Case Study 1

Marketing Strategies for Low-Income Consumers

Unilever in Brazil
(1997-2007)
RAIHAN MUFLIHHAMIM
SISWO AFRIANTO
TOMMY YULIAN
WAHYUDI
 Case Based Learning
1. Identify the situation
2. Identify the actors
3. Identify the key facts
4. Identify the problems
5. Apply the Porter’s Five Forces Tools
6. Suggest the possible solutions
7. Give the recommendations
The Actors of Unilever in Brazil
Robert Davidson Laercio Cardoso

Brazil Head of Leadership Position

Unilever’s Home in China
Care Div

Team

Marcos Diniz – Sales

Antonio Conde – Finance
Airton Sinigaglia - Manufacturing

Robert Davidson made a phone call to Laercio Cardoso because he is looking for
someone to explore growth opportunities in the marketing of detergents to low-
income consumers .
The Problem of Unilever in Brazil

explore growth opportunities in the

marketing of detergents to low-income
consumers in the northeast
1. How could one justify diverting money from Omo to invest in a
lower-margin segment?
a. Should Unilever change its current marketing and
branding strategy?

b. Would a new brand be necessary?

c. What would be the ideal positioning and marketing mix

of unilever brand targeted low-income consumers?
Overview and Regional ; Clothes Washing
Differences
Northeast Regional Overview Southeast Regional Overview

1. Per capita income $2,250 1. Per capita income $6,600

2. 48 million living in the Northeast 2. 15% of the population are illiterate
3. 40% of the population are illiterate 3. 21% of population lives on less than two mininimum
4. 53% of population lives on less than two wages (social class E+ and E-)
mininimum wages (social class E+ and E-) 4. 30% of the population mixed African-european
5. 65% of the population mixed African-european

Northeast Clothes Washing Overview Southeast Clothes Washing Overview

1. 28% of households own washing machine 1. 67% of households own washing machine
2. 73% of women think that bleach is necessary to 2. 18% of women think that bleach is necessary to remove
remove fat stains fat stains
3. They scrub clothes using bars of laundry soap, add 3. Women mix powder and softener in washing machine,
bleach to remove tough stains, and add a little and only use laundry soap and bleach to remove
detergent powder toughest stains
4. Use a lot more soap and less powder 4. Use a lot more powder and less soap
5. Clothes washed more frequently (5x/week) 5. Clothes washed less frequently (3.9x/week)
6. Value : Women see the cleanliness as the indication 6. Value : Own a washing machine for self-esteem and
of dedication to the family social status
Consumer Decision Making in Northeast
Six Key Attributes (Exhibit 5)

1. Power of Detergent ; ability to clean and whiten clothes

with a small quantity of product ; judged by foam
quantity
2. Smell of the Detergent ; Strong-Pleasant with softening
and gentleness to fabric and hands
3. Ability to Remove Stains without laundry soap and
bleach
4. Ease ; powder dissolves in water and absence of residue
on the fabric after rinsing ; consistency and granularity
5. Packaging ; simple – easy-to-recognize ; easy to open
and protect against humidity
6. Impact on Colours (Less Important)
The Brazilian Fabric Wash Market
Detergent Powder
Key
Unilever
Industry Players in Brazil ● Detergent Powder was large ($106M for 42,000 tons)
1. US$56 Billion company ; HQ in London (UK) and ● Growing Rate 17%/yr
Rotterdam (Netherland) ● The barrier to entry is high because the manufacturing
2. 300,000 Employees in more than 150 countries process is capital intensive
● Unliever has a dominant brand OMO 52% Share, Minerva
3. Started in Brazil 1929 17% Share, Campeiro 6% Share. But below its national
4. Omo launched 1957 ; Minerva (Detergent powder average
and Laundry Soap) ; Campeiro (Cheapest Brand) ● P&G market share slightly above its national average
5. 81% Market Share (17.5%)

Procter & Gamble Laundry Soap

● Laundry soap was large ($102M for 81,250 tons)
1. US$40 Billion company ; HQ in Cincinnati (USA)
● Growing Rate is slow : 6%/yr
and Rotterdam (Netherland) ● Also the barrier to entry is low because it is relatively easy to
2. 98,000 Employees in more than 80 countries produce. Then, the cost to produce is relatively low cost
3. Started in Brazil 1988 ● Laundry soap has a lower price
4. Brands launched in 1996 : Quanto (Ace) , Odd ● Laundry soap is multi-use product
Fases (Bold) , Pop (Low-price Brand) ● Minerva dominate market share with 19.1% in Northeast, but
5. 15% Market Share in Laundry Soap market share is fragmented, the competitor
was ASA and another Local Brand. Hence, the competitor are
numerous.
Porter’s Five Forces Analysis of Detergent
Powder Supplier Power (HIGH) Threat of Entry (LOW)
Unilever has DOMINANT PLAYER of its OMO,Minerva,
The supplier of detergent powder Is DOMINANT. The Campeiro product based on Exhibit 7 it has 75% market share.
manufacturer by mixing sulfonic acid, sodium sulphate, and kelp. And the quality of the product above of all product in the market.
Specially for unilever because it has specific enzymes and bulder. Then, THE CAPITAL REQUIREMENT to entry is HIGH
So, the COST OF SWITCHING IS HIGH. But, in drying process because of the manufacture cost. Hard Access to distribution.
Unilever use local plant which is low-risk of switching. Then
HIGH RISK OF FORWARD INTEGRATION because most of all
low income consumer in Northeast prefer to buy product in Threat of Substitute (MEDIUM)
Specialized distributor. Unilever has a BETTER QUALITY than all the competitor
products based on Exhibit 5 specially for OMO product. The
competitive produt is only for Minerva which the competitor are
Competitive Rivalry (HIGH) Ace and Bold because of the quality is not signifact and the price
The biggest competitor is P&G, because detergent market has is higher. The BRAND POSITION is also above of the
HIGH GROWTH RATE (17%) it is possible that P&G would competitor products based on Exhibit 8
compete Unilever. Because in northeast based on data FREQUENT
OF CLOTHES WASHING IS HIGH (5X/WEEK). But, for now
Buyer Power (MEDIUM)
Unilever still DOMINANT THE MARKET based on the 75%
The northeast social class, 53% of population is E- and E+ Class.
Market Share. HIGH FIXED COST OF MANUFACTURING, so
Then, the consumption of detergent is almost half than laundry
the Unilever needs to create a new formula and new marketing
soap. So, buyer prefer to buy a low-price product. So, Unilever
program to get higher profitability.
need to strengthen MINVERVA and CAMPEIRO to get low-
income consumer because it has high risk of switching (low
differentiation-high competition).
 Porter’s Five Forces of Unilever Detergent Powder

Threat of Substitute (MEDIUM) Supplier Power (HIGH)

• Omo is the best product in the • Dominant supplier of

market manufacturing
• Threat for Minerva in detergent, • High Cost of switching
low differentiation among • High Risk of Forward Integration
competitor, higher price

Competitive Rivalry (HIGH)

• High Growth Rate (17%)

• Unilever is Dominant (75%
market share)
• High Fixed Cost of Manufacture

Buyer Power (MEDIUM) Threat of Entry (LOW)

• Alternative product – low • Unilever is Dominant Player
differentiation • High capital requirement
• Threat for Minerva in detergent, • Hard access of distribution
low cost of switching