Case Report Unilever in Brazil

After familiarizing the reader with the existing problem situation, this case study presents alternatives and discusses relevant issues. This approach aims to weigh the alternatives according to their strategic capability of solving the problem situation and finally recommends the most advisable way of acting in a conclusion. 2Problem Statement Admittedly, even in the North Eastern market Unilever seems to perform pretty well. On the other hand, as already mentioned, the company has still not managed to attract the local low-income customers.

This is probably not only due to the fact that Unilever Brazil lacks substantial experience in this segment as there are huge differences between its typical Brazilian customer and this low-income consumers, but also to obvious barriers in distribution and promotional activities in this market. Unilever now deals with the challenge to find the strategy that constitutes of the right balance of their marketing mix elements in order to address this customer segment appropriately and therefore represents the key to enormous future success.

3Alternatives . 1 Turn something old into something special In order to conquer the Northeastern market, Unilever may consider repositioning its cheapest brand Campeiro. Campeiro is currently not very well perceived by Northeastern Brazilians. Especially in terms of cleanliness, whitening productivity, smell and softness (the most important attributes of detergent powders for Northeastern Brazilians) Campeiro is ranked well behind other detergent brands. Therefore, an intensive new marketing campaign should be started in order to discard Campeiro’s bad image.

Campeiro’s formula may be changed slightly and scents may be improved.

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Although the product is changed only a little bit, „the new formula“ would be advertised aggressively. Unilever may also consider adapting the brand name to Novo Campeiro in order to emphasize the message of a new and improved Campeiro. Advertising messages would strongly promote Campeiro’s new cleaning and whitening power and its irresistible scent. New package sizes would be created in order to better fit customers’ needs. Unilever would keep Campeiro’s current retail price of $ 1. 70 also for Novo Campeiro. $ 1. 0 already is very low compared to most other detergent brands, and with its improved formula and scent, Novo Campeiro even offers (promotes) an increased value for the same price. Although this might be challenging, Unilever should distribute Novo Campeiro to all of the approximately 75,000 small outlets across the Northeast. Most of the Northeastern Brazilians shop in small stores instead of big supermarkets. Therefore, it is crucial for the success of Novo Campeiro to be sold all over the Northeast. 3. 2 Mix & Mingle to form something new Unilever may also consider creating a new detergent brand for the Northeastern market.

The detergent powder formula of the new product would be in between of Unilever’s existing brands Minerva and Campeiro. Therefore, it would be designed to appeal to customers who prefer detergents superior to Campeiro but cannot afford buying Minerva. The new brand name would be Cheivadinho, which is a combination of the words „cheiroso“ (smelling good) and „lavadinho“ (cleanly washed). By using this brand name, Unilever combines two of the most important detergent attributes for Northeastern Brazilians, namely cleanliness and good smell, in its product name.

In order to promote Cheivadinho, an extensive new advertising campaign with a strong emotional appeal would be launched. Washing clothes is sort of a social activity for many Northeastern women. They enjoy meeting and chatting with friends while doing the washing in public laundries or rivers. Therefore, a strong effort would be put on transmitting this pleasant feeling in the advertisements. Commercials may show a group of women chatting and having a good time at a local public laundry while their clothes are being washed. The initial retail price of Cheivadinho would be $ 1. 99.

Thereby targeting consumers who can but do not want to buy Campeiro ($ 1. 70), but cannot afford Minerva ($ 2. 40). As described in Alternative 1, Cheivadinho should be distributed all around the Northeast. 3. 3 Keep it simple! Instead of adding another detergent to its product range, Unilever may consider introducing a new laundry soap for the low-end market in the Northeast of Brazil. This could be a profitable option for Unilever as the Northeast of Brazil has a huge market potential for laundry soap bars. Additionally, production costs for laundry soaps are far lower compared to those of detergent powder.

The brand name of the new laundry soap would be Simlavo and it would be marketed as „Simplesmente alvo! “ (Simply clean). Therefore, the advertising campaign should be as simplistic as possible, focusing mainly on the cheap retail price with the main message: Clean clothes at the lowest price. Simlavo would be sold at $ 1. 15, meaning $ 0. 5 lower than competitive products. This extremely low retail price can be achieved by keeping everything as simple as possible Production should be quarried out quickly and efficiently, using just the necessary ingredients and discreet scents and leaving out all the rest.

Advertising costs should be kept as low as possible. Ads are designed in a simple way, just showing the product, the slogan and the price, for example. TV-commercials should be created in a similar way and may be shown only during the day. The main target group for laundry soup is housewives, who also watch TV during day quite frequently. Therefore, it is not necessary to spend money on expensive commercials during prime time. 4Issues 4. 1 How does the product fit the way of washing clothes? As the procedure of washing clothes is very particular in the Northeast, analyzing this point carefully is important.

Firstly, a main issue is that only a few households possess a washing machine. In Recife, a two-million-resident city the penetration amounts to 28%. Therefore, the procedure of washing is done in a traditional way and hence highly labour intensive: Clothes are scrubbed using laundry soap, than bleach is added to remove stains and detergent powder is only used to finish and give a good smell. Moreover, washing clothes has a social impact. First, people in the Northeast attach a symbolic value to cleanliness and it is important for their self-esteem.

As it is highly labour intensive it is seen as an indication of the dedication of the mother to the family. As well, low-income consumers own fewer clothes, so these are washed more often (up to 5 times a week). Secondly, washing is a social get-together as it is often done in a public laundry, at a river or pond and therefore perceived as pleasurable. As a matter of fact, although the penetration of detergent powder and laundry soap is almost the same in the North-eastern market, the quantity used differs tremendously. The new laundry soap Simlavo would perfectly fit the traditional procedure of washing clothes.

However, for the newly advertised Campeiro and the new detergent Cheivadinho, it is a mean barrier, that more than a quarter of the households is not equipped with washing machines. Hence, promoting the detergent in combination with washing machines will be a challenge. 4. 2 How do the products have to be promoted to best reach customers? Promoting Simlavo would be an easy task as ads and TV commercials would be designed in a simple way, not involving many costs. However, as mentioned in the issue above, communicating both detergent powders most efficiently will be complex.

But just as such a high value is attached to washing and cleanliness, consumers will be convinced that a detergent powder will better serve their needs. Campeiro or Cheivadinho will be advertised directly at the spot of consumption in public laundries and dispensers in the laundry could be filled with the product. The superior quality product Cheivadinho will be introduced in a campaign that will directly focus on the consumers needs of cleanliness, good smell and their need for washing machines. A raffle for 250 washing machines will take place. With every 500g package a lottery ticket will be included.

Thus, an awareness for the need of washing machines will be risen. 4. 3 How can Unilever best skim the market without cannibalizing its portfolio too much? A major concern that had been voiced by Unilever’s managers prior to the decision of entering the north-eastern market for low-income consumers was the possibility of cannibalising the company’s existing brands. Considering the firm’s market share of 75% in the north-eastern region it seems very likely that by repositioning an existing brand or launching a new product some cannibalisation will occur.

Nevertheless we must bear in mind that Unilever’s main goal is to reach the low-income consumers, who are predominantly using laundry soap for the main washing process at this stage, using a little detergent only at the end. Even if the laundry soap market is a very large one, profit margins are very slim and therefore not very lucrative. Consequently Unilever must try to persuade costumers to change their habits and make detergent their main cleaning product. To achieve this Unilever keeping mind following things.

First of all it is crucial to demonstrate that using detergent is actually more effective than the method that consumers have been employing hitherto. Thus extensive advertising that shows the benefits of the product will be necessary. Moreover price is a very important criterion. It must be low enough so that costumers can afford it, but high enough in order for it not to be perceived as low quality, and to prevent cannibalisation of existing brands. This suggests that the new or modified product should be cheaper than Minerva, which is too costly for low-income consumers, but slightly more expensive than Campeiro, which has a cheap appeal. . 4 To what extent does the company have to adapt its distribution to reach low-income consumer? Low-income Consumers in the Northeast rarely shop at large supermarkets like Wal-Mart and Carrefour, but rather at small outlets that are spread throughout the region. This is a big problem for Unilever who, despite having established a first-rate network of generalist wholesalers has no access to these small shops. Subsequently it seems inevitable for the company to modify its strategy and to start contracting with special distributors.

This would not only enable a more efficient and direct distribution to consumers, but would also give way to an extensive point-of-purchase activity. Not to forget that this would reduce the cost of distribution by 50%. 5Conclusion 6Appendix Exhibit 1 Unilever Advertisements 1. ) Unilever advertisement that tries to encourage people to buy washing machines 2. ) Unilever advertisement to motivate people to use washing machines by emphasizing the upcoming social interactions in launderettes whereas washing at the riverside getting rarer Where do you prefer to wash?