case study

Brazil Unilever – 1996 Marketing Case Study

Situation Analysis

Full situation analysis is available on Exhibit 1.

  • Unilever is a leading company in the detergent powder category with 81% of market share
  • 19.1% of market share in the laundry soap category with minerva
  • Distribute their products with two channels, generalist wholesaler and specialized distributor
  • Customers in NE in Brazil have features of low income level, more care about washing clothes
  • Washing clothes is one of pleasurable and social activities for women in NE
  • Cleanliness, Smell, and ability to remove stains are top three factors for evaluating products
  • P&G Brazil is the main competitor in the market-15% of market share
  • Each category has even market size($106M for detergent powder, $102M for laundry soap)
  • More consume laundry soap than detergent powder(20.4kg vs 11.4kg)
  • A price of plastic sachet is 30% of that of traditional cardboard box

 

Decision Question
How to strategically enter Brazil low-income market using which brand and which marketing mix (price, product, promotion, distribution)?   

Decision Criteria

  1. Level of Consumption Rate, Socioeconomic Status and Brands Recognition in NE States (Case Exhibit 1, 2, and 3): With nearly 96.6% penetration and the highest 20% consumption rate (Exhibit 3), Northeastern state of Brazil has over 53% of social class E (Exhibit 2) and provided important GDP and population group % information on how to approach pricing in NE consumers.
  2. Brand Market Share in the Laundry Soap and Detergent Powder (Case Exhibit 5 and 7): Although Camperio has low product attributes and low top-of mind brand awareness among the existing competition, it can create potential higher sales value, given its competitive wholesale $1.7 price/kg with the third largest market share from the detergent market.

  3. NE Consumers’ Perceive Price, Quality, and Key Product Information (Case Exhibit 9 and 10) NE consumers’ perceive value quality and top-of-mind awareness of Camperio are better than Invicto, Bold, and Pop. Exhibit 10 was used in calculating the profit margin for new packaging.

 

Options and Evaluation

Option 1: Existing Campeiro Brand Reposition

  • Target audience: Low-income consumers who use detergent powder or laundry soap for clothes washing.
  • Solution: Reposition Campeiro to not only cater to low-income segment, but as an alternative to take over the soap market (including own brand Minerva).
  • Marketing Mix
  • Product: Campeiro cardboard box + plastic refill package (cost 30% of box)
  • Price: Same as the existing Minerva soap $1.7/kg price (goal to replace Minerva soap)
  • Promotion: Bundling of cardboard box package with refill pack
  • Distribution: Small specialized distributors’ push strategy; Ads focusing on attributes of whitening and smell to create pull strategy.
  • Rationale:
  1. Soap consumption 2X higher than powder market, but with slow growth rate (6%).
  2. Campeiro powder ($1.7/kg) is already pricing similar with others ($1.2/kg) and Minerva soap ($1.7/kg). While possible cannibalization for Minerva soap, Unilever should be ready to get rid of the dog and grow its cash cow.
  3. 53% NE population is social class E which is fairly price sensitive. Though with little awareness, Campeiro is already known as affordable and average-quality based on the perceptual map. Therefore, with ads campaign emphasizing the whitening (weight 24%) and smell (20%) benefits, Campeiro can be repositioned to over-take the soap market.
  4. Possible Cannibalization of Minerva soap, but the low-income market size is big enough to compensate the loss.

 

Option 2: Existing Omo Brand with Same Position

  • Target audience: low-income (NE) segment in powder market
  • Solution: Maintain premium position but create price discrimination by coupon distribution, and packaging in small size.
  • Marketing Mix
  • Product: Omo small size cardboard box package
  • Price: remain Omo’s premium price for new small package
  • Promotion: coupons distribution in NE/ referral program (network of housewives)
  • Distribution: Small specialized distributors’ push strategy (point-of-purchase promotion)
  • Rationale:
  1. Omo’s high awareness (>75%) and share (52%) in powder market, premium brand image saves the effort for advertising and branding.
  2. Controlled coupon distribution avoid brand dilute by price discrimination.
  3. Possible Cannibalization of Minerva, but the low-income market size is big enough to compensate the cannibalization loss.

 

Recommendation

Option 1, Reposition Existing Brand Campeiro, would be our priority recommendation for Unilever because of detergent powder feature and price advantage.

According to promotion, we suggest Unilever to promote Campeiro through TV channel and radios instead of newspaper and billboard, because 40% of the population in NE is illiterate. Moreover, since music and humor are one of main cultural in NE, it is better for Unilever to imply those elements in the commercial AD. The AD should emphasize whitening and smell, because many poor NE people are proud of keeping their clothes spotlessly clean, and detergent powder does not have the yellowish color and smell limitation that laundry soap has. Also, it should educate people that foam is not the criteria to measure the cleanliness quality, which is a shortcoming of Campeiro based on Exhibit 5 in the case.

In order to take over the sales of laundry soap category, Campeiro could offer plastic package to NE consumers for refilling the traditional cardboard boxes. By using plastic package, the Campeiro detergent powder saves $0.245/kg packaging, and increases profit margin from 17% to 29.1% (See Exhibit 2). Also Campeiro can have price advantage comparing to any other laundry soap brands ($1.2/kg).

 

Appendix
Exhibit 1  5C Analysis for Current Situation Facing the Unilever in Brazil

Company
  • A clear leader in the detergent power category with an 81% of market share
  • Premium brand positioning
  • Detergent Powder: OMO(52%), Minerva(17%), Campeiro(6%)
  • Laundry Soap: Minerva(19.1%)
Collaborators <Generalist Wholesaler>

  • They mainly distribute top 3 brands in many categories to whole national wide
  • They are opportunistic and price driven to Unilever

<Specialized Distributors>

  • Smaller local wholesalers have exclusive rights to sell products in certain areas
  • They have partnership and exchange information with Unilever

<Small store owners>

  • Retail store owners provide advice and financing to low-income consumers
Customers
  • Low income people in Northeast of Brazil(average only around $2,250)
  • Only 28% of households own a washing machine(67% in Sao Paulo)
  • Washing more frequently in the NE than the Southeast(5 vs 3.9 times per week)

→ Own fewer clothes and have more free time

→ Washing clothes is viewed as pleasurable activities(social activities)

  • Be proud of keeping themselves and their families spotlessly clean
  • The quantity of foam it produces attributes the consumer’ perception
  • Consider cleanliness(24%) is the most important, followed by smell(20%) and ability to remove stains(16%)
  • Regard as only second-rate products other than cardboard boxes packages
  • Might be reluctant to buy a product advertised “for low-income people”
Competitors
  • P&G Brazil: 15% share of the Brazilian detergent market
  • Local Brazilian companies in laundry soap category(ASA had 11% of the market share with Bem-te-vi)
  • Two markets size are similar($106M for detergent powder, $102M for soap)
  • More competitive in laundry soap than detergent powder
Context
  • 40% of people in NE are illiterate and 53% of the population in NE lives on less than two minimum wages(E+ and E-)
  • Consumption of soap(20.4kg) is higher than detergent powder(11.4kg)
  • Using a plastic sachet would cost 30% of traditional cardboard boxes expenses

Exhibit 2 –  Brand Data on Important Financial Data from Exhibit 10  

Unilever Brazil Detergent & Soap Brand Data
Key Assumptions are shown as below for the calculation above:

Total Fixed Cost = FC (Formulation Cost) + Packaging Cost + Promotion Cost
Profit Margin = Wholesale Price – Total Fixed Cost
Given the equal 17% profit margin between Minerva detergent and Camperio, Camperio offers competitive profit margin for NE market.

If the packaging is changed to plastic from a cardboard box, the 70% PKC reduction would result in the saving of $ /kg in packaging cost. The new packaging cost based on plastic would be at $0.105/kg.  (Calculation: $0.35/kg x 0.30 = $0.105/kg; $0.35/kg- $0.105/kg = $0.245/kg saving).  So the new fixed cost is $0.90 + $0.105 + $0.20 = $1.205, while the existing total fixed cost = $1.45.

Thus, every kg of Camperio detergent sold will have $0.245/kg more profit.
($1,70-1.205/$1.70) = 29.1%
So the new profit margin will  be $0.45/kg, and profit margin of $0.495/kg or 29.1%.

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