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Unilever in Brazil: Marketing Strategies for Low Income Consumers 1997-

2007

Technical Report · April 2016

DOI: 10.13140/RG.2.1.1820.9683

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UNILEVER IN N-E
BRAZIL
Marketing Plan 2013
UNILEVER IN BRAZIL
Marketing Strategies for Low-Income
Consumers

1997-2007

GAGNE Marketing Research Consultants Team

Boccanera Vittorio
Cimmino Caserta Luigia
Cobio Nicola
Le Gouz de Saint-Seine Tristan
Lam Abby Marketing Plan 2013
“Marketing Is Too Important To Be Left
To the Marketing Department”
David Packard
CONTENTS AND OVERVIEW

Brazil’s Unprecedented Challenges Unilever’s response to the

changing customer needs
As can be seen from the very foundations of Unilever,
Brazil’s NE Population the company has always strived to achieve and capture
has reached 48 million the most from their customers, in terms of value and
in temrs of acquiring a long-lasting response, both in
and is thus a considerable market
terms of Loyalty and Brand Image
opportunity for Unilever

1929 The Lever Brothers Started operations in Brazil

Market Split The diverging
geographical
between Soap and cultures should be 1930 Opened their first Plant in Sao Paolo
Detergents monitored

1957 Unilever launches their most successful brand

Water type differs Soft and Hard Water have
distinct characteristis that
to this date, Omo. This was the first detergent
powder in the country
between the North will be essential in
establishing the
ad the South target market 1960s Unilever Enriches its portfolio of brands with
Personal care items

Culture The Culture is at the heart

of the Brazilian’s way of Unilever starts its food operations with the launch
is extremely versatile life.
1970s
of Doriana, the first margarine in Brazil

Local and Global competition 1996 Unilever started to expand, and divided into three
Competition from P&G is constantly on main divisions, Personal Care, Foods, and Detergents
continues to rise the move towards a
convergence.
1996 Detergents remain the most prominent cash cow
for Unilever in Brazil. Omo, Minerva and Campeiro
respectively have 81% market share.

CONTENTS
Part 1: Introduction Part 4: Marketing Strategy -
Executive Summary Segmentation and Targeting
Segmentation Analysis
Target Markets
Part 2: Overview
Positioning and Propositions for the future
Company Description
Goals and Strategic Focus
Unilever’s Mission: Brazil Part 5: Marketing Mix
Product Strategy
Pricing Strategy
Part 3: Situation Analysis SWOT
Promotion Strategy
Competition Analysis
Distribution Strategy
Company Analysis
Customer Analysis
Part 6: Appendix
Financial Analysis
Exhibits
EXECUTIVE SUMMARY
This marketing plan analyses and forecasts the different ways in which Unilever could suc-
cessfully exploit growth opportunities in the marketing of detergents to Brazil’s North East-
ern low-income consumers. Unilever’s decision is based on three main corporate criteria
fundamental in reaching a conclusion:

DIVESTING NEW PRODUCT ATTRIBUTES &

STRATEGY
Whether Unilever should Whether Unilever should
divert money from its What price, product,
reposition existing
premium brands to target promotion, and distribu-
brands to a new large yet
the lower margin tion strategy would allow
specific target market,
segment of low-income Unilever to deliver value
expand its product depth
customers. to low-income consumers
or launch a new brand.
without cannibalizing its
own premium brands too
heavily.

TH AND
Unilever must also consider external factors such as the diversity in culture from its work-
ing market; customer needs thatENE influence perceived quality of a product and lifestyle cus-
toms. With these considerations, the conclusions drawn revolve around the production of a
new Laundry Soap Bar, due to the humid conditions of the NE that would diminish powder
quality. In addition, innovative modifications to the soap bar, such as the introduction of
bleach in the compound, will increase quality, a high value among the NE consumers.

This will help

diseases like diarrhoea.

COMPANY DESCRIPTION
Unilever is an Anglo-Dutch multinational $56 billion consumer goods company. It arose as
the result of the merger of the British soap maker Lever Brothers and the Dutch margarine
producer Margarine Unie. Founded in 1930, it is one of the oldest multinational companies in
the consumer goods industry. Its products range from food to personal care products, includ- and
Healthy employees
ing beverages and cleaning agents. It is headquartered in London and Rotterdam.betterIn 1996 it
workplaces.
had a portfolio of 1,600 brands worldwide. It was present in more than 150 national markets
and employed about 300,000 employees. In addition to strengthening its market share in the
Brazilian detergent market, Unilever grew in other product types, buying Kibon ice cream in
1997.
COMPANY GOAL AND STRATEGIC
FOCUS
Unilever’s goals are related to growth and an intense sense of social purpose. The company
has a clear and compelling vision of their future that consists in their brands and services
reaching and inspiring people across the world, helping them double the size of their busi-
ness while reducing their environmental footprint and increasing their positive social
impact. Unilever aims to improve hygiene, nutrition and health for communities with their
wide range of products. The company hopes to strengthen their relationships in emerging
markets which will be significant for their future growth. Unilever is committed to support-
ing sustainability and has ran many campaigns that reflects its key priorities, a “better
future for children, healthier futures, a more confident future, a better future for the planet
and a better future for farming and farmers”.

MISSION STATEMENT FOR

UNILEVER IN BRAZIL
Unilever’s mission statement can be MISSION STATEMENT FOR BRAZIL
found on their corporate website. It
states, “we work to create a better
future every day, with brands and
services that help people feel good,
We strive
look good, and get more out of life. TO PARNTER WITH THE WOMEN OF
We will lead for responsible growth,
inspiring people to take small every- NORTHEASTERN BRAZIL—THE
day actions that will add up to a big MOTHERS, GRANDMOTHERS AND
difference. We will develop new ways AUNTS-
of doing business that will allow us to
double the size of our company, while in the simple joy yet significant task of keeping a
reducing our environmental footprint household clean. We believe all families in the com-
and increasing our positive social munity should have viable washing solutions, and our
impact.” detergents seek to provide that. We will be environ-
mentally and socially responsible, delivering products
that help people get more out of their washing rou-
tine”.
 SWOT ANALYSIS

COMPETITION
a.

ANALYSIS
a. Two product types, namely powder detergents and laundry soap,
which are in turn divided geographically in terms of dominance,
predominantly compose the home care market in Brazil. The histori-
cal and cultural geographical differences, as a result of the significant
differences in household income levels, have shaped the way in which
COMPANY
ANALYSIS
customers wash their clothes, and as a result, Unilever’s competitors
have different attributes according to the geographical region
analysed.

Unilever faces three categories of competitors in

two different market sub-sectors, and should Unilever has several dominant advantages that
therefore be analysed on a geographical basis. help its market penetration and market share
The most used product in the North East (NE) is retention within both the powder detergent and
laundry soap, due to its lower price in compari- laundry soap markets. As the market leader for
son to powder detergents. This market is com- both sectors (75% and 19% respectively), Unile-
prised of two competitor types, the top 4 players ver can exploit the ever-growing population in
having only 4% market share. The biggest com- Brazil. The probability that quality of life is main-
petitor is ASA, with its trademark brand Bem- tained ceteris paribus thus decreases, increas-
te-vi holding 8% less market share than ing low-income market’s needs for laundry soap
Unilever’s Minerva. Minerva also competes with in which it has, however, a $0.5/kg higher cost
smaller local brands that hold less than 1% than Bem-te-vi’s. The fact that it is also a clear
market share. In contrast, the detergent market leader in the Detergent market, with 45 key
is more saturated with brands competing both in detergent brands, amplifies their influence on
Brazil and globally. Procter & Gamble (P&G) consumer’s lives, with the addition that this
owns 15% market share. Although this is a mere market sector grows at a whopping 17% annu-
20% of Unilever’s 81% share, they are nonethe- ally. It is, as a result, a clear pioneer in the Bra-
less the biggest competitor, with R&D and mar- zilian consumer goods industry. Having said this,
keting expertise that threatens Unilever’s repu- what makes Unilever’s detergents so attractive
tation in the long run. As Exhibit X shows, P&G’s are the specific enzymes and builders that
strategy revolves around 3 brands, Ace, Bold and improve the whitening power of the detergent.
Pop, each having 11.80%, 5.35% and 1.40% However, hand-washing detergents, although
market share respectively. Having said this, cheaper, are of lower quality. Unilever is in an
ASA’s Invicto is Unilever’s Campeiro’s main com- opportunistic position, pondering on a “Go/No
petitor, both pricing at $1.70/kg and $1.71/kg Go Decision”, whereby tapping in the NE low-
respectively. This intertwined market poses all income market would require some product
sorts of threats to Unilever’s detergents, and modification or product depth extension.
individual product items.
CUSTOMER ANALYSIS
Unilever wants to target low-income consumers in North Eastern Brazil. 53% of the popula-
tion live on less than two minimum wages, 40% are illiterate and per capita income is around
$2,250. NE regions have a distinct culture that share lifestyle, culture and religious elements
inherited from African and European origins. Majority of poor North-Easterners are proud of
the fact that they keep their families spotlessly clean despite their low income, and many
women see the cleanliness of clothes as an indication of their dedication to family. Unilever’s
target market wash their laundry very frequently and view washing clothes as one of the
more pleasurable activities of their week.

Low-income NE consumers evaluate detergents by six key attributes, “cleanliness, whiten-

ing, productivity, smell, softness, ability to remove stains, dissolving power (its ability to clean
and whiten clothes with a small quantity of product) packaging and harm to colours”. The
quality that mostly drives customer-buying decisions is the perceived power of the deter-
gent, which is judged by the quantity of foam produced. The smell of the detergent is also
important-consumers often associate a strong, pleasant smell with softening power and
gentleness to fabric and hands. Low-income consumers (who are often barely literate)
prefer simple and recognizable packages that open easily and protect against humidity.

SEGMENTATION ANALYSIS
In plotting the plan of action necessary to implement the project “Every-
man”, Laercio Cardoso should give priority to segmenting the Brazilian
detergent market correctly. Two distinct segments can be identified,
middle-income Southern families and low-income Northern families. In
both cases the matriarch is the purchaser, but being an indigenous of
the North or the South comprises different collateral effects. Northern
Brazilians have a different background; they are on average less literate
and less wealthy than their countrymen, thus translated into different
habits. NE matrons are used to hand-wash the family clothes, and hence
buy cheap bars of laundry soap instead of powder detergent which is an
inconvenient tool to use when a washing machine is not available; as a
matter of fact these category of housewives recurs to just a sprout of
powder soap in the final passage in order to convey a nice perfume to the
laundry. On the contrary SE families are prosperous, and hence they can
afford washing machines, therefore they would rather buy moderately
priced detergents than inexpensive soap bars, which would not even be
suitable for this particular domestic appliance. Recapping, considering
that NE matrons use soap bar detergent since they have to manually
wash their families’ clothes, and that they enjoy its foam-ness and prac-
ticality, the harsh smell being the only flaw in the product, an advisable
move for Unilever would be that of developing a line of soap bars with
more enjoyable perfumes.

TARGET ANALYSIS
Since the core objective to achieve is that of amplifying the penetration of Unilever in the
low-income detergent market, managers should target NE customers. These clients live on
a tight budget; consequently at present they cannot afford the expensive Omo products.
Targeting them, Cardoso should keep in mind that they are illiterate, that they are attracted
by simple packaging, by nice soap perfumes and by great quantity of foam, all aspects that
should be respected and accentuated in the marketing strategy of the company.
POSITIONING AND PROPOSITION
FOR THE FUTURE
Despite their tight budget constraint, customers prefer to purchase Minerva, a compromise
between price and quality, rather than the cheaper Campeiro or the more expensive Omo.
Campeiro holds only 6% out of the 75% market share Unilever has in the detergent market,
and in the soap bar market it falls together with small local firms. Hence, the cannibalization
concerns of Fernanda Machado are not justified. The firm could further penetrate the cheap
laundry soap market focusing just on Minerva, enhancing the smell, packaging, foam quality
of their product and reducing the price considering the existent gap with respect to what ASA
offers. In conclusion, Unilever’s product lines target three different consumer segments
(Low Income, Middle Income and High Middle Income), whereas Brazil’s geographical
distinctions present a high degree of income gentrification, dividing the poor from the rich.
Consequently, this drastically reduces Campeiro’s efficacy in establishing itself as a loyalty
brand.

PRODUCT STRATEGY
Unilever should produce a new product for low-
income NE consumers in Brazil for several reasons.
By introducing another product, Unilever can capture
UNILEVER SHOULD PRODUCE
more market share and respond to the threat of P&G A NEW PRODUCT
by gaining first mover advantage. Unilever can also
learn from this venture and gain valuable experience A NEW BAR OF SOAP
to improve their low-income detergent lines globally,
perhaps even developing more products in the future.

The proposed new product is a bar of laundry soap, The new soap bar will generate a
which is the form of detergent that NE low-income high quantity of foam to efficiently
families are already using. Unilever should not sell
remove resisting stains and leave
powder soap because low-income buyers are gener-
ally living in high humidity areas and their homes are a pleasant smell
not well insulated against water. Such humidity would
aggregate the powder and diminish the product qual-
ity. Furthermore powder is not suitable with washing
habits in in that region and so this would represent a
limitation the sale of powder. The new soap bar will
generate a high quantity of foam to efficiently remove
resisting stains and leave a pleasant smell. The prod-
uct will also contain a touch of bleach to strengthen
washing power. These characteristics all reflect the
values of consumers in the NE. The packaging will be
distinctive, simple and easy-to-recognize, easily open-
able and heavily protected from humidity. The card box
will be in the well known colours of the Brazilian flag.
The brand name will be called BOA. This means
“good” in Brazilian. We kept the word short and
memorable, knowing that 40% of the population is
illiterate. See Exhibit X for an example of the brand
logo.
 PRICE STRATEGY
Unilever should not change the price of its other brands. OMO buyers won't be affected by
the new product targeting low-income customers since products are clearly differentiated.
To reduce the cost of the product, Unilever should rethink each step along the value chain
and find areas to increase efficiency. The company should develop a new business model
capable of reaching unparalleled scale based on small transactions. In addition, it should
find new ways to leverage the power of communities of buyers and local producers.

OMO, the premium brand, is sold at $3 per kg. BOA’s price should be less than OMO but
more than local competitors like Bem-te-vi, which is sold respectively at $1.2 per kg. The
final price should be $1.80/kg. This price reflects quality and robustness of the product,
exactly what low-income customers are looking for. EVEN PRICE The card box would cost
$0.38/kg which is more expensive than plastic but it will guarantee the success of the prod-
uct. Variable costs will be at $1.00/kg. Distribution cost will be around $0.07/kg. The unit
contribution margin will be 0.73/kg (1.80/kg - 0.90/kg+0.10/kg+0.07/kg).

PROMOTION STRATEGY
Unilever should continue with the current allocation of communication expenditure with 70%
above-the-line and 30% below-the-line. It is illogical to spend 70% on below-the-line communi-
cation since low income Brazilians would not be able to go to fancy events and there will be
lower reach with a higher cost per contact. Unilever should run a TV advertisement to raise
awareness and inform the women of Northeastern Brazil about BOA. Since Brazilians are avid
TV watchers, this is the most effective way to capture their attention. The ad would start off
showing a difficult day of chores in the life of a tired Brazilian mother. There is depressing music,
rain in the background, dark lighting, and the mother is dressed in dreary clothes. The scene
then shows the mother sitting alone in a dark room washing a very dirty pile of laundry that
appears to smell lucrative and is impossible to wash clean. The detergent she uses is not foam-
ing. Upon making a noise of frustration, another lady walks into the room and asks her what’s
wrong. This lady’s appearance greatly contrasts the mother-she is full of energy and wearing
bright colours. After an explanation about being frustrated with doing laundry, the lady hands
the mother a BOA bar and the scene automatically switches to a lively gathering by the river on
a sunny day where women are happily washing laundry together, chatting, and singing. We can
see BOA bars colourfully lying on the grass, and a lot of foam in the river as the women do their
washing. The mother now has a huge smile on her face as she’s seen having fun doing laundry
in a community. A close up shot shows her smelling her now clean clothes and smiling at the
fragrance. As her children run to her and thank her for doing the laundry, the slogan is seen
across the screen: “BOA-the simple joys in life”. This slice of life ad shows appreciation for Bra-
zilian women’s job in keeping their households clean in a way similar to P&G’s thank you mom
campaign for mother’s day. It also reflects Unilever’s mission statement for Brazil (see above),
where they aim to join in on the fun communal laundry culture. The advertisement would air on
the most popular TV channels that BOA’s target market watches.

DISTRIBUTION STRATEGY
By selling through small retail outlets, Unilever is using an indirect distribution channel. Unile-
ver should use specialized distributors because they reach traditional retail stores and super-
markets with fewer checkouts, which targets lower income customers better since they rarely
shop at large supermarkets. The lower cost is essential for keeping the price low so that cus-
tomers can afford the product. A partnership based relationship better than opportunistic one
because general wholesaler have a larger bargaining power and may keep pressuring for higher
distribution prices in the future.

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