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%)

<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>

Collaborators
 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

 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)

Customers
 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”

 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)
Competitors
 Two markets size are similar($106M for detergent powder, $102M for soap)
 More competitive in laundry soap than detergent powder

 40% of people in NE are illiterate and 53% of the population in NE lives on less than tw
minimum wages(E+ and E-)
Context  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

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%.