Assignment – Unilever Brazil Case Write Up

Section – K
SG – K 11
Kanishk Sharma (62210706), Prathyusha Reddy (62210432), Rishav Lohia
(62210718), Sowmya Pulumati (62210898)

1) Conduct a Five Cs analysis for Unilever Brazil? (10 points)

Customers
Our focus group here is the Northeast customers who represent the lower rung of the
society in Brazil. They are part of the working class and predominantly from the agriculture
background. What we know about these customers is that washing clothes holds a great
significance to them beyond just considering it a chore. They wash their clothes in a public
wash or river and they hand wash them. To them this is an enjoyable activity and is part of
their socialising regimen where they catch up on gossip while washing clothes. Cleanliness
of the clothes represents the quality with which a mother is managing a household, so it is
also a matter of pride for them to have exceptionally clean clothes. These customers also
have fewer clothes compared to their SE counterparts and wash more frequently than
them. Their requirement was for a powerful and low-cost soap to get rid of stains on
clothes. Some of the things that mattered most to them in terms of laundry soap are the
power of the detergent (ability to clean and whiten clothes with a small amount of product),
gentleness on the hands, ability to get rid of stains, good smell of the detergent and
affordability of the product. The power of the detergent was also judged by how much foam
it produced as they saw that as an indicator of its quality. Consistency and granularity of the
product was used as judging criteria for how quickly it will dissolve in water and whether it
will leave residue or not. Packaging that is easily recognisable and preserves against
humidity was sought after. They gave minimal importance to fading colours.
Context
One of the biggest countries in Latin America, NE consisted of 48million people and SE of 73
million people. NE was the hub for some festivals, and they celebrated music and humour.
The culture was greatly influenced by African and European cultures. The country as a whole
saw economic recovery in the 70s with a GDP growth of 8.1% per year and came down to
2.6% in the 80s. However, the Plano Real initiative in the mid 90s led to very strong
economic recovery. This raised the per capita income in NE to $2,250. This is less than SE’s
$6,600 but most of the economic and political power in Brazil is located in SE.
The context in terms of detergent use here is that only 28% families in NE own a washing
machine as opposed to the 67% in SE. The process of washing in NE is to begin with
scrubbing clothes with soap bars (which requires a lot of effort) and then using bleach to
remove difficult stains and lastly using just a little laundry powder to make the clothes smell
nice. The difference between NE and SE is that in NE they use a lot more soap bars than SE,
where they follow the American method of mixing softer and detergent powder in the
washing machine and very rarely using bleach to get rid of stains. On the contrary, 73%
women in NE believe that bleach is a necessary ingredient to remove fat stains. One of the
challenges for Unilever to overcome is the softness in the water in NE. This reduces one of
the main advantages of detergent powder that foams even in hard water. Soap easily foams
in this soft water and foam is a key indicator of quality and power of detergent for people in
the northeast.
Collaborators
The collaborators here can be the distributor network that helps get the product out.
Generalist Wholsalers usually get the product to supermarkets and other smaller secondary
wholesalers help get them to the smaller retail stores. Since our target group, low-income
customers, usually shop at the small stores for low-cost products, the company can
collaborate directly with the people who distribute to the small retail shops and build a
network there. They can further train and develop these distributors to communicate the
value of the product to the people who manage these smaller shops.
Company
Unilever was started in 1929 as a Home Care products company and it is now valued at $56
billion. The main offices are located in London and Netherlands. The company was a leader
in the detergent market and launched, Omo, the first laundry detergent in the country. The
case also explains that the detergent business is the main source of income for the
company, and it fuelled the growth of their other products.
The company’s core competence in detergent is its brand and established distribution
network. The detergent market also has high barriers to entry as it is capital intensive, and
this can become an advantage to the company. The strengths of the company are that it is a
global company with many resources and R&D knowledge to encash upon. It is a major
player in Brazil and dominates several categories of the detergent market. It has 81% of
detergent market in Brazil with Omo, Minerva and Cameiro plus 19.1% of the laundry soap
market. It has an established supply chain and infrastructure setup in the country and an
existing network of distributors that can built upon and trained. Further the company’s
brands are well recognized and well-perceived by the target segment (NE low-income
consumers).
Some of the weaknesses are that they do not have the reach or knowledge to work with
low-income consumers. Only a few people had any knowledge of low-income consumers or
first-hand experience of the kind of marketing strategy that will work. Further, the company
was divided on people wanting to encash upon this opportunity and people wanting to not
go into this market at all because of the lack of experience of the company.
Their current distribution system does not go that far and their cheapest product in the
market now is not high on the quality scale. To reach the 75000 smaller shops, they will
have to rely on secondary wholesalers.
Competitors
P&G is one of Unilever’s notable competitors in the detergent powder market. The company
owns brands like Ace, Pop and Bold. However, it only has a 15% share of the market in the
detergent space. The real threat from P&G is that it could pose a threat if it chose to shift its
focus to this area. The company is valued at $40billion with extensive capabilities in the R&D
space. Ace has an 11% market share and the other P&G brands account for 6% of the
market followed by other smaller players. However, it is important to note that P&G’s Ace
and Bold are perceived to have better quality than Minerva. Even Pop has been received
well in the low-cost detergent market. Unilever’s Campeiro is a leader in this market
followed by Invicto, but customers perceive Pop as a better detergent than Invicto. Overall,
P&G’s products are well received but the company hasn’t had too much focus in this market
yet so it is something that Unilever should have on its radar but not see as an immediate
threat.
The other side of the competition is conquering the laundry soap market which is
dominated by smaller local players. They have 63.6% market share at $1.2/kg as opposed to
Unilever’s Minerva at 19.1% at $1.7/kg. There is a high price difference in the laundry soap
market at $0.5/kg between Minerva and the other local players.
One of the notable points of each category is that the detergent powder market is growing
at an annual rate of 17% while the soap market is only growing at 6%every year.
Detergent Powder Market
Name Price in Dollars Market Share %
Omo 3/kg 52
Minerva Powder 2.4/kg 17
Compeiro 1.7/kg 6
Ace 2.4/kg 11
Other P&G 2.3/kg 6
Invicto 1.7/kg 5

2) Should it target the NE Brazil market? (5 points)

As discussed in the 5Cs, we know that detergent is Unilever’s cash cow. It has been in this
field since 1957 and to maintain its dominant position in detergent, Unilever needs to be
alert and keep expanding its market share. Although dominant in some areas, P&G is
increasing its credibility in the market and can pose a serious threat anytime. Unilever
market share in the northeast in detergent is 75% which is 6% less than the 81% national
average they have. It is very necessary to bridge the gap to stay on top of competition.
The industry growth rate for detergent powder is very high at 17% annually and offers a
terrific opportunity for Unilever to tap into the fragmented market that has 63.3% smaller
players. Laercio’s “Everyman” project showed that the perception of Unilever’s brand is high
with the low-income consumers, but they do not purchase these products because of the
excessive cost.
Unilever needs to target the low-income consumers in the northeast and given that the
barriers to entry are high in the detergent powder business, the smaller players who
compete with soap in the low-income category won’t be able to keep up. Given the positive
reviews for the brand perception among the low-income segment, we can capture this
market by utilizing Unilever’s extensive portfolio to get the consumers a lower cost product
that fits their priorities. The current practice of washing with soap is very energy exhausting
and requires the use of several other products (bleach & detergent) to finish the process of
washing. Unilever can capitalize on its expertise in the detergent industry and the skills
they’ve developed since 1957 to give the customers a product that satisfies their needs
(listed in the “Consumer” analysis of the 5Cs).

3) Evaluate three alternative strategies (reposition one of the three existing brands,
launch a brand extension, or launch a new brand) to compete in the low-income segment
in NE Brazil. Include a discussion of the break-even cannibalization rate (BECR) as a
criterion.
Answer:
Reposition one of the three brands
Repositioning Omo and Minerva will not make sense as they are priced at $3 and $2.4 per
kg respectively and both of them constitute about 69% of the total market share of
detergents in NE. The cost of production of both the brands are $2.35 and $2.05 per kg
respectively (From case Exhibit 10). Since, we are targeting the low end consumers, we can’t
price it so high as the low end consumers (we assume that low end consumers buy laundry
soap which is priced between $1.2 - $1.7) won’t buy it.
If we choose to reposition Campeiro, the low end consumers may not buy it as the
perceived quality and top-of-mind awareness of this detergent is very low (From case
Exhibit 8 and 9). It will take humongous effort to change the perceived quality of the brand
and still not many consumers will be willing to buy it.
Launch a brand Extension
Launching a brand extension for Omo and Minerva may cannibalise the existing sales of the
product. Since, these two brands are priced higher as compared to other brands in the
market, we assume that the high end consumers ($350 - $1400, see Figure 1 below) which is
about 23%, purchase these. If we introduce a brand extension of these two brands with a
lower price, the existing consumers may move to the extended brand and it may affect our
overall sales. The other factor will be pricing, how much do we price the extended brand?
From case exhibit 7, we can see that the lower end consumers buy laundry soaps priced
between $1.2 - $1.7 per kg. Also, around 80.90% of the laundry soap consumers buy the
product with a retail price of $1.2 per kg.
 Average Monthly Income Figure 1. From case Exhibit 2, we have
3% 5% calculated the average monthly income
9% distribution of NE by multiplying $70 to
33%
the multiples
30%
20%

>$1400 $700 - $1400 $350 - $700

$140 - $350 $70 - $140 <$70

The current positioning of Omo is that it removes stains by using less quantity of the
product whereas for Minerva is deliver a pleasant perfume and softness to the cloth. If we
reduce the price we have to let go these attributes. From case Exhibit 5, we can see that low
end consumer’s has these two attributes as the most important ones.
If we launch a brand extension of Campeiro, it may not excite the low end consumers to buy
it because of the low perceived quality and low top-of-mind awareness as mentioned above
as well. If we come up with an extension with price higher than $1.7 per kg, it may not
attract the low end consumers and if we price it lower than $1.7 per kg, it may further
decrease the perceived quality.

Launch a new brand

Launching a new brand will make more sense as the above two strategies will not be
feasible for the company. For this, we will use any other low end brand from the portfolio
Unilever holds in different geographic region. We will rebrand it as per the lifestyle,
aspirations and laundry habits of the NE. With this strategy, we will brand, price and market
it in a way that only low end consumers buy it.

This strategy will cannibalise our sales specifically Campeiro detergent and Minerva Shop
because we are planning to price the new brand between $1.5 - $1.7. Our main target
market will be the laundry soap buyers. Below, we have calculated the break-even
cannibalisation rate (BECR) for both Campeiro detergent and Minerva Shop by using pricing
between $1.5 and $1.7for the new product.
 Figure 2: BECR of Minerva Soap (Amounts in USD)
Price of Unit Margin Unit Margin
the new Formulation Packaging Promotion of New of Minerva
product Cost Cost Cost Product Soap BECR
1.7 0.9 0.35 0.15 0.3 0.3 100%
1.6 0.9 0.35 0.15 0.2 0.3 67%
1.5 0.9 0.35 0.15 0.1 0.3 33%

Figure 3: BECR of Campeiro Detergent (Amounts in USD)

Price of Unit Margin Unit Margin
the new Formulation Packaging Promotion of New of Campeiro
product Cost Cost Cost Product Detergent BECR
1.7 0.9 0.35 0.15 0.3 0.25 120%
1.6 0.9 0.35 0.15 0.2 0.25 80%
1.5 0.9 0.35 0.15 0.1 0.25 40%

In Figure 2 and 3, we have taken three pricing strategies and calculated BECR of Minerva
Soap and Campeiro Detergent. For cost we have assumed the formulation cost and
packaging cost of the new brand to be similar to Campeiro detergent (From case Exhibit 10).
As per case Exhibit 13, the variable cost associated with specialised distributors is less than
$0.05 when compared to generalist wholesaler. Here we have assumed that the cost
associated with distribution of the existing products are already included in the promotion
cost. In our case we will be using specialised distributors so the promotional cost will go
down by $0.05. The promotion cost for Campeiro detergent as given in case Exhibit 10 is
$0.2. For the new product, promotion cost will be $0.2 - $0.05 i.e. $0.15. The unit margin of
the new product is calculated by subtracting all the cost with the price. For different pricing
strategies, the unit margin will be different but the cost will be same throughout. Unit
margin for Minerva Soap and Campeiro detergent is calculated from case Exhibit 10 in the
same manner we calculated for the new product. Break – Even Cannibilisation Rate is
calculated as Unit Margin of the New Product divided by Unit Margin of the Existing (i.e.
Minerva and Campeiro) Product.

4) Write down a positioning statement for the new offering. (5 points)

Positioning Statement:
Pureza is an economical, pleasant-smelling, easy to use detergent powder that cleanses
clothes effectively in small quantities, generates substantial froth in soft water and leaves
no stains on the clothes. It will appeal to the members of low-income households,
particularly mothers, in North-Eastern Brazil, who would otherwise use low-priced soaps
which require strenuous physical effort to use and leave yellow stains on the cloth.

5) What marketing mix strategy would you recommend? Address the following issues in
your recommendation: (10 points)
a) Product:
i) Brand: We will introduce the new product under a new brand name, Pureza (which
means purity in Portuguese), as per our House of Brands model. The lowest price segment
detergent being sold by Unilever is the Campeiro detergent. While the Brand Knowledge
and Market Penetration of Campeiro remain strong, its Top-of-the-Mind Awareness is very
low (Exhibit 8). This could potentially mean that the pre-dominant image of the brand is
that of a product focussed on low-income groups. In order for our new product to capture
the low-income market of North-Eastern Brazil, we aim to brand it as something that caters
specifically to the tastes, preferences and needs of this group, and not as a low-cost
alternative. Hence, we intend detergent being used to cater to low-income segments in a
country outside Brazil, and sell it to the low-income segment in Brazil under a new brand.
This will enable us to use the same ingredients, formulations and processes to form a base
product and add features specific to our target segment, such as a refreshing fragrance. This
will ensure that we can start production immediately and use the existing production lines
and capital, thus saving large amount of expenses in R&D and capital acquisition costs,
because producing detergents is capital intensive.
ii) Formulation: The benefits that will primarily be highlighted will be:
- Excellent cleaning capacity of the detergent, which will be demonstrated by its
tendency to thoroughly cleanse the clothes and produce large amounts of froth.
- Its refreshing fragrance coupled with gentleness on fabric and hands.
- Its ability to remove stains without the need of a soap or bleach, ease of dissolving
in water and absence of any residue on the fabric after rinsing, unlike the soap bars
which usually leave a yellow residue.
- Its usability without washing machines.
- We will specifically highlight the significant relief it will provide to the members of
the household, particularly mothers, by reducing the efforts required in washing a
large number of clothes. As opposed to soap bars that have to be physically rubbed
across each cloth, hence requiring strenuous efforts, the detergent can simply be
mixed in a bucket of water. The clothes can be left to soak it up for a few minutes
and then washed.

iii) Packaging: The Pureza detergent will be packaged in silver coloured plastic packs
encompassed within bright coloured (a combination of Orange, Sky Blue, White and
Yellow) cardboard boxes, weighing a total of 1 kg each.
b) Price: Since the detergents meant for hand-washing are cheaper to produce, we will
initially price our mini-detergent box at $1.5 per kg, below our existing cheapest detergent
used in washing machines, Campeiro for our smallest unit. This price range will compete
with the soaps and detergents selling at similar prices, including the Minerva soap and the
Campeiro detergent. At this price, the Break-Even Cannibalization Rate will be more than
33.3% because the production cost of XYZ will be lower, and hence the per unit margin
will be higher. This cannibalization will happen for the Campeiro detergent and the
Minerva soap bar. The cheapest soaps are prices at $1.2, and hence by effectively show-
casing the advantages of our detergent over soap bars, we can expect to draw a portion of
customers of these rival soap bars as well. Hence, some amount of cannibalization is
expected to be offset by the acquisition of such new customers. Pricing it at a low along
with aggressive advertising will help the company capture the market initially. Once a
substantial market share has been captured, in case the cannibalization rate goes beyond
33.3%, we will increase the price to $1.6 per kg, at which level the Break-Even
Cannibalization rate will be greater than 66.7%. If this rate is breached as well, we will
further increase the price to $1.7 per kg, at which level the Break-Even Cannibalization
Rate will be greater than 100% for the Minerva soaps 120% for the Campeiro detergent.
This means that at this rate, having captured the detergent and soap market substantially,
the product will be profitable even if the Minerva soap and Campeiro detergent are
completely cannibalized by the new product.
c) Promotion: Advertisements in the form of posters will be placed in and around the
venues and locations of the local festivals such as the Carnival, “Forro Festivals” and
“Maracatu”, which witness the participation of millions of people. The brand will partner
with the organizers of the festivals and will be one of the sponsors. During the festivities,
stalls will be set-up by the company and people will be encouraged to come and try out the
new product. Free samples of the detergent will also be handed out to multiple sets of
sample customers. The samples will be chosen such that they are representative of our
target demographics (mothers and females of the households) and localities in North-
Eastern Brazil.
The written word and visual imagery used in the marketing campaign will be designed
around the idea of motherly lovea and dedication and family pride. The advertisements will
features themes such as: mothers dedicated to their families beaming with pride as they
dress their kids in clean clothes freshly washed with the Pureza detergent; a family in a
locality standing out uniquely from the other families as they use Pureza, which makes
their clothes look extra clean and smell fresh; motherly figures socialising along the banks
of water bodies as their clothes soak in the detergent in buckets, and so on. Since the
detergents made for hand washing perform very poorly in washing machines, this will
ensure that only this specific set of customers are attracted to it and not the well-to-do
strata that already uses Unilever’s high-end products such as Omo and Minerva in their
washing machines. This will avoid any cannibalization of the Omo and Minerva brands.
Music and humour form a very important part of North-East Brazil’s culture. Hence, the
brand will sponsor Live stand-up comedy shows and music events starring popular local
comedians and music artists.
We will allocate 70% of our advertisement budget for below-the-line communication and
30% for above-the-line communication. We will rely on the initial above-the-line media
advertising to spread a general brand knowledge and basic top-of-mind awareness, and
the subsequent below-the-line communication in the form of trade promotions, events
such as the Carnival, “Forro Festivals” and “Maracatu”, and point-of-purchase marketing
to reinforce the brand image, hammer in the points-of-difference and play a vital role in
market penetration. This is based on the knowledge that personal and home cleanliness
are main subjects of gossip in North-Eastern Brazil. There is also a general tendency of
word-of-mouth to be a strong information disseminator in rural areas.

d) Place/Distribution: We plan to create a widespread network of Specialized Distributors

via contracting. Our target is the low-income households of North-Eastern Brazil, who buy
most of their household groceries from local mom and pop wholesale stores, and hardly
ever from supermarkets. These distributors would get exclusive rights to sell all Unilever
detergents in North-Eastern Brazil. Apart from distributing Pureza to the small local
wholesale stores, these specialized distributors will also be used to distribute the premium
OMO and Minerva brands in relatively small supermarkets with 1 or 2 checkouts to cater
to the growing number of well-to-do buyers of these products as well. The substantially
lower per unit cost of using specialized distributors - $0.05 per kg as opposed to $0.1 kg in
case of Generalist Wholesalers – will increase the unit margin of Pureza, and will allow a
high BECR of 100% and 120% for Minerva soaps and Campeiro detergent respectively. This
can be seen in the BECR analysis in Q3.