aspect of themarketing 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 ascannibalizing sales from Campeiro.Financial analysis has ruled out the possibility of targeting the soap market in addition to thedetergent market with the new brand. Using similar pricing logic it is impossible to keepcosts down to an acceptable level and if wholesale price is to be kept at a price competitiveenough to challenge for market share in the low income consumer market it would result intoo small of a margin. See pricing section of Marketing Mix for more information on thepricing issues for a new brand in the soap market e.g. Table 8- Pricing and Brand ProfitMargin Analysis for Soap Market.Short Term Financial ResultsAt this price point the forecast profits over the next three years can be seen below for thedetergent market. The table below also highlights the expected cannibalization rate of theCampeiro brand whose sales will continue for the next three years. 8
  9. 9. Detergent Market 1996 1997 1998 1999New Brand Profit 0 $393,120 $919,900 $1,479,890Market 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 $0Profit (not incl new brand) $630,000 $737,100 $862,407 $1,009,016Profit level of Campeiro and New Brand $630,000 $886,977 $1,213,119 $1,479,890Table 5 - Financial Results of Targeting NE with New BrandThe financials to be taken from this table are that for the first two years Unilever will benefitfrom the two brands income, shown in the bottom row of cells. From the initial year oflaunch the financial output from targeting the low income market in this way is greater thanleaving Campeiro to continue in the market. In the short term, 1997 combined profit fromboth brands will be equal to $886,997 as opposed to $737,100 from just Campeiro if leftalone. This increase in profits rises year on year as can be seen from the table. Over theperiod of three years the financial input will shift from Campeiro to the new brand andeventually all income from the low income consumer market will be as a result of the newbrand.Long TermStrategically, Unilever will be replacing the Campeiro brand that exists in the low incomemarket at the moment. The reasons for this are due to the fact that the brand isunderperforming and is viewed as poor by the consumers. The new brand will be betterquality and in turn fit in with Unilever’s mission and vision of delivering consumer ledproducts.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 inthe market.As can be seen from Table 5, there is long term financial growth in the strategy with the newbrand 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 companyholding 11% share by 1999 equalling a total market share of 80% in the Northeast. This 9
  10. 10. figure has the potential to be even higher should the purchasing power of low incomeconsumers increase even further. 10
  11. 11. 4 Brand Portfolio WP Market Brand Market Mind Brand Type Price/per Share Knowledge Penetration Awareness KG OMO .52 Detergent 100% 97% 72% 3.00Minerva .17 Detergent/Soap 100% 91% 16% 2.40Campeiro .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 11
  12. 12. any change in market share will be difficult to achieve for this brand as price is thecompeting variable and not quality. We believe that from our research that Campeiro willcontinue to struggle in growing within the competitive environment and Unilever must actnow in order to protect its cumulative market share. See forecasts below.Forecast 1996 1997 1998 1999Detergent Market (volume in 42,000 49,140 57,494 67,268tonnes)Total Market Value $106,000,000 $124,020,000 $145,103,400 $169,770,978Growth Rate 17%NE Share 75%OMO Selling Price $3.00OMO Market Share 52%OMO (volume in tonnes) 21,840 25,553 29,897 34,979OMO Margin per KG $0.65OMO Profit after Costs $14,196,000.00 $16,609,320.00 $19,432,904.40 $22,736,498.15Minerva Selling Price $2.40Minerva Market Share 17%Minerva (volume in tonnes) 7,140 8,354 9,774 11,436Minerva margin per KG $0.35Minerva Profit after Costs $2,499,000 $2,923,830 $3,420,881 $4,002,431Campeiro Selling Price $1.70Campeiro Market Share 6%Campeiro (volume in tonnes) 2,520 2,948 3,450 4,036Campeiro per KG $0.25Campeiro Profit after Costs $630,000 $737,100 $862,407 $1,009,016Unilever 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 96,770tonnes)Soap Market Total Value 102,000,000 108,120,000 114,607,200 121,483,632Growth rate 6%Minerva Selling Price $1.70Minerva Market Share 19%Minerva (volume in tonnes) 15,438 16,364 17,346 18,386Minerva Revenue $26,243,750 $27,818,375 $29,487,478 $31,256,726Minerva Margin per KG $0.30Minerva Profit after Costs $4,631,250 $4,909,125 $5,203,673 $5,515,893Table 6 - Sales Forecasts Northeast Brazil 12
  13. 13. The above table illustrates the forecast sales over the next three years of all existing brandsin both the soap and detergent market of the Northeast.As highlighted earlier Campeiro is yielding a small return and given the nature f thecompeting variable, price, it is hard to see where they will pick up ground if or maintain ifnew entrants come in with a better offer at low price. As OMO and Minerva are competingin higher segments they are sustainable and do not need to alter their product. 13
  14. 14. 5 OptionsThere are three options open to Unilever.  Brand Extension  Brand Repositioning  New BrandBrand ExtensionA well planned and well implemented extension of one of their three brands could offerUnilever a number of advantages. As we are targeting the low income segment and OMOand Minerva are higher priced it would be foolish to tamper with those brands as they havea good audience also. Extending those to a lower cost consumer would only damage theoriginal. Therefore if any extension were to take place it would have to take place withCampeiro.Advantages of using an extension could be:  Facilitate new product acceptance  Reduce risk perceived by customer 14
  15. 15.  Increase efficiency in promotional expenditures  Reduce costs of introductory market programmes  Avoid cost of developing a new brand  Packaging efficiencies  Permit customer variety seekingDisadvantages:  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 brandIn this case there is a cost to operating an extension. Please see breakdowns below of eachoption.Current Margin OMO Minerva Campeiro In-between Formula FormulaFC $1.65 $1.40 $0.90 $1.15PKC $0.35 $0.35 $0.35 $0.35PC $0.35 $0.30 $0.20 $0.25Total Cost $2.35 $2.05 $1.45 $1.75Wholesale Price $3.00 $2.40 $1.70 $2.10(WP)Margin per KG $0.65 $0.35 $0.25 $0.35New Brand ViverIncremental PC - $0.10 $0.10 $0.10Distribution - $0.05 $0.05 $0.05New Cost - $2.20 $1.60 $1.90New Margin per KG - $0.20 $0.10 $0.20Year 1 Sales in KG 1,965,600 1,965,600 1,965,600Yearly Profit $393,120.00 $196,560.00 $393,120.00Brand ExtensionIncremental PC - $0.05 $0.05 $0.05Distribution - $0.05 $0.05 $0.05New Cost - $2.15 $1.55 $1.85 15
  16. 16. New Margin per KG $0.25 $0.15 $0.25Year 1 Sales in KG 1,965,600 1,965,600 1,965,600Yearly Profit $491,400.00 $294,840.00 $491,400.00Brand RepositionIncremental PC - $0.00 $0.00 $0.00Distribution - $0.05 $0.05 $0.05New Cost - $2.10 $1.50 $1.80New Margin per KG $0.30 $0.20 $0.30Year 1 Sales in KG 1,965,600 1,965,600 1,965,600Yearly Profit $589,680.00 $393,120.00 $589,680.00Table 7 - Brand Profit Margin Analysis DetergentThe above highlights the different margins that can be charged if a new brand, brandreposition or brand extension were chosen. An additional $0.05 can be removed from themargin 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 16
  17. 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 $861,250Table 8- Pricing and Brand Profit Margin Analysis for Soap MarketThe formulation price of $0.82 is derived from calculating the percentage difference in Formulationcost for the Minerva brand ($1.40) and the new formula for Viver ($1.15) and taking this percentageof the formulation cost for Minerva Soap ($1). Incremental promotion costs and distribution costsput the margin for a new brand at $0.03. The profit resulting from this can be seen as $98,428.57 asum which due to the low growth rate of 6% in the soap market does not increase at a satisfactorylevel and is tiny in comparison to the profits generated by the Minerva brand of soap.Brand RepositioningUnilever have the option to reposition a current brand in order to gain these low cost customers. Inorder to do this effectively they will need to establish more compelling points of difference. As OMOand Minerva already have strong points of difference it is therefore Campeiro that would berepositioned. 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 conditionsHowever having acknowledged the Campeiro brand’s existing knowledge within the market amongstconsumers we feel it would be very difficult to reposition as they are already known as the pricecompeting brand with low quality and that perception would be difficult to change. We also back 17
  18. 18. this up as even a successful reposition may not yield significant returns over another strategic optioni.e. New Brand.New Brand-ViverWe believe that the most profitable strategy for breaking into thelow cost market segment is to launch a new brand. We proposeViver. At present our low income brand Campeiro is simply notproviding the attributes e.g. quality, that is demanded by the lowincome consumers. It is part of Unilever’s mission statement toadd vitality to life through their products so by bringing more tothe customers is a fit with their overall strategy. Consumers havestated that they want cleanliness, whitening, productivity,Smell, softness, ability to remove stains according to surveysin exhibit 5 of the case.While Campeiro is positioned solely as a cut price brand the new brand Viver will bepositioned as a higher quality low cost detergent. It will be positioned as a middle ground toCampeiro and Minerva. It will deliver the demanded attributes at low cost to low costconsumers whilst maintaining a reasonable margin. Rather than be positioned on price orcost it will be sold on the quality of the product. We feel that positioning the product onquality and just below Minerva can avoid cannibalization of Minerva, gain market sharefrom competitors below Campeiro, defend Unilever’s position to outside competitor’s andall whilst growing overall market share in the Brazilian market. The foreseeable future isthat it will replace Campeiro. As seen above we have valued Campeiro and projected thatViver will exceed the old brand.Regi Population Unique SE KG per customer SE Yearly Cost per Value of SEon Customers per per year customer market yearSE 73,000,000 5,603,070 12.9 $27.09 $151,787,171 6.8 $8.16 $45,721,052Detergent Market (volume in tonnes) 42,000Consumption NE KG # of people buying detergent in NE # of people buying soap in NEDetergent 11.4 3,684,211 3,982,843Soap 20.4 8% 8%Table 9 - Calculations for SE market value 18
  19. 19. The market value of South East Brazil is obtained by calculating the number of uniquebuyers 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 thepurchasers of the product in the northeast.This percentage is then applied to the Southeast and the reverse procedure is carried out. 19
  20. 20. 6 Marketing MixProduct: Vivar, Brazilian term for Life.Viver would be formulated and available in both Detergent and Laundry Soap grantingaccess to two growing markets with one branding strategy.The primary benefits of Viver will be in line with Attributes that are most important to NEconsumers. 1) Cleanliness, whitening, Productivity 2) Smell, softness 3) Ability to remove stainsWith this in mind Unilever’s formula for Viver will be priced half way between Minerva andCampiero. To avoid cannibalisation of Minerva, Viver would omit lesser demandedattributes such as Dissolving Power and Harm to Colours which will be decreased to anacceptable level. The strategic map would look as follows: 20
  21. 21. Packaging:While Viver is pursuing a low cost strategy, the long termstrategic aim is to dominate the LIC market share. Therefore, it iscritical the perceived quality of the product is higher than that ofPop and Invito. With this in mind, Viver will forego the 30%saving that would accompany a plastic sachet package as LIC’sregard anything not in a cardboard package to be second rate.Considerations have also been made for the weekly budget ofthe LIC and consequently Viver will be sold in 1kg and 500gcardboard packaging.Place:Distributing to NE Brazil does not come without its challenges. We are told that LIC’s dorarely shop in large supermarkets such as Walmart or Carrefour. This means the chosendistribution 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 partnershipcould be the most economical way forward.The team suggest contracting with Specialised Dealers who would have the necessaryfocused reach to distribute Viver to LIC’s. The benefits include 24-40 SKU’s as opposed tohundreds which are available in Generalist Wholesalers meaning more favourable shelfspace, category management, merchandising and extensive point of purchase activity. Withthe basis of the distribution relationship being that of a partnership, a free flow ofinformation would be available increasing Unilever’s knowledge of marketing to andaccessing 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 ofUnilever that could be leveraged in other markets.While the cost of a specialised dealership is 5c per kg lower than a Generalist Wholesalerdistribution agreement, there is a distribution exclusivity clause for negotiation in thecontract. This would be reviewed with the core issue of protecting the distribution networkof Unilever’s primary brands OMO and Minerva. If this distribution agreement threatenedthe market share of these brands then the company would have no choice but to pursuedistribution through General Wholesaler which would have a less focused strategy andwould cost an additional 10c per kg.Promotion:As mentioned in the case, the key message of the promotional strategy would need to takeinto consideration that marketing a brand that is overtly communicating “low-incomeproduct” would almost certainly communicate “low-quality product”. 21
  22. 22. With this in mind, the team propose that the promotional strategy instead focus on thepositive lifestyle of LIC’s in regards to washing clothes as opposed to being price based. Asstated 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 positivemessage: “Viver, Vida Parece Brillhante”, (Viver, Life looks bright). The team assert that thetagline would imply wholesome, positive energy resulting in a clean bright washing.The promotional campaign will rely heavily on imagery to communicate the key messages toovercome the challenges posed by the NE’s high illiteracy rates of 40%. The chosen imageryused would feature mothers talking and laughing while using Viver. The imagery wouldcommunicate health, happiness and pride in a job well done reiterating that Viver is theperfect 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 kgin incremental marketing costs. This will practice Unilever’s established communication planof 70% above the line and 30% below the line marketing expenditure. The 70% above theline advertising will rely on television segmented towards female LIC’s and image intensebillboard and print advertising. The 30% below-the-line will include point-of-purchasemarketing 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 floorwhere the critical first purchase can be won by introductory promotion and categorymanagement.Price:Current Margin In-betweenFormulation Costs $1.15Packaging Costs per KG $0.35Promotional Costs per KG $0.25Total Cost $1.75Wholesale Price (WP) $2.10Margin per KG $0.35New Brand ViverIncremental Promotional Costs per KG $0.10 22
  23. 23. Distribution Costs per KG $0.05New Cost $1.90New Margin per KG $0.20Table 10 - Pricing StructureThe formulation cost is derived from ingredients providing a product that is in-between Cambeiroand Minerva in terms of Quality.Packaging costs are the same as all productsPromotional costs are the same, but because of the need for additional marketing for a new brandthere 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 toobtain the profits shown in Table 5 - Financial Results of Targeting NE with New BrandThe cost was set at $2.10 in order to facilitate this margin as well as take advantage of the increasingpurchasing power of the low income consumers in the Northeast. Although higher than competitorswho charge a wholesale price of $1.70 the price of $2.10 still represents value for money for theNortheasters.Yearly Detergent @ Soap @ $1.20 Yearly Detergent @ Soap @ $1.20Wage $2.10 as % of as % of income Wage $1.70 as % of as % of income1996 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 productsThe above table illustrates how the price of $2.10 is still value for money for the customer. At thisprice a customer’s yearly spend on detergent is still at a lower percentage than it was in 1995 at thelower price of $1.70. By pricing the detergent at this level it is allowing customers access to a higherquality product at the same real time value. The higher cost is justified by the ingredients in theproduct which meet customers’ needs. 23
  24. 24. 7 ConclusionThe team recommend that Unilever enter the NE Brazil market to target LIC’s with a newbrand Viver. In the short term Viver will make $393,120 and will combine with Campeiro togenerate $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 financialinvestigation of the Unilever portfolio, the team have found that the Campiero brand is notdelivering on capturing value for the consumer and creating value for Unilever. Campiero isestimated to make $630,000 at the end of year 1. The team contend that Viver, if marketedand executed correctly could earn $1,479,890 at the end of year 1. Therefore, the teamstress that not only is product cannibalisation possible but it is necessary if Unilever are tosuccessfully market to LIC’s in NE Brazil.Once Viver has made successful wins in the NE Detergent and Soap market Unilever wouldthen be in a prominent position to launch into the SE Market which is valued at $123m fordetergent and $46m for soap. Not only does the NE LIC market financially make sense, italso has significantly positive strategic implications. Firstly, by growing their market share inthe LIC segment, Unilever will aggressively defend against a competitor growing andpresenting a credible threat as was seen with Nirma in India. The team propose that Vivercan successfully secure the LIC segment forming a barrier to entry for any potential newentrant or current competitor. Secondly, the team concur with Laercio’s assertion that NEBrazil Detergent market presents Unilever with the opportunity to perfect the art ofmarketing to LIC’s. This capability could become a Unilever core competency which could betranslated firstly to the Brazilian market beyond Detergent and Soap and into theHomecare, Personal Care and Food markets. 24
  25. 25. BibliographyBooks: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 inconsumer research”, Journal of Consumer Research, vol. 24, no.4, March, p.343-373.Websites:IBGE online, Brazilian Statistics Office Online. Available at: 25