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Unilever In Brazil 1997 To 2007 Marketing Strategies For Low Income Consumers Case Solution

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2257 5600 Words (18 Pages) Pedro Pacheco Guimaraes, Pierre Chandon INSEAD : INS615
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This assignment deals with the questioning of marketing and branding value of the Unilever company in Brazil specifically in low-income consumers. It is based on the objective and perception of Northeast consumers. By analysing the case study, we have addressed different questions associated with the case study. In this regard, this assignment understands the low-income marketing value of Unilever along with its future performance in Brazil. 

Unilever is a US$56 billion Anglo-Dutch multinational consumer products company. It was established when the organizations like, lever Brothers, Dutch margarine, and Margarine manufacturing, Unilever were merged and founded in the year 1930. It became one of the longest-established multinational companies in the consumer goods industry. The range of the product increases as it includes food, personal hygiene, and personal care products. Its headquarters are located in London and Rotterdam. In 1996, it had a portfolio of 1,600 brands worldwide. Its business covers more than 150 national markets and employs approximately 300,000 employees. Furthermore, Unilever has grown in the market because it strengthens its product in the market share by introducing the new product (Golubkina, 2019). 

Following questions are answered in this case study solution

  1. Introduction

  2. Should Unilever target the low-income segment of consumers in the Northeast? Why / Why not? Provide your analysis.

  3. Evaluate Unilever’s current brand portfolio. Is a new brand necessary to serve the low-income segment or could Unilever reposition one of its existing brands or simply launch a brand extension? If you decide that a new brand is necessary, write its positioning statement and choose its name among Unilever’s worldwide brand names?

  4. Design the Marketing Mix. Choose the product (formulation and packaging), price, promotion (objectives, message, mix), and distribution that will allow Unilever to create and capture value for low-income consumers in the Northeast of Brazil.

  5. Case Feedback: Provide your analysis of this assignment

    a. How would you rate this Case assignment overall/10? What did you learn from it?

    b. Would you recommend it for future students? Why? Why not? 

    c. How can we improve it?

  6. Conclusion

Case Analysis for Unilever In Brazil 1997 To 2007 Marketing Strategies For Low Income Consumers Case Solution

1. Should Unilever target the low-income segment of consumers in the Northeast? Why/Why not? Provide your analysis.

As the core goal is to increase Unilever’s penetration rate in the low-income detergent market, management should target new energy customers. These customers have tight budgets; therefore, they cannot currently afford expensive Omos’ products. Unilever got attracted by the low-income Northeast consumers. All these features should be respected and emphasized in the company’s marketing strategy (Boudet et al., 2018). For many reasons, Unilever should produce a new product for Brazil’s low-income Northeast consumers. By launching another product, Unilever responds to the P&G threat by obtaining the fastest advantages. It is also learned from the project of new innovation and improve the global low-income product and get success in this line, and it is expected to improve and develop more product in the future. (Chittora & Awasthi, 2020). 

According to Raj & Aithal (2018), a detergent has been used by the low-income ménages in Northeast China. Unilever should inhibit selling powdered soap due to the lower income of the consumers as the environment is humid so the houses are not waterproof. This moisture can accumulate powder and reduce the quality of the product. In addition, the powder is not suitable for the washing habits in this area, so this will limit the sales of the powder. The soap bar will produce a lot of foam because it is a Unilever product, and it also effectively removes the stain. These products will also contain bleach to increase the power of washing (Maurya, 2019). The NE consumers reflect all the characteristics, along with the packaging would be simple, visual, recognizable, and easy to start highly hydra-proof.  

It is important to name the proposed product that can attract low-income consumers and the overall consumer market, in general. The name of the brand will be called BOA which means “good” in Brazil. We become short and memorable because we know that 40% of the population is illiterate. Two independent factors can be determined, northern low-income groups and middle-income southern (Mishra, Singh & Jaikumar, 2021). In both cases, the empress is the buyer, but the insurance effect of being a native of the north or south is different. In fact, this group of housewives only took out the soap powder during the last walk and brought a beautiful perfume to the laundry room (Pizzagalli, Sharma & Lascu, 2018). On the other hand, SE families can afford the washing machines, because they are wealthy as compared to eth NE consumers. So, they can buy detergent rather than the cheap soaps, or even not suitable for this particular device (Rabossi, 2019). Again, considering that NE housewives use soap lotion to wash their homes by hand, and like foam and practicality, a strong smell is the only drawback of the product. In this regard, Unilever’s suggestion is to develop a series of more interesting soap bar perfumes. 

After studying NE’s Brazilian consumer characteristics, Unilever decided to enter this part, although some employees thought it was dangerous for large multinational companies and the cost structure was considerable. The reason for this change comes from the evaluation of this part, by looking at three main factors: its size, attractiveness, and the company’s goals and capital (Susilowati, 2018). First of all, Unilever already has an 81% market share in the Brazilian laundry detergent market, because it targets the NE segment and can obtain new growth opportunities. The region is actually the second most populous cluster in the country, of which 48 million people are mainly low-income people (28% of the total population). Given the size of this market segment, being able to capture consumer demand can greatly increase Unilever’s revenue and its overall importance in Brazil. Secondly, the Northeast is part of the so-called “bottom of the pyramid”, that is, the countries where low-income consumers live in the world (van Bommel, Nijssen & Alblas, 2021). Due to the low purchasing power of citizens, it is an undeveloped market. However, as a group, they represent the most unused majority, so given the lack of competition, it may be attractive.

Even small local entrepreneurs cannot stabilize the lower cost structure, and many people believe that Unilever would not get success in low- income segment. The same goes for Fernando Machado, leader of the Detergent Party, who believes that Unilever should not embezzle funds from its brands and invest in low prices. However, since none of the detergent industry giants in Brazil uses a lower revenue share, the company provides ample opportunities for growth in this category. There is also a need for high-quality products that match the flagship brand Omo, but at the same time affordable products for women in the Northeast, as the example of Maria ConceiÇão clearly illustrates (Oliveira et al., 2019). 

A map illustrating the population density of Brazil

The following Table provides a marketing plan for non-premium cleaning products in northeastern Brazil. The study considered some aspects which are given below: 

  • Annually increase in market level, is estimated to grow to some extent, while the detergent market is expected to increase by 6%. We also expect this growth rate to remain stable in the next four years.

  • Non-premium detergents in the amount are similar. 

  • The company will increase its market share in the high-end market from the current 48% to 60% within 4 years.

The result in additional sales, will found the transition in the soap market the lower cost of detergent. Considering the detergency of detergents relative to washing soaps, based on rising prices and declining consumption, it is assumed that the conversion coefficient from soap to detergent is about 0.7. We can choose the lower-income segmentation because it has the following aspects:

  • Enter the low-income group before P&G arrives

  • The detergent market in this category will always be a cash cow

  • Temporary demand analysis shows that the market needs high-quality detergents

2. Evaluate Unilever’s current brand portfolio. Is a new brand necessary to serve the low-income segment or could Unilever reposition one of its existing brands or simply launch a brand extension? If you decide that a new brand is necessary, write its positioning statement and choose its name among Unilever’s worldwide brand names?

Unilever has a number of outstanding features that help it enter this market and maintain its market share in the powder detergent and soap market. As the market leader in these two industries (75% and 19%, respectively), Unilever can take advantage of Brazil’s growing population. Therefore, the possibility of maintaining the quality of life with other conditions is unchanged, increasing the demand for soap in the low-income market, because it is more than $0.5/kg more expensive than Bem-te-vi. In fact, it is also the clear leader in the detergent market, with 45 major detergents used in detergents, adding that these markets are growing by 17% each year, thereby increasing their impact on consumers’ lives. Therefore, it is a clear pioneer in Brazil’s consumer goods industry. In other words, the reason why Unilever's detergent is so attractive is that its specific enzymes and builders can improve the whiteness of the detergent. However, although hand sanitizers are cheap, they are of poor quality. Unilever is in an opportunistic position and is considering the “Go / N Go decision” because entering the NE revenue market will require some product changes or product deep expansion. 

According to Jurietti et al. (2017), 53% of the population lives on normal expenses, but 40% of people are illiterate, and the estimated income of overall capital is US$2,250. Therefore, Unilever targets or focus the low-income consumers in northeastern Brazil. 53% of the population lives on less than two minimum wages, approximately 40% remain illiterate, and the estimated per capita income is US$2,250. The Northeast has a special culture, sharing lifestyle, cultural and religious aspects inherited from European and African origins. Despite low incomes, most poor Nordic people are proud of their family’s cleanliness, while men and women regard the purity of their clothes as a sign of their loyalty to their families. The interesting part is that the Unilever Market often washes clothes and regards as the most enjoyable act of the entire week. Low-income consumers value the six key elements of detergents: purity, whitening, productivity, odor, softness, ability to remove stains, dissolving power (the ability to clean and whiten clothes with a small amount of product), packaging, and colour damage. Ferrarini et al. (2021) explain the market and low-income consumers, the quality that primarily drives the customer’s purchase decision is the detergent’s perception ability, which is evaluated by the amount of production of the foam in the detergent. Unilever also focuses on the smell of the soap because it also attracts the consumers and along with the moisturizing power and mildness of fabrics and hands. Low-income consumers (usually illiterate) prefer packaging that is easy to identify, easy to open, and moisture-proof.

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