MG506

Global Marketing

Unilever in Brazil (1997-2007)

‘Marketing Strategies for Low-

Income Consumers’

Lecturer: X

Date: X

Group E:

Cian Corbett xxx

David Mc Weeney xxx

Seánpaul Walsh xxx

2

Contents:

1. Introduction 3

2. Brazil 4

3. North-East Market Attractiveness 6

4. Brand Portfolio 11

5. Options 14

6. Marketing Mix 20

7. Conclusion 24

Bibliography

25

3

1 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 Unilever’s 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 company’s 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 Unilever’s 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.

4

2 Brazil

Brazil is a country with a population of

approximately 170m. It’s 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 Brazil’s 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 don’t own a washing machine compared to 33% who

don’t have one in the South East.

Political Economic

Social Legal

PEST

5

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” (Hollenson, 2007; P221).

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 LIC’s 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 LIC’s that

validate those consumers’ life-theme as good mothers (Fournier, 1998).

.

6

3 Northeast Market Attractiveness

An analysis of the Northeast versus the Southeast of Brazil can highlight the attractiveness

of the region for Unilever.

Min Monthly Wages (MMW)

Percentage of Population

Population Figure

# of Monthly MW's

Monthly MW in $

Yearly MW 1996

Yearly MW in 1995

Income Class 100% 48,000,000 $70.00

E- 33% 15,840,000 1 $70.00 $840.00 $661.42

E+ 20% 9,600,000 1.5 $105.00 $1,260.00

D 30% 14,400,000 3.5 $245.00 $2,940.00

C 9% 4,320,000 7.5 $525.00 $6,300.00

B 5% 2,400,000 15 $1,050.00 $12,600.00

A 3% 1,440,000 20 $1,400.00 $16,800.00

Table 1 - Income Analysis Northeast Brazil

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 Wage 1996

Detergent @ $1.70 as % of income

Yearly Wage 1995

Detergent @ $1.70 as % of income

$840.00 2.31% $661.42 2.93%

Table 2 - Percentage of spend on cleaning agents

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 consumer’s eyes.

7

Market Values

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, (See Table 9 - Calculations for SE market value) the reason for such

variation is down to regional differences in laundry habits. In the north soap

Forecast 1996 1997 1998 1999

Detergent Market (volume in tonnes)

42,000 49,140 57,494 67,268

Detergent Market $ Value $106,000,000 $124,020,000 $145,103,400 $169,770,978

Growth Rate 17%

Soap Market (volume in tonnes)

81,250 86,125 91,293 96,770

Soap Market $ Value 102,000,000 108,120,000 114,607,200 121,483,632

Growth rate 6%

Table 3 - 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. See Error! Reference source not

found. -shows the same forecasts applied to all of the existing brands in the Unilever

portfolio. Some of the main findings from that analysis included the relatively poor showing

of the 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 1996 1997 1998 1999

Campeiro Selling Price $1.70

Campeiro Market Share 6%

Campeiro (volume in tonnes) 2,520 2,948 3,450 4,036

Campeiro per KG $0.25

Campeiro Profit after Costs $630,000 $737,100 $862,407 $1,009,016 Table 4 - Campeiro Sales Forecast

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.

8

Based on the above analysis Unilever should target the low-income 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 by

Table 4 - Campeiro Sales Forecast. Exhibit 5 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. The issue of launching a new brand will be relooked at in section 5 of the

report where the reasons for doing so are discussed in greater detail. Price is set at $2.10

with a margin of $0.20. Details on pricing can be found under the pricing aspect of the

marketing 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 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. See pricing section of Marketing Mix for more information on the

pricing issues for a new brand in the soap market e.g. Table 8- Pricing and Brand Profit

Margin Analysis for Soap Market.

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.

9

Detergent Market 1996 1997 1998 1999

New Brand Profit 0 $393,120 $919,900 $1,479,890

Market 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 $0

Profit (not incl new brand) $630,000 $737,100 $862,407 $1,009,016

Profit level of Campeiro and New Brand $630,000 $886,977 $1,213,119 $1,479,890

Table 5 - Financial Results of Targeting NE with New Brand

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 and

eventually all income from the low income consumer market will be as a result of the new

brand.

Long Term

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 Unilever’s 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 can be seen from Table 5, there is long term financial growth in the strategy with the new

brand 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

10

figure has the potential to be even higher should the purchasing power of low income

consumers increase even further.

11

4 Brand Portfolio

Brand Market

Share Type

Brand

Knowledge

Market

Penetration

Mind

Awareness

WP

Price/per

KG

OMO .52 Detergent 100% 97% 72% 3.00

Minerva .17 Detergent/Soap 100% 91% 16% 2.40

Campeiro .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

12

any change in market share will be difficult to achieve for this brand as price is the

competing variable and not quality. We believe that from our research that Campeiro will

continue to struggle in growing within the competitive environment and Unilever must act

now in order to protect its cumulative market share. See forecasts below.

Forecast 1996 1997 1998 1999

Detergent Market (volume in tonnes)

42,000 49,140 57,494 67,268

Total Market Value $106,000,000 $124,020,000 $145,103,400 $169,770,978

Growth Rate 17%

NE Share 75%

OMO Selling Price $3.00

OMO Market Share 52%

OMO (volume in tonnes) 21,840 25,553 29,897 34,979

OMO Margin per KG $0.65

OMO Profit after Costs $14,196,000.00 $16,609,320.00 $19,432,904.40 $22,736,498.15

Minerva Selling Price $2.40

Minerva Market Share 17%

Minerva (volume in tonnes) 7,140 8,354 9,774 11,436

Minerva margin per KG $0.35

Minerva Profit after Costs $2,499,000 $2,923,830 $3,420,881 $4,002,431

Campeiro Selling Price $1.70

Campeiro Market Share 6%

Campeiro (volume in tonnes) 2,520 2,948 3,450 4,036

Campeiro per KG $0.25

Campeiro Profit after Costs $630,000 $737,100 $862,407 $1,009,016

Unilever Actual Revenue (Detergent)

$86,940,000.00 $101,719,800.00 $119,012,166.00 $139,244,234.22

Unilever Total Profits (Detergent)

$17,325,000.00 $20,270,250.00 $23,716,192.50 $27,747,945.23

Soap Market (volume in tonnes)

81,250 86,125 91,293 96,770

Soap Market Total Value 102,000,000 108,120,000 114,607,200 121,483,632

Growth rate 6%

Minerva Selling Price $1.70

Minerva Market Share 19%

Minerva (volume in tonnes) 15,438 16,364 17,346 18,386

Minerva Revenue $26,243,750 $27,818,375 $29,487,478 $31,256,726

Minerva Margin per KG $0.30

Minerva Profit after Costs $4,631,250 $4,909,125 $5,203,673 $5,515,893

Table 6 - Sales Forecasts Northeast Brazil

13

The above table illustrates the forecast sales over the next three years of all existing brands

in both the soap and detergent market of the Northeast.

As highlighted earlier Campeiro is yielding a small return and given the nature f the

competing variable, price, it is hard to see where they will pick up ground if or maintain if

new entrants come in with a better offer at low price. As OMO and Minerva are competing

in higher segments they are sustainable and do not need to alter their product.

14

5 Options

There are three options open to Unilever.

Brand Extension

Brand Repositioning

New Brand

Brand Extension

A well planned and well implemented extension of one of their three brands could offer

Unilever a number of advantages. As we are targeting the low income segment and OMO

and Minerva are higher priced it would be foolish to tamper with those brands as they have

a good audience also. 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

15

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:

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

In this case there is a cost to operating an extension. Please see breakdowns below of each

option.

Current Margin OMO Minerva Formula

Campeiro Formula

In-between

FC $1.65 $1.40 $0.90 $1.15

PKC $0.35 $0.35 $0.35 $0.35

PC $0.35 $0.30 $0.20 $0.25

Total Cost $2.35 $2.05 $1.45 $1.75

Wholesale Price (WP)

$3.00 $2.40 $1.70 $2.10

Margin per KG $0.65 $0.35 $0.25 $0.35

New Brand Viver

Incremental PC - $0.10 $0.10 $0.10

Distribution - $0.05 $0.05 $0.05

New Cost - $2.20 $1.60 $1.90

New Margin per KG - $0.20 $0.10 $0.20

Year 1 Sales in KG 1,965,600 1,965,600 1,965,600

Yearly Profit $393,120.00 $196,560.00 $393,120.00

Brand Extension

Incremental PC - $0.05 $0.05 $0.05

Distribution - $0.05 $0.05 $0.05

New Cost - $2.15 $1.55 $1.85

16

New Margin per KG $0.25 $0.15 $0.25

Year 1 Sales in KG 1,965,600 1,965,600 1,965,600

Yearly Profit $491,400.00 $294,840.00 $491,400.00

Brand Reposition

Incremental PC - $0.00 $0.00 $0.00

Distribution - $0.05 $0.05 $0.05

New Cost - $2.10 $1.50 $1.80

New Margin per KG $0.30 $0.20 $0.30

Year 1 Sales in KG 1,965,600 1,965,600 1,965,600

Yearly Profit $589,680.00 $393,120.00 $589,680.00

Table 7 - Brand Profit Margin Analysis Detergent

The above highlights the different margins that can be charged if a new brand, brand

reposition or brand extension were chosen. An additional $0.05 can be removed from the

margin 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 (WP)

$1.70 $1.40

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

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 $861,250

Table 8- Pricing and Brand Profit Margin Analysis for Soap Market

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 Viver ($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.

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

Changed market conditions

However having acknowledged the Campeiro brand’s 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

18

this up as even a successful reposition may not yield significant returns over another strategic option

i.e. New Brand.

New Brand-Viver

We believe that the most profitable strategy for breaking into the

low cost market segment is to launch a new brand. We propose

Viver. At present our low income brand Campeiro is simply not

providing the attributes e.g. quality, that is demanded by the low

income consumers. It is part of Unilever’s 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 Viver 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 Unilever’s position to outside competitor’s and

all whilst growing overall market share in the Brazilian market. The foreseeable future is

that it will replace Campeiro. As seen above we have valued Campeiro and projected that

Viver will exceed the old brand.

Region

Population Unique Customers per year

SE KG per customer per year

SE Yearly Cost per customer

Value of SE market

SE 73,000,000 5,603,070 12.9 $27.09 $151,787,171

6.8 $8.16 $45,721,052

Detergent Market (volume in tonnes) 42,000

Consumption NE KG # of people buying detergent in NE # of people buying soap in NE

Detergent 11.4 3,684,211 3,982,843

Soap 20.4 8% 8%

Table 9 - Calculations for SE market value

19

The market value of South East Brazil is obtained by calculating the number of unique

buyers 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 the

purchasers of the product in the northeast.

This percentage is then applied to the Southeast and the reverse procedure is carried out.

20

6 Marketing Mix

Product: Vivar, Brazilian term for Life.

Viver 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 Viver will be in line with Attributes that are most important to NE

consumers.

1) Cleanliness, whitening, Productivity

2) Smell, softness

3) Ability to remove stains

With this in mind Unilever’s formula for Viver will be priced half way between Minerva and

Campiero. To avoid cannibalisation of Minerva, Viver would omit lesser demanded

attributes such as Dissolving Power and Harm to Colours which will be decreased to an

acceptable level. The strategic map would look as follows:

21

Packaging:

While Viver 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, Viver will forego the 30%

saving that would accompany a plastic sachet package as LIC’s

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 Viver will be sold in 1kg and 500g

cardboard packaging.

Place:

Distributing to NE Brazil does not come without its challenges. We are told that LIC’s 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 Viver to LIC’s. The benefits include 24-40 SKU’s 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 Unilever’s knowledge of marketing to and

accessing 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 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 Unilever’s primary brands OMO and Minerva. If this distribution agreement threatened

the market share of these 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 “low-quality product”.

22

With this in mind, the team propose that the promotional strategy instead focus on the

positive lifestyle of LIC’s 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.

Viver would seek to emphasise this in the promotional strategy in an extremely positive

message: “Viver, Vida Parece Brillhante”, (Viver, 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 NE’s high illiteracy rates of 40%. The chosen imagery

used would feature mothers talking and laughing while using Viver. The imagery would

communicate health, happiness and pride in a job well done reiterating that Viver is the

perfect 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 kg

in incremental marketing costs. This will practice Unilever’s 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 LIC’s 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 In-between

Formulation Costs $1.15

Packaging Costs per KG $0.35

Promotional Costs per KG $0.25

Total Cost $1.75

Wholesale Price (WP) $2.10

Margin per KG $0.35

New Brand Viver

Incremental Promotional Costs per KG $0.10

23

Distribution Costs per KG $0.05

New Cost $1.90

New Margin per KG $0.20

Table 10 - Pricing Structure

The formulation cost is derived from ingredients providing a product that is in-between Cambeiro

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 in Table 5 - 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.

Yearly

Wage

1996

Detergent @

$2.10 as % of

income

Soap @ $1.20

as % of income

Yearly

Wage

1995

Detergent @

$1.70 as % of

income

Soap @ $1.20

as % of income

$840.00 2.85% 2.91% $661.42 2.93% 3.70%

Table 11 - Change in percentage of consumers income spent on laundry products

The above table illustrates how the price of $2.10 is still value for money for the customer. At this

price a customer’s yearly spend on detergent is still at a lower percentage than it was in 1995 at the

lower price of $1.70. By pricing the detergent at this level it is allowing customers access to a higher

quality product at the same real time value. The higher cost is justified by the ingredients in the

product which meet customers’ needs.

24

7 Conclusion

The team recommend that Unilever enter the NE Brazil market to target LIC’s with a new

brand Viver. In the short term Viver 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.

There arises the issue that a new brand will cannibalise other brands. Upon financial

investigation of the Unilever portfolio, the team have found that the Campiero brand is not

delivering on capturing value for the consumer and creating value for Unilever. Campiero is

estimated to make $630,000 at the end of year 1. The team contend that Viver, if marketed

and executed correctly could earn $1,479,890 at the end of year 1. Therefore, the team

stress that not only is product cannibalisation possible but it is necessary if Unilever are to

successfully market to LIC’s in NE Brazil.

Once Viver has made successful wins in the NE 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 NE 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 Viver

can successfully secure the LIC segment forming a barrier to entry for any potential new

entrant or current competitor. Secondly, the team concur with Laercio’s assertion that NE

Brazil Detergent market presents Unilever with the opportunity to perfect the art of

marketing to LIC’s. 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.

25

Bibliography

Books:

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, 4th 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 in

consumer research”, Journal of Consumer Research, vol. 24, no.4, March, p.343-373.

Websites:

IBGE online, Brazilian Statistics Office Online. Available at:

http://www.ibge.gov.br/english/estatistica/populacao/contagem/defaulttabelas1.shtm