Business School Essays

Strategic Leadership, Marketing Management and Technology.

Freitag, 26. April 2013

Unilever Brazil. The introduction of detergent powder

for the Northeast.
Nova SBE, Lisbon
Marketing in a Dynamic World
Harvard Business Case

Target low-income segment of consumers in the

Northeast?
Unilever should target the low income market in the NE of Brazil for many reasons. In Brazil Unilever
already has a market share of 81% with their detergent portfolio, so they have to find new ways for market
growth. There is also an entry threat by one of their main competitors P&G which could take the first
mover advantage and address the segment before them. A successful market strategy for the low income
market in Brazil can be used as best practice to gain valuable insights for specific market needs for other
low income markets around the world. Last but not least sustainability and CSR became a huge trend

during the last decade. It will attract new partners and employees and create synergy effects with NGOs.
First of all there are 48 million potential low income customers in the North East of Brazil. The market is
basically huge. There are two approaches which have to be undertaken, in order to reach this market.
First by restructuring the value chain for a rural market we have to create affordability and availability.
At the same time we have to tailor our offer to the individual needs of the market, develop a specific
marketing mix to create acceptability and awareness to finally capture that value.
Availability
Rural markets are hard to reach. NE Brazilians predominantly get their groceries from small shops. The
new product could be made available through approximately 75.000 small stores, which are preferably
used by BOP customers. Here Unilever has two possibilities. First they can take advantage of their
existing network of small entrepreneurs and incentivize them to sell their product. Existing supply chains
have either to be used and shared, or extended through entirely new supply chains, which would help to
reach even the stores in the most rural areas, to create brand knowledge and increase sales. However,
this action is cost intensive and implies negotiations of new contracts with specialized distributors, which
is hard to reverse.
Affordability
This is one of the most crucial factors when addressing the BOP consumers. Unilever has to find out how
much income their segment effectively has available to spend on their products and how the frequency of
their salary and shopping looks like. 53% of the population have to live with less than 2 minimum wages
($140/month)The pricing of new products has to be linked to the buying power of the people in the NE.
According to the per capita income ($2250), bargaining power in the NE results in about $6/day. From
those $6 normally 2/3 have to be spend on food. This leaves about $2/day for additional shopping for the
average citizen. Those earning the minimum wage of ($70/month) have less than $2,29/day for food and
additional shopping. However, the goal here is to be able to offer products which are affordable and
beneficial even for the poorest consumers. So it has to be adapted to their cash flow (sequence of
payments) and on a day to day basis, by offering multiple sizes for example.
Acceptability
In order to sell their product successfully Unilever needs to meet the unique needs of consumers but also
of the distributors in the NE of Brazil. Additionally Unilever has to understand regional, cultural, and
socioeconomic requirements of the BOP users. African and European roots brought rhythm, joy and
resulted in carnival. Those are significant sociocultural factors forming attitudes and behavior. Only about
a third of Recifes population owns a washing machine and bleach is regarded as highly effective for
removing stains for hand washing. Washing techniques and means also look different from western

cultures: Women hand scrub clothes with soap bars, which requires a lot of time and effort. Detergent
powder however is used very little at the end for its smell. Ex 5 reveals that cleanliness is valued most
(24%), followed by smell/softness (20%) and the ability to remove stains (16%). So Unilever has to focus
on those attributes when developing a new product. Additionally, washing clothes is seen as a
pleasurable and social activity and as dedication invested for the familys purity. Cleanliness is
furthermore common as one of the main subjects for gossip. Unilever needs to respect and to understand
the maternal pride for the washing activity.
Awareness
In the NE of Brazil about 40% are illiterate. So for all promotional efforts, Unilever has to be aware that
more of a third of potential customers might not fully be able to understand the positioning statement. So
when choosing packaging and promotion it would be important to make it self-explaining, easy to
recognize. Further when broadcasting TV ads nationwide there would be a risk of cannibalization of highmargin sales like OMO with low margin ones of the new product. In order to respect their pride, the
offered product therefore cannot be sold as a discount product which communicates lower quality.

Evaluation of Unilevers current portfolio.

As pioneer on Brazils consumer goods market, in 1996 Unilever already had a market share sum of 81%.
Here OMO is clearly the market leader with 52% market share. Furthermore there are many product
variations of it and it is Unilevers highly priced premium product (index of 120). Most of the SE population
of Brazil uses it for washing machines, since it is regarded as highly effective and technology oriented. It
is expensive to produce (FC = $1.65/kg) and is less suited for hand washing which makes it unsuited for
the NE market, where it is barely affordable. However It has therefore a brand knowledge of 100%, 97%
Market penetration and 71% top of mind wareness in the NE. Perceived quality is way above its price.
Another discount priced variation of this category would lead to cannibalization.
Minerva exists in powder form or as hand soap. The powder has a market share of 17%, provides
perfume and softness and communicates emotional appeal. They also have 100% brand knowledge, 90%
market penetration and 16 % top of mind awareness. The quality is still perceived higher than the price
(medium price index of about 95) but the difference is less than with OMO.
The Minerva laundry soap has a 19% share on the soap market and Unilever was market leader since
only small local competitors were competing. It is supposed to leverage brand equity of the powder.
Further it is 41% cheaper than OMO. The perceived quality is also higher compared to its discount price.
However since 72% in the NE do not own a washing machine, soap bars are quite popular for hand
washing purposes. The downside is that they are very hard to perfume and that animal fat might leave
yellow clothes. Due to their soft water foam develops easily and provides and advantage compared to
detergents. Minerva would be a possible brand but is still too highly priced and therefore out of their
reach. Further it does provide additional and significantly higher benefits than Campeiro which are not as

highly valued as others (harm to colors and packaging). Campeiro has a 6% share is definitely a cost
saving price brand but also valued by consumers. Its name plays with their rural area. Despite its discount
brand it has 99 % brand knowledge, 65% market penetration but only 5 % top of mind awareness.
Perceived quality however is under the price. Since a discount product does cannot be as good as the
premium ones in terms of washing power, its acceptance level would be pretty low. After all this product is
not tailored to their needs.
So basically Unilever would need a new modified formula that provides the best benefits of Minerva, with
the foam power of soap bars and a price above but near Campeiro. On the market positioning map it
would be positioned between Campeiro and Minerva in terms of quality and price. But in the heads the
goal is to perceive a perception higher than Minerva and to create a new standard like their own personal
OMO which was developed especially to meet their needs. However on the internal Unilever portfolio the
new product would be positioned close to Minerva in Terms of quality.
In order to solve this dilemma, my research has shown that by now Unilever already launched a new
product for the NE of Brazil.[1] ALA was born and developed in Argentina in 1962. Unilever Brazil
decided to re-launch that brand from a market with similar cultural values and adapted it to the needs of
the Northeastern culture and offered it for a very favorable price. Designed for laundering by hand, Ala did
not need the expensive enzymes that most washing machine detergents included for removing stains,
which made it cheaper in production. It is offered only in the NE in order to prevent Brazilian wide
cannibalization. They consciously named it ALA which is also a palindrome like OMO to draw a line
between the perceived qualities of OMO.
Positioning Statement:
To the mother who is always caring about the cleanliness of her beloved family. ALA soap detergents
provide superior cleaning power for a small price. It removes the most persistent stains from your clothes
while covering them with the freshest smell of flowers. Proven and tested for you by the creators of OMO!

Marketing Mix
While the four As addressed in question 1 basically described the current market situation, we now have
to find ways to meet those needs and conditions.

Product
Formulation
Highly important is the effectiveness on hand washing; this also implies that it should be pleasant to the
skin, but also somewhat eco-friendly in order to prevent harmful residuals to dissolve into the rivers.
Further it has to address the three most important attributes (1. Cleanliness, 2. Smell, 3. Bleaching); A

high quantity of foam associated powerful cleaning qualities to remove stains. A nice smell communicates
gentleness and softness. And by adding bleach we could finally combine the three most valued attributes
in one product (Soap and Bleach, and Smell). If the formula is taken from ALA Argentina it has to fulfill
those needs of the NE of Brazil. As the picture from the cover letter shows Unilever succeeded. Since
harm to colors and packaging has a lower rate on the scale. Those factors leave a larger scope formula
reduction and cheaper packaging.
Packaging
Unilever decided to create a well-designed packaging similar to market leader OMO, in order to prevent a
cheap discount image. Further it is made from plastic, which is 30% cheaper to produce than regular card
boxes. It keeps humidity outside and due to its colors it is highly distinctive and easy to recognize for
illiterates. The package size should be kept to a regular 500g, since this is currently the smallest package
on the market to keep production volume at existing levels. Further it is considered that this size is most
likely according to their existing washing behavior and meets their monthly budget.
Price
Here Unilever is facing the dilemma of finding the gap between a price even the poorest can afford, and a
price which does not fuel cannibalization of their premium segment. Assuming ALA as existing product
gets re-launched on the Brazilian Market, there will be no incremental marketing costs. Assuming ALA
provides a formula half-way between Compeiro and Minerva those costs would be $1.20/kg. Since we are
promoting below the line we can push promotion cost down to $0.05/kg. Plastic packaging is also cheaper
with $0.11/kg. Distribution costs including, new contracts with specialized distributors will be $0.05/kg.
Finally we would have variable cost at $1.41/kg. Since this pricing is value driven and tailored the price
needs to be located between Compeiro and Minerva at about $1.90/kg resulting in 95 cents / 500g .
This approach will Unilever still provide with a relatively high profit margin. Since NE are less willing to
buy the cheapest brand, but are more willing to save up on quality product for their familys well-being.
ALA will be positioned with a price index of about 85 a perceived quality way above the price on the
perceived map.
Distribution
Unilvers existing network is less suited to execute that strategy according to their high costs. Most BOP
consumers dont use hypermarkets. In order to reach the 75.000 small outlets, which are preferred points
of sale for the NE population, the smartest way would be to create new contracts with specialized
distributors and to create entirely new supply chains. This would also beneficial effects on the promotion
in terms of first-hand information about our points of sale. Their variable cost to reach the small stores is
half the price per kg and their main customers are our preferred point of sale (Traditional retails stores
with 1 or two checkouts).

Promotion

Objectives After we tailored our offer and created a new value chain, we have use a specific marketing
mix to create acceptability and awareness to finally capture that value. We therefore want to introduce
the new brand to the market and stress the fact that it was exclusively developed for their needs.
Perceived quality needs to be significantly above the given price. The goal is to build up credibility and
positive attitudes for our new brand and to influence buying behavior accordingly.
The Messagethroughout the entire promotion has to be aligned with our position statement; Powerful,
Tailored, Affordable. Our main target will be mothers of all age.
Mix
In order to keep promotional costs comparably low, the focus will be on below the line communication
(70%) and 30% above the line (media advertising). Since most Brazilians watch a lot of TV the allocation
of the 30% should put predominantly here. The TV ad clearly targets a proud Brazilian mother, who has
pleasure washing her kids shirts and to make it all shiny and good smelling, while still being able to
surprise her with a gift, due to the money she has saved on ALA.[2] According to the high numbers of
illiterates written print media to educate customers about benefits are less suited, except they are rich in
pictures and self-explaining. For the 70% below the line communication Unilever has many possibilities
to incentivize purchases. Trial Promotions in terms of free product samples of about 50g could be passed
on to provide the possibility of testing. For repeat purchase Unilever could use a simple coupon program
by collecting marks which have to be cut out from the original packaging and a certain amount can be
treated for goodies or extra powder to increase loyalty. Unilver could also engage in personal selling
activities like Avon did. By empowering housewives in promoting ALA for them the idea is to create winwin situations. Those women can get some extra work during their spare time and introduce the new
powder to friends and other families and educate them about benefits.