Unilever in Brazil: Marketing Strategies for Low Income

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

Brazil’s NE Population As can be seen from the very foundations of Unilever, the company has always strived to achieve and capture has reached 48 mi llion 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 monitored Detergents 1957 Unilever launches their most successful brand Water type differs Soft and Hard Water have to this date, Omo. This was the first detergent distinct characteristis that 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 1970s Unilever starts its food operations with the launch is extremely versatile life. of Doriana, the first margarine in Brazil

Competition Local and Global competition 1996 Unilever started to expand, and divided into three 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 Part 2: Overview Target Markets Positioning and Propositions for the future Company Description Goals and Strategic Focus Unilever’s Mission: Brazil Part 5: Marketing Mix Product Strategy Part 3: Situation Analysis SWOT Pricing Strategy 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 What price, product, divert money from its reposition existing promotion, and distribu- premium brands to target brands to a new large yet tion strategy would allow the lower margin specific target market, Unilever to deliver value segment of low-income expand its product depth to low-income consumers customers. or launch a new brand. without cannibalizing its own premium brands too heavily.

Unilever must also consider externalTH ANDfactors such as the diversity in culture from its work- ing market; customer needs thatEN inﬂuenceE 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,Healthy emp includ-loyees and ing beverages and cleaning agents. It is headquartered in London and Rotterdam.better In workplaces. 1996 it 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 business 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

MISSION STATEMENT FOR BRAZIL Unilever’s mission statement can be found on their corporate website. It states, “we work to create a better future every day, with brands and We strive services that help people feel good, 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 customers wash their clothes, and as a result, Unilever’s competitors have different attributes according to the geographical region analysed. ANALYSIS 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 population 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, whitening, 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 detergent, 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. UNILEVER SHOULD PRODUCE By introducing another product, Unilever can capture 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 quality. 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 product 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 product. 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 communication 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 supermarkets 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 customers 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.