Marketing Management

Case Analysis

Unilever in Brazil

Contents
Executive Summary............................................................................................... 3 Introduction............................................................................................................ 4 Brazil ..................................................................................................................... 4 North East Marked Attractiveness..........................................................................5 Brand Portfolio .......................................................................................................6 Options................................................................................................................... 7 Ansoofs Matrix....................................................................................................7 Issues to be Addressed.........................................................................................11 Go/No Go Decision............................................................................................11 Marketing Mix....................................................................................................15 Brand and Marketing Decisions.........................................................................19

Executive Summary
The case centres on the decision of Unilever in Brazil as to whether to introduce a new low cost washing powder in a market where it already holds the predominant share of washing powders. It is about Unilevers highly ambitious Everyman project of the mid-90s which began with extensive field studies to help determine whether it was in the corporations interests to enter the lower end of the domestic market. 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 and sales of Unilever detergent brands available in the Brazilian market. Laercio Cardoso was called to lead the project whose mission was to explore the growth opportunities in the marketing of detergents to low income consumers in the North East of Brazil. Cardoso became increasingly convinced over time that, in light of its massive market dominance, pursuing the lower end of the detergents market was Unilevers only clear opportunity for domestic growth. He was extremely wary of seeing the company lose out to cheaper local brands, as had recently been the case in India and in Pakistan, from where he had just transferred. Cardoso soon faced stiff resistance from many colleagues, who felt that the premium brands Unilever already offered were the reason behind its enviable domestic position. The case cites the major marketing challenges that entry into such a market will near-inevitably present. The months spent living in the favelas slums with lowincome consumers had taught Unilever that the attitudes and behaviour of this segment of consumers were very different from what they were used to. The rivals had quite different statures within Brazil at the time. Unilever had achieved a quite remarkable 81% market share in the washing powder sector and was a consumer goods pioneer in the country. P&G was a very distant second and had entered the local market far later. However, it had a muchenvied R&D unit as well as extensive marketing experience worldwide. Its potential long-term threat to Unilever was obvious.

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 Unilevers 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 companys 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 Unilevers 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.

Brazil
Brazil is a country with a population of approximately 170m. Its 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 Brazils 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 dont own a washing machine compared to 33% who dont have one in the South East. 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 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 LICs 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 LICs that validate those consumers life-theme as good mothers

North East Marked Attractiveness

An analysis of the Northeast versus the Southeast of Brazil can highlight the attractiveness of the region for Unilever. Min Monthly Wages (MMW) Income Class EE+ D C Percent age of Populati on 100% 33% 20% 30% 9% Populati on Figure 48,000,0 00 15,840,0 00 9,600,00 0 14,400,0 00 4,320,00 0 # of Monthly MW's $70.00 1 1.5 3.5 7.5 $70.00 $105.00 $245.00 $525.00 $840.00 $1,260.0 0 $2,940.0 0 $6,300.0 0 $661.42 Monthly MW in $ Yearly MW 1996 Yearly MW in 1995

B A

5% 3%

2,400,00 0 1,440,00 0

15 20

$1,050.0 0 $1,400.0 0

$12,600. 00 $16,800. 00

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 1996 $840.00 Wage Detergent @ $1.70 as % of income 2.31% Yearly 1995 $661.42 Wage Detergent @ $1.70 as % of income 2.93%

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 consumers eyes.

Brand Portfolio
Brand Market Share
.52 .17 .06

Type

Brand Knowle dge

100% 100% 99%

Market Mind Penetrat Awaren ion ess

97% 91% 66% 72% 16% 4%

Price Per/Kg
3.00 2.40 1.70

OMO Minerva Cam peiro

Detergent Detergent/Soa p Detergent

If we examine Unilevers 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. Campeiro despite of being a established brand, has been recognized for being price competitive. This indicates to Unilever that any change in market share will be difficult to achieve for this brand as price is the competing variable and not quality.

Options
There are three options open to Unilever. Brand Extension Brand Repositioning New Brand

Ansoofs Matrix

Brand Extension A well planned and well implemented extension of one of their three brands could offer Unilever a number of advantages. As Unilever is targeting the low income segment and OMO, Minerva are higher priced, it would be foolish to tamper with those. 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 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 of using an extension be: 7

 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

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 However having acknowledged the Campeiro brands 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 this up as even a successful reposition may not yield significant returns over another strategic option i.e. New Brand. New Brand - Brancura Another strategy for breaking into the low cost market segment is to launch a new brand. We propose Brancura (Portuguese meaning of Whiteness). At present Unilever low income brand Campeiro is not providing the attributes e.g. quality, that is demanded by the low income consumers. It is part of Unilevers 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 Brancura 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 Unilevers position to outside competitors and all whilst growing overall market share in the Brazilian market. The foreseeable future is that it will replace Campeiro. Costing breakdown of all the three options discussed above is given belowCurrent Margin FC PKC PC Total Cost Wholesale Price Margin per KG Brand Extension Incremental PC Distribution New Cost New Margin per KG Year 1 Sales in KG Yearly Profit Brand Reposition Incremental PC Distribution New Cost New Margin per KG Year 1 Sales in KG Yearly Profit New Brand Brancura Incremental PC Distribution New Cost New Margin per KG Year 1 Sales in KG Yearly Profit OMO $1.65 $0.35 $0.35 $2.35 $3.00 $0.65 Minerva $1.40 $0.35 $0.30 $2.05 $2.40 $0.35 $0.05 $0.05 $2.15 $0.25 1,965,600 $491,400.00 Campeiro $0.90 $0.35 $0.20 $1.45 $1.70 $0.25 $0.05 $0.05 $1.55 $0.15 1,965,600 $294,840.00 In-between $1.15 $0.35 $0.25 $1.75 $2.10 $0.35 $0.05 $0.05 $1.85 $0.25 1,965,600 $491,400.00

$0.00 $0.05 $2.10 $0.30 1,965,600 $589,680.00

$0.00 $0.05 $1.50 $0.20 1,965,600 $393,120.00

$0.00 $0.05 $1.80 $0.30 1,965,600 $589,680.00

$0.10 $0.05 $2.20 $0.20 1,965,600 $393,120.00 9

$0.10 $0.05 $1.60 $0.10 1,965,600 $196,560.00

$0.10 $0.05 $1.90 $0.20 1,965,600 $393,120.00

Pricing and Brand Profit Margin Analysis for Soap Market is given belowSoap Margin FC PKC PC Total Cost Wholesale Price(WP) Margin per KG Brand Extension Incremental PC Distribution New Cost New Margin per KG Year 1 Sales in KG Yearly Profit Brand Reposition Incremental PC Distribution New Cost New Margin per KG Year 1 Sales in KG Yearly Profit New Brand Incremental PC Distribution New Cost New Margin per KG Year 1 Sales in KG Yearly Profit Minerva $1.00 $0.15 $0.25 $1.40 $1.70 $0.30 New Formula $0.82 $0.15 $0.25 $1.22 $1.40 $0.18 $0.05 $0.05 $1.50 $0.20 3,445,000 $689,000 $0.00 $0.05 $1.45 $0.25 3,445,000 $861,250 $1.40 $0.30 15,437,500 $4,631,250 $0.10 $0.05 $1.37 $0.03 3,445,000 $98,428.57

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 Brancura ($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.

10

Issues to be Addressed Go/No Go Decision

Issue -At what cannibalization rate (percentage of new sales coming from other Unilever brands) would Unilever start losing money? Whether, Unilever had the right skills and organization to compete in this market? In the long run, what exactly would Unilever gain and what would it risk if things went wrong? Response -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, the reason for such variation is down to regional differences in laundry habits. Forecast Detergent Market (volume in tones) Detergent Market $ Value Growth Rate Soap Market (volume in tones) Soap Market $ Value Growth rate 1996 42,000 $106,000,000 1997 49,140 $124,020,00 0 86,125 108,120,000 1998 57,494 $145,103,40 0 91,293 114,607,200 1999 67,268 $169,770,978

17% 81,250 102,000,000 96,770 121,483,632

6% Table- 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. However, if we apply the same forecasts applied to all of the existing brands in the Unilever portfolio; we find the relatively poor performance of 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 Campeiro Selling Price Campeiro Market Share Campeiro (volum e in tones) Margin per KG Campeiro Profit after Costs 1996 $1.70 6% 2,520 $0.25 $630,000 2,948 3,450 4,036 1997 1998 1999

$737,10 $862,40 0 7 Table Campeiro Sales Forecast 11

$1,009,016

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. Based on the above analysis Unilever should target the lowincome 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 in Campeiro Sales Forecast analysis. Moreover, Exhibit 5 of the case 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. Group recommends the Unilever to launch the new brand Brancura, with the suggested positioning, discussed in different available options section. In that case, Price would be set at $2.10 with a margin of $0.20. 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. 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
Detergent Market New Brand Brancura Profit Market Share Campeiro Market Share (including new brand -Brancura) % Decrease from Cannibalization 1996 0 0% 6% 1997 $393,120 4% 4% 1998 $919,900 8% 2% 1999 $1,479,890 11% 0%

0%

33%

66%

100%

12

Profit (including new brandBrancura) Profit (not including new brand-Brancura) Profit level of Campeiro and New Brand

$630,000 $630,000 $630,000

$493,857 $737,100 $886,977

$293,218 $862,407 $1,213,119

$0 $1,009,016 $1,479,890

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 - Brancura and eventually all income from the low income consumer market will be as a result of the new brand. Long Term Financial Results 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 Unilevers 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 calculated above, there is long term financial growth in the strategy with the new brand Brancura, 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 figure has the potential to be even higher should the purchasing power of low income consumers increase even further. Once Brancura has made successful wins in the North East 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 North East 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 Brancura can successfully secure the LIC segment forming a barrier to entry for any potential new entrant or current competitor. Secondly, the team concur with Laercios assertion that NE Brazil Detergent market presents Unilever with the 13

opportunity to perfect the art of marketing to LICs. 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. Organization Capabilities - In order to analyze whether, Unilever had the right skills and organization to compete in this market; let us analyze the major strengths and weakness of Unilever Strengths Leadership position Unilever brands are enjoying 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 in terms of Market Share) 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. Experience and skill set in Detergents- Unilever is a US $56 billion company with a portfolio of 1,600 brands worldwide, including 45 key detergent brands. Two of their brands are already enjoying first and second rank in terms of market share. Weaknesses Distribution -Unilever is facing a big Distribution issue in the NE; Unilever detergent SKUS, are not present on shelves in approximately 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 to small stores, the lack of Distribution is an extremely serious issue Consumer Expectations - Excluding Omo, other Unilever SKUS have problems in perception, and are depasse by P&G brands (Ace and Bold) Lack of experience in LIC segment Unilever dont have much experience in LIC detergent segment. Unilever was already experience failure in this, where a low priced detergent Nirma had gained 48% of market. In our opinion, distribution will, going to be one of the major challenges for Unilever. LICs 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. What if things went wrong In case the things went wrong it can hit the market share and brand value of Minerva, Campeiro as well the new brand Brancura. In case, Brancura is placed wrongly it will not only cannibalize Campeiro, but can eat the market share of Minerva as well. However, in this complete process, all this will not create any monetary benefit for the firm. We have proposed, new brand Brancura to be positioned as a middle ground to Campeiro and Minerva. It will deliver the demanded attributes at low cost to low 14

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 in case the quality of the product is at par with Minerva, it will cannibalize Minerva, as well as Campeiro. Despite of, increase in volumes this positioning will not going to be, financially beneficial for Unilever. In case the price of the product is below Campeiro, it will again perceived as low quality product and will not going to succeed defend Unilevers position. In the same way, if the new brand is priced above Minerva with low quality, no market share will be gained. Moreover, a long delay in the process, will invite P&G and other competitors to tap the market and again, the result will be similar to India.

Marketing Mix
Issue - Should Unilever change its current marketing and branding strategy? For example, could Unilever extend or reposition its existing cheaper brands, Minerva and Campeiro, or would a new brand be necessary? What would be the ideal positioning and marketing mix of a Unilever brand targeted at low-income consumers? Response -If we examine Unilevers 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. However, the mind awareness of Minerva and Campeiro is just 4% whereas market penetration is only 66%. All this, indicates Campeiro a struggling brand , that has been recognized for being price competitive. Further, it is mentioned in the case that Campeiro is perceived as low quality product by consumers and hence, indicates, the failure of marketing and branding strategy in case of this particular brand. As discussed earlier, three options open to Unilever Brand Extension Brand Repositioning New Brand The team recommend that Unilever should enter the North East Brazil market to target LICs with a new brand Brancura. Brancura 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 Brancura will be in line with Attributes that are most important to NE consumers. Cleanliness, whitening, Productivity Smell, softness 15

 Ability to remove stains With this in mind Unilevers formula for Brancura will be priced half way between Minerva and Campiero. To avoid cannibalisation of Minerva, Brancura would omit lesser demanded attributes such as Dissolving Power and Harm to Colours which will be decreased to an acceptable level. We contend that Brancura, if marketed and executed correctly could earn $1,479,890 at the end of first year. The ideal positioning statement and marketing mix for Brancura are discussed belowPositioning Statement For the women, who gives highest priority to quality. Brancura is a detergent powder which gives you a better cleaning power with much less effort than the similar priced competitors Packaging While Brancura 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, Brancura will forego the 30% saving that would accompany a plastic sachet package as LICs 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 Brancura will be sold in 1kg and 500g cardboard packaging. Place Distributing to NE Brazil does not come without its challenges. We are told that LICs 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 Brancura to LICs. The benefits include 2440 SKUs 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 Unilevers knowledge of marketing to and accessing LICs 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 Unilevers primary brands OMO and Minerva. If this distribution agreement threatened the market share of these 16

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 lowquality product. With this in mind, the team propose that the promotional strategy instead focus on the positive lifestyle of LICs 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. Brancura would seek to emphasise this in the promotional strategy in an extremely positive message: Brancura , Vida Parece Brillhante, ( Brancura , 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 NEs high illiteracy rates of 40%. The chosen imagery used would feature mothers talking and laughing while using Brancura . The imagery would communicate health, happiness and pride in a job, reiterating that Brancura is the perfect brand partner in the pursuit of resolving the life theme of dedicated mother. Also, as discussed earlier new brand introductions will cost an additional $0.10 per kg in incremental marketing costs. This will practice Unilevers 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 LICs 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 Formulation Costs Packaging Costs per KG Promotional Costs per KG Total Cost Wholesale Price 17 In-between $1.15 $0.35 $0.25 $1.75 $2.10

(WP) Margin per KG New Brand Brancura Incremental Promotional Costs per KG Distribution Costs per KG New Cost New Margin per KG

$0.35 $0.10 $0.05 $1.90 $0.20

The formulation cost is derived from ingredients providing a product that is inbetween Campeiro 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, 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. Issue - Unilever could produce a product comparable to Campeiro, its cheapest product, but would it deliver the benefits that low-income consumers wanted? Response- Upon financial investigation of the Unilever portfolio, we have found that the Campeiro brand is not delivering on capturing value for the consumer and not creating value for Unilever. We recommend that Unilever should enter the NE Brazil market to target LICs with a new brand Brancura (Portuguese meaning of Whiteness). At present Unilever low income brand Campeiro is not providing the attributes e.g. quality, that is demanded by the low income consumers. It is part of Unilevers 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 Brancura 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. 18

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 Unilevers position to outside competitors and all whilst growing overall market share in the Brazilian market. The foreseeable future is that it will replace Campeiro. Issue -Should Unilever use coupons or other means to reduce the cost of the product for low income consumers? Should it change the price of Omo, Minerva and Campeiro? Response- We recommends that, Unilever should not use coupons or other means to reduce the cost for low income consumers as cutting down the price can signal the poor quality of product. Moreover, Omo and Minerva are already market leader in their segment and there is no need to disturb the equilibrium. However, their current low income brand Campeiro is not performing well. Currently the price of Campeiro is in the purchasing range of poor North Easters however, it does not meet LIC segment needs for perceived product attributes and as such only retains 6% of the market. Further cutting down the price of this product will not help as along with price, primarily low-income consumers of the Northeast evaluate detergents on six key attributes. The most important attribute is the perceived power of the detergent followed by smell and ability to remove stains. Many poor North Easterners are proud of the fact that they keep themselves and their families spotlessly clean despite their low income. Because it is so labour intensive, many women see the cleanliness of clothes as an indication of the dedication of the mother to her family. Personal and home cleanliness is a main subject of gossip. We recommend that Unilever should enter the NE Brazil market to target LICs with a new brand Brancura. While Campeiro is positioned solely as a cut price brand the new brand Brancura 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. Issue -What about packaging and point-of purchase displays? Should they use the same slogan as the television commercial? Finally, what should Unilever tell the owners of the small stores where most lowincome consumers shopped? Response-

Brand and Marketing Decisions

Issue -Was there something wrong with the existing positioning of Unilevers three detergent brands? Would it be really necessary to develop a new value proposition? If so, what should it be? ResponseCompetitive positioning of Unilever detergent portfolio is give below19

Positioning Importance Superior Omo High perceived quality Removes stains with low quantity of product

Unilever Products Minerva Good perceived quality Delivers a pleasant perfume and softness to your clothes

Campeiro Low price Cost reduction across all dimensions valued by consumers

If we examine Unilevers 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. However, the mind awareness of Campeiro is just 4% whereas market penetration is only 66%. All this, indicates Campeiro a struggling brand that has been recognized for being price competitive. Further, it is mentioned in the case that Campeiro is perceived as low quality product by consumers and hence, indicates, the failure of marketing and branding strategy in case of this particular brand. Also, upon financial investigation of the Unilever portfolio, the team have found that the Campeiro brand is not delivering on capturing value for the consumer and not creating value for Unilever. All this indicates the failure of marketing positioning of Campeiro brand. 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. In this scenario, as discussed earlier, three options open to Unilever Brand Extension Brand Repositioning New Brand Out of above mentioned options, our team recommends that Unilever should target North Eastern LIC segment with a new brand Brancura . In the short term Brancura 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. The team

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contend that Brancura , if marketed and executed correctly could earn $1,479,890 at the end of first year. Issue -Could Unilever deliver the desired value proposition with one of its three existing brands, or with a brand extension? Would Unilever really have to develop a new brand from scratch? Could it use a brand from its large international portfolio? Response As discussed earlier, in the option section, three options are open to Unilever Brand Extension Brand Repositioning New Brand

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