Aalto Executive MBA Cohort 15 – Brand Management Case Studies

| December 1, 2017

Aalto Executive MBACohort 15 – Brand ManagementMay 30 – 31, 2015Professor Claude CHAILANEM Strasbourg Business School, FranceCase Study: “Unilever in Brazil 1997-2007: Marketing Strategies for Low-IncomeConsumers”, Pedro Pacheco Guimaraes and Pierre Chandon, 2014, INSEAD, INS615-PDF-ENGIs the issue of low-income consumers a true opportunity or a mirage? This question has notyet been completely solved by international companies and we will try to shed some light onthis important current issue in marketing.To do so, please answer the following questions:1. Give short introduction2. Summarize the market situation at the time of the case writing. What are the keyfactors driving this market? Please spend time on the costs and prices issue as this isclearly a decisive attribute in customers’ choice)3. Take the position of Fernanda Machado and explain precisely which risks could comeout from a low-income orientation at Unilever Brazil.4. If you were Laercio Cardoso, which marketing plan would you suggest in order to facethese risks?5. Give short conclusionCase Study: “Club Med: Is the Phoenix rising from the Ashes?”, Claude Chailan, 2011,ECCH, #511-060-1Club Med benefited from strong leadership in the leisure market. Their brand image was verypowerful, based on a unique vacation concept. However, they had difficulties in reinventingthemselves.1. Summarize Club Med history and then explain in details the Club loss of leadershipand problems encountered after the 90’s.2. Develop a brand identity analysis using concepts and tools seen in the classroom(such a Kapferer’s prism or Strebinger’s map).3. What do you think of the latest changes of the marketing strategy? Is Club Medresponse to the problem appropriate? Discuss pros and cons. Is the Club able toappeal to the luxury consumer? Explain your answer.4. The Club was purchased on mid-February 2015 by the PRC’s company Fosun. Howdo you foresee the company and brand future? ExplainNB: Do not hesitate to complement your knowledge on the company through netsurfing,although this is not pre-required to answer the questions.Case Study: “L’Oréal and the Globalization of American Beauty”, Geoffrey G. Jones,David Kiron, Vincent Dessain and Anders Sjoman, 2006, Harvard Business Review,#805086-PDF-ENGAnswer the following questions:1. How did L’Oréal become the world’s largest beauty company? What was the role ofacquisitions in this growth?2. L’Oréal offers consumers worldwide “American” and “French” concepts of beauty. Arethere any limits to the national beauty images it can globalize?3. What are the global opportunities for Khiel’s? What are the limits, if any?4. What is specific to L’Oréal brand expansion policy in comparison with the one of othermultinationals?NB: Do not hesitate to complement your knowledge on the company through netsurfing,although this is not pre-required to answer the questions.Case Study: “ST Dupont: Back to Brand?”, Claude Chailan, 2012, ECCH, #512-051-1This case illustrates an interesting attempt to revive a prestigious brand:1. Summarize the history of the brand until the 90s, emphasizing the most importantphases of this history.2. Explain the pros and cons, strengths and weaknesses of 1996 – 2005 strategy and itsimplementation? How did the restructurings and the image exchange help/hurt thecompany?3. Develop an analysis of the brand. Identify elements of the brand could be particularlyvaluated to expand the territory of the brand to other product categories? What arethe extensions that appear most appropriate for the brand? Why?4. Analyse and discuss the strategy implemented since 2007. What do you think of thelatest shift in the marketing strategy? Is S.T. Dupont new policy appropriate? Is thebrand able to appeal to the luxury consumer? Is S.T. Dupont truly recovering? Howshould the brand expand from now on?NB: Do not hesitate to complement your knowledge on the company through netsurfing,although this is not pre-required to answer the questions.Case Study: “Mountain Man Brewing Company: Bringing the Brand to Light”, HeideAbelli, 2007, Harvard Business Review, #2069-PDF-ENGThe core of the debate in this case lies in exploring the concept of brand equity, how it iscreated, and how brands can be used as platforms for growth.Please, answer the following questions:1. What has made MMBC successful? What distinguishes it from competitors?2. What has caused MMBC’s decline in spite of its strong brand?3. Should MMBC introduce a light beer? Is Mountain Man Light feasible for MMBC?Build an income statement forecast on a 3 years period to support your standpoint.Case Study: “Al Marsa Fisheries: Sustainability Put into Practice”, Claude Chailan,2010, ECCH, #310-200-1The goal of this case is to analyse how to make profitable a new project in an emergingcountry companies. How can such a companies rely on branding in order to gain broaderrecognition for their products and breakeven?You are asked to answer the following questions:1. Build an attractiveness/competitiveness analysis of the situation (market andcompany).2. Answer the questions on page 11 of the case3. Which approach would you recommend to Mr Durin? Which timeframe do yousuggest?INS615Unilever in Brazil (1997-2007):Marketing Strategies for Low-Income Consumers07/2014-5188This case was prepared by Pedro Pacheco Guimaraes, INSEAD MBA 2003, and Pierre Chandon, Associate Professorof Marketing at INSEAD, as the basis for class discussion rather than to illustrate either effective or ineffectivehandling of an administrative situation. We thank Laercio Cardoso and Robert Davidson from Unilever Brazil formaking this case possible. We also thank Fernando Machado (INSEAD MBA 2003), Mauricio Mittelman (INSEAD PhDStudent), Weima Bezarra (RB distributors, Ceara, Brazil), and Luca Lattanzi (INSEAD Executive MBA 2004) for theircomments.Additional material about INSEAD case studies (e.g., videos, spreadsheets, links) can be accessed atcases.insead.edu.Copyright © 2007 INSEADCOPIES MAY NOT BE MADE WITHOUT PERMISSION. NO PART OF THIS PUBLICATION MAY BE COPIED, STORED, TRANSMITTED, REPRODUCED OR DISTRIBUTEDIN ANY FORM OR MEDIUM WHATSOEVER WITHOUT THE PERMISSION OF THE COPYRIGHT OWNER.Overall winner of the 2008 European Case Clearing House AwardsWinner of a 2007 European Case Clearing House Award in the category “Marketing”Winner of the European Foundation for Management Development Case of the Year Award2004 in the category “Marketing”For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.After three successful years in the Personal Care division of Unilever in Pakistan, LaercioCardoso was contemplating an attractive leadership position in China when he received aphone call from the head of Unilever’s Home Care division in Brazil, his native country.Robert Davidson was looking for someone to explore growth opportunities in the marketingof detergents to low-income consumers living in the Northeast of Brazil. An alumnus ofINSEAD’s Advanced Management Programme, Laercio had joined Unilever in 1986 aftergraduating in business administration from Fundação Getulio Vargas in São Paulo. He thushad the seniority and marketing skills that were necessary for the project. More importantly,he had never been involved in the traditional approach to marketing detergents and, havingwitnessed the success of Nirma1 in India, he was acutely aware of the threat posed by localbrands targeted at low-income consumers.For this project, named “Everyman”, Laercio assembled an interdisciplinary team includingMarcos Diniz from Sales, Antonio Conde from Finance, and Airton Sinigaglia fromManufacturing. The first phase of the project involved extensive field studies to understandthe lifestyle, aspirations, shopping and laundry habits of low-income consumers. It was duringone of these trips that Laercio met Maria Conceição, pictured on the cover page in her homein Fortaleza, where she lived with her daughter, Elizangela, 19 (shown on the right with twoof her four children). Like almost everyone in Brazil, Maria told Laercio that although shewould love to buy Omo, Unilever’s flagship brand, her tight budget meant that she could onlyafford cheaper local brands.Back at Unilever’s headquarters in São Paulo, Laercio prepared for an important meeting withDavidson to decide whether the company should change the way it marketed its detergentbrands to low-income consumers in the Northeast. Increasing detergent usage by Maria andthe other 48 million predominantly low-income consumers in Brazil’s Northeast was crucialfor Unilever, given that the company already had an 81% share of the detergent powdercategory. However, many in the company believed that a large multinational like Unilevershould not fight in the lower-end of the market, where even small, local entrepreneurs with alower cost structure struggled to break even. How could one justify diverting money fromOmo to invest in a lower-margin segment?Deciding to target low-income consumers in the Northeast would throw up some moredifficult questions: Should Unilever change its current marketing and branding strategy? Forexample, could Unilever extend or reposition its existing cheaper brands, Minerva andCampeiro, or would a new brand be necessary? What would be the ideal positioning andmarketing mix of a Unilever brand targeted at low-income consumers? Finding the answerswould not be easy as few at Unilever (or other multinational firms) had any knowledge oflow-income consumers or first-hand experience of the kind of marketing strategy that wouldwork for this segment.1 Nirma, a low-price detergent developed by a small Indian entrepreneur, quickly gained 48% of the Indiandetergent market, leaving Unilever in a distant second place with a 24% market share. For moreinformation on Nirma, see “Hindustan Lever Limited: Levers for Change”, by Charlotte Butler andSumantra Ghoshal (INSEAD Case n° 302-199-1 © 2002).Copyright © INSEAD 1For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.Consumer InformationBrazil: Overview and Regional DifferencesBrazil is by far the largest country in Latin America. It covers 8.5 million km² (almost as bigas the US and 35 times bigger than the UK) stretching 4,345km from North to South and4,330km from East to West. Its 170 million people live predominantly in two clusters on theAtlantic coast: one concentrated in the Southeast, home to Brazil’s two largest cities, SãoPaulo and Rio de Janeiro, and the other in the Northeast, whose main cities are Salvador,Recife and Fortaleza.During the last three decades Brazil has experienced cycles of deep recession and strongeconomic recovery. GDP grew by 8.1% per year during the “economic miracle” of the 1970s,but only by 2.6% per year during the 1980s, the so-called “lost decade” characterized bystagnation and hyperinflation. In 1994, the Plano Real initiated by the Finance Minister (andlater President) Fernando Henrique Cardoso introduced a new currency (the Reais, R$) andsucceeded in controlling inflation, which led to a strong economic recovery in 1995-1996.The boom was particularly beneficial to lower-income consumers and the purchasing powerof the poorest 10% of the population grew by 27% per year during this period.In 1996, Brazil’s per capita income was $4,420, on a par with countries like Hungary ($4,370)and Malaysia ($4,310), and well above other developing countries like Indonesia ($1,050) andIndia ($380). As shown in Exhibit 1, however, this average hid large regional differences. Percapita income was around $6,600 in the Southeast (comparable to Uruguay or Saudi Arabia)and only around $2,250 in the Northeast (comparable to Peru or Jamaica). More generally, the48 million people living in the Northeast lagged their Southeastern counterparts on just aboutevery development indicator. For example, 40% of the population in the Northeast (NE) areilliterate, a level comparable to India (52%), whereas only 15% are illiterate in the Southeast(SE). As shown in Exhibit 2, 53% of the population in the Northeast lives on less than twominimum wages (social classes E+ and E–) vs. 21% in the Southeast. During the 1990s,federal and local governments started providing tax incentives to companies investing in theNE region, yet the economy in the NE was predominantly rural and remained heavilydependent on agriculture.The Northeastern states of Brazil also have a distinct culture and history. It was the firstregion of Brazil to be colonized by Europeans, who brought large numbers of West Africansto work as slaves on sugar cane and cocoa plantations as early as the sixteenth century. In1996, 65% of the population in the NE was of mixed African and European origins (vs. 30%in the SE). Lifestyle, culture and religion all share African influences. Music and humour arekey elements of their culture and many of Brazil’s best-known artists come from the region.Popular parties like Carnival, “Forró Festivals” and “Maracatu” bring millions of people ontothe streets and are major events in the region. In contrast, the Southeast was developed later,mainly by Europeans who migrated in the 1880s to work on the coffee plantations. Theeconomic and political power of modern Brazil is firmly rooted in the Southeast region.Clothes Washing in the Southeast and Northeast of BrazilThe way clothes are washed in the Northeast and Southeast of Brazil is very different. InRecife (NE), only 28% of households own a washing machine and 73% of women think thatCopyright © INSEAD 2For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.bleach is necessary to remove fat stains. In São Paulo (SE), 67% of families own a washingmachine and only 18% of women think that bleach is necessary to remove fat stains. Ingeneral, women in the Northeast scrub clothes using bars of laundry soap, a process whichrequires intense and sustained effort. They then add bleach to remove tough stains and onlyadd a little detergent powder at the end, primarily to make the clothes smell good. In theSoutheast, the process is similar to European or North American habits: women mix powderdetergent and softener in a washing machine and use laundry soap and bleach only to removethe toughest stains.As a result of these differences, the penetration of detergent powder and laundry soap isalmost the same in the NE and the SE, but Northeasterners use a lot more soap and lesspowder than Southeasterners (see Exhibit 3). Another difference is that clothes are washedmore frequently in the NE than the SE (5 times a week in Recife versus 3.9 in São Paulo).This is because low-income consumers own fewer clothes and have more free time (becausefewer women work outside the home) than higher-income consumers. Interestingly, manywomen in the NE view washing clothes as one of the more pleasurable activities of theirweek. This is because they often do their washing in a public laundry, river or pond wherethey meet and chat with their friends. In the SE, in contrast, most women wash clothes athome alone. They perceive doing laundry as a chore and are primarily interested in ways tomake the task easier.People in the NE and SE differ in the symbolic value they attach to cleanliness. Many poorNortheasterners are proud of the fact that they keep themselves and their families spotlesslyclean despite their low income. Because it is so labour intensive, many women see thecleanliness of clothes as an indication of the dedication of the mother to her family. Personaland home cleanliness is a main subject of gossip. In the Southeast, where most women own awashing machine, it is much less important for self-esteem and social status.How do Northeastern Consumers Evaluate Detergents?Along with price, the primarily low-income consumers of the Northeast evaluate detergentson six key attributes (Exhibit 5 provides importance ratings, the range of consumerexpectations, and the perceived positioning of key detergent brands on each attribute). Themost important attribute is the perceived power of the detergent (its ability to clean andwhiten clothes with a small quantity of product), which is often judged by the quantity offoam it produces. Second is the smell of the detergent: consumers often associate a strong,pleasant smell with softening power and gentleness to fabric and hands. Third is the ability toremove stains without the need for laundry soap and bleach. Next is the ease with which thepowder dissolves in water and the absence of residue on the fabric after rinsing, two elementsthat are evaluated by the consistency and granularity of the powder. Packaging comes next:low-income consumers (who are often barely literate) prefer distinctive, simple and easy-torecognizepackages that are also easy to open and protect against humidity. Impact on colours(fading) is the least important attribute for these consumers.The Brazilian Fabric Wash MarketKey Industry Players in BrazilUnileverUnilever is a US$56 billion company, headquartered in London (UK) and Rotterdam(Netherlands). It has about 300,000 employees in more than 150 countries. In 1996 it had aportfolio of 1,600 brands worldwide, including 45 key detergent brands (see Exhibit 6).Unilever is a pioneer of the consumer goods industry in Brazil. Lever Brothers startedoperations in Brazil in 1929 and opened their first plant in São Paulo in 1930 to manufactureSunlight soap. Omo, Unilever’s most successful brand, was launched in 1957 and was the firstdetergent powder in the country. Unilever acquired Cia Gessy Industrial and its rich portfolioof personal care brands in the 1960s and started its food operations in the 1970s with thelaunch of Doriana, the first margarine in Brazil. In 1996 it operated with three divisions:Lever for home care, Elida Gibbs for personal care, and Van den Bergh for foods. Yetdetergents remain the cash cow of Unilever Brazil, providing fuel for growth in the food andpersonal care categories. In 1996, Unilever was a clear leader in the detergent powdercategory in Brazil, with an 81% market share achieved with three brands: Omo (one ofBrazil’s favorite brands across all categories), Minerva (the only brand to be sold as bothdetergent powder and laundry soap), and Campeiro (Unilever’s cheapest brand).2Procter & GambleProcter & Gamble is a US$40 billion company, headquartered in Cincinnati (USA), with98,000 employees and operations in 80 countries. P&G started operations in Brazil only in1988. In 1996 they acquired the detergents business of Bombril, a Brazilian company, and itsthree brands: Quanto, Odd Fases and Pop. After spending a large amount on manufacturingimprovements, P&G migrated Quanto towards Ace and Odd Fases towards Bold, two of itsglobal brands, but kept the low-price brand Pop. P&G is a distant second player with only a15% share of the Brazilian detergent market. However, the real threat is larger than its currentmarket share suggests because P&G Brazil can draw on the formidable R&D and marketingexpertise of the company worldwide.Market StructureThe Brazilian fabric wash market consists of two categories: detergent powder and laundrysoap (sales of liquid laundry detergents are negligible).Detergent PowderIn 1996, detergent powder was a $106 million (42,000 tons) market in the Northeast, growingat the remarkable annual rate of 17% thanks to the economic upturn of the Plano Real. Thebarriers to entry in this market are high because the manufacturing process is capital intensive.Detergent powder is made by mixing sulfonic acid, sodium sulphate and kelp. Premiumproducts, like Unilever’s three detergents, also contain specific enzymes and builders which2 Unilever also sells Brilhante, a brand of laundry soap and detergent powder. However, it had almost zeromarket share in the NE in 1996 and is therefore not mentioned any further in this case study.Copyright © INSEAD 4For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.improve the whitening power of the detergent when it is used in a washing machine. The mixis then heated up to 400ºC to form a liquid pulp which is then transformed into powder whenhot air is blow through it in a dry tower. The drying process consumes a great quantity ofsteam which is produced by a local utility plant. Perfume and other heat-sensitive substancesare added at the end of the process. Detergent designed for hand washing is cheaper toproduce but performs very poorly when used in a washing machine.At 75%, Unilever’s share of the NE detergent market is below its national average (seeExhibit 7). Omo, its dominant brand, has a 52% share and is sold to retailers at $3 per kg.Minerva has a 17% share and its retail price is 82% that of Omo. Campeiro has 6% of themarket and is sold at 57% of Omo’s price. In the NE, P&G’s market share is slightly above itsnational average (17.5%). Ace is the third highest-selling brand with an 11% market share.Laundry SoapIn 1996, the NE market for laundry soap bars was as large as the detergent powder market($102 million for 81,250 tons), but growing at a slower rate (6%). The barriers to entry werelower in the laundry soap market than in the detergent powder market because soap isrelatively easy to produce from fats and oil. In fact, the animal fat that is a primary componentof soap is produced in large quantities by slaughterhouses and meat processing plants. One ofthe limitations of laundry soaps is that animal fat tends to leave the clothes yellow. They arealso difficult to perfume because the base has a very strong smell.3 Laundry soap was sold at amuch lower price than laundry detergent powders (average revenues of $1,250 per ton vs.$2,520 per ton for detergent powder).Laundry soap is a multi-use product which has many home and personal care uses. Peoplewith washing machines primarily use it to remove tough stains (e.g., on shirt collars); forthose without, laundry soap is used to wash all clothes. The popularity of laundry soaps in theNE is also due to the softness of the water in this region (i.e., its low calcium content), whichhelps the soap to dissolve and produces great quantities of foam, thus reducing one of the keyadvantages of powders. In comparison, most water in Europe, US and India is hardThe NE market for laundry soap was very fragmented. As shown in Exhibit 7, the top fourplayers have only 38% of the market. Unilever’s Minerva brand is the leader with a 19%market share, selling to retailers at $1.7 per kg (a 41% discount relative to Omo). P&G did notmanufacture laundry soap. Hence Unilever’s main competitors were local Braziliancompanies. The biggest competitor was ASA. Its brand, Bem-te-vi, had 11% of the marketand sold at $1.2 per kg. The other players were even smaller local companies with no morethan 1% of the market each (except for Flora Fabril, which had 6% of the laundry soapmarket).Brand PositioningExhibit 8 provides information on brand awareness, brand knowledge and brand penetrationof the major detergent powder brands in the NE in 1996. Exhibit 9 shows the perception ofthese brands on two dimensions: perceived quality and perceived price. Exhibit 10 provides3 Toilet soap uses the same base as laundry soap but the raw material is submitted to a long and costlyprocess of filtering, which removes the base smell and leaves it neutral.Copyright © INSEAD 5For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.key information on all detergent powder and laundry soap brands (packaging, positioning, keyhistorical facts, and financial and market data).Decision-making TimeThe results of the Everyman project increased Laercio’s conviction that Unilever should alsotarget low-income consumers. Still, he was facing strong internal resistance from people likeFernanda Machado, the category manager for detergents. A typical argument between Laercioand Fernanda would run like this:“Laercio, I think that we should stay away from the low-income segment. Thesepeople just have no money and I really don’t see why we should divert moneyfrom our premium brands to invest it in a low price brand! In the short term thiswould simply cannibalise our high-margin sales with lower-margin ones. In thelonger term this would certainly increase price competition in the category. Howwill I be able to sustain Omo’s price premium if people can buy almost the sameproduct at half the price?”“Fernanda, I understand your concerns but we need to do something for the lowincomesegment. We already have 81% of the market and I really see no otherway to grow. Besides, if we don’t do anything, P&G will attack us in this segmentwhere we are most vulnerable. Just look at what happened to us in India.”“But Laercio, caramba! Brazil is not India! Detergent penetration is 95% here vs.55% in India, our products are of much higher quality, and we have beenmarketing premium brands in Brazil since 1929. Think about the kind of messagethat the global investment community will hear: “Unilever has lost its marketingskills and is abandoning its premium brands.” Remember Marlboro Friday?4How do you think the stock market will respond? What about our corporatereputation? How are we going to be able to attract and retain the next generationof brand managers who only want to work on premium brands?”“Que isso, Fernanda! You should spend more time getting to know your fellowBrazilians and less time behind your computer! If we get the right strategy, lowincomeconsumers will be ready to pay for our brand and Omo buyers won’tmove. Also, think about the expertise that we would gain, which we could apply toour other categories. If we become a leader in marketing to low-incomeconsumers I bet that financial analysts will praise us and that top students willline up to interview with us.”Go/No Go DecisionRobert Davidson had heard these arguments over and over, yet he was still undecided. He wasparticularly concerned with the profitability of this consumer segment. Certainly, part of the4 On 2 April 1993, Philip Morris USA cut the price of Marlboro by 20%, and in the process knocked almost$10 billion off the market value of the company. Many analysts interpreted Philip Morris’ decision as asign that big brands were losing the battle against cheaper private labels and unbranded products.Copyright © INSEAD 6For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.new sales would come at the expense of Unilever’s existing brands. At what cannibalizationrate (percentage of new sales coming from other Unilever brands) would Unilever start losingmoney? More generally, he wondered whether Unilever had the right skills and organizationto compete in this market. In the long run, what exactly would Unilever gain and what wouldit risk if things went wrong?Brand and Marketing StrategyValue propositionWas there something wrong with the existing positioning of Unilever’s three detergentbrands? Would it be really necessary to develop a new value proposition? If so, what should itbe?Brand StrategyCould Unilever deliver the desired value proposition with one of its three existing brands, orwith a brand extension? Would Unilever really have to develop a new brand from scratch?Could it use a brand from its large international portfolio? This was a thorny issue, especiallyconsidering the rumor coming from headquarters that Unilever was about to embark on alarge-scale effort to reduce its brand portfolio.5Marketing MixProductUnilever could produce a product comparable to Campeiro, its cheapest product, but would itdeliver the benefits that low-income consumers wanted? Alternatively, Unilever could useMinerva’s formulation, but it might be too expensive for low-income consumers. Unilever’sscientists could develop a third formula priced half-way between Minerva and Campeiro ifthey could eliminate some ingredients. The question was to determine which attributes couldbe eliminated, which should be retained, and which, if any, would actually need to beimproved relative to both existing brands.Selecting the right packaging size and type was another difficult task. Larger packages wouldreduce the cost per kilo but could price the product out of the weekly budget range of thepoorest consumers. Unilever could use a plastic sachet, which would cost 30% of the price oftraditional cardboard boxes, but market research data showed that low-income consumerswere attached to boxes and regarded anything else as good for only second-rate products. Onesolution might be to launch multiple types and sizes.PriceChoosing the wholesale price (the price paid by retailers) was the single most importantdecision for Unilever. Priced too high, the product would be out of reach for the targetsegment. Priced too low, it would increase the inevitable cannibalization of existing Unilever5 For the purpose of the break-even analysis, assume that developing a new brand would add $0.10 per kg inincremental marketing costs, that launching a brand extension would add $0.05 per kg and thatrepositioning an existing brand would not lead to any incremental marketing costs.Copyright © INSEAD 7For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.brands. Should Unilever use coupons or other means to reduce the cost of the product for lowincomeconsumers? Should it change the price of Omo, Minerva and Campeiro?PromotionWhat would be the objective of the communication? What should be the key message? Lowincomeconsumers might be reluctant to buy a product advertised “for low-income people”,especially as products with that kind of message were typically of inferior quality. On theother hand, using the classic aspirational communication of most Brazilian brands couldconfuse consumers and lead to unwanted cannibalization. What about packaging and point-ofpurchasedisplays? Should they use the same slogan as the television commercial? Finally,what should Unilever tell the owners of the small stores where most low-income consumersshopped? Getting buy-in from small store owners would be crucial because low-incomeconsumers relied on them for advice and for financing (which is widely used in Brazil, evenfor inexpensive consumer goods).In regular detergent markets Unilever had established that the most effective allocation ofcommunication expenditure was 70% above-the-line (media advertising) and 30% below-theline(trade promotions, events, point-of-purchase marketing). The advantages of usingprimarily media advertising were its low cost-per-contact and high reach because almost allBrazilians, irrespective of income, are avid television watchers. One alternative would be touse 70% below-the-line communication. At $0.05 per kg, this plan would require only onethird of the cost of a traditional Unilever communication plan. On the other hand, it wouldlower the reach and increase the cost-per-contact.DistributionUnilever did not have the ability to distribute to the approximately 75,000 small outlets spreadover the Northeast (see photograph, Exhibit 12). Yet getting access to these stores was keybecause low-income consumers rarely shopped in large supermarkets like Wal-Mart orCarrefour. For distribution, Unilever could rely on its existing network of generalistwholesalers, which supplied Unilever’s existing detergents and a wide variety of products andhad national coverage, but which sometimes had to rely on secondary, smaller localwholesalers to reach all stores, which increased their cost. Alternatively, it could contract withdozens of specialized distributors who would get exclusive rights to sell all Unileverdetergents in certain areas (see Exhibit 13 for a comparison of the two distribution channels).Choosing the right distribution channel was important because it was a large component ofthe product cost, would be hard to reverse, and ultimately would have strong implications forthe ability to push sales and build brands at points of sale.Copyright © INSEAD 8For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.Exhibit 1Map of Brazil and Key Economic and Social Indicators by Region in 1996Source: IBGE.Copyright © INSEAD 9For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.Exhibit 2Distribution of Social Classes in the Southeast and Northeastof Brazil in 1996Source: IBGE.Note: Social class membership is based on family income, shown here as a multiple of monthly minimum salary(in 1996, one minimum salary is about $70 per month).33%9%20%12%30%33%24%13% 9%5%8% 3% A (>20) B (10-20) C (5-10) D (2-5) E+ (1-2) E- (<1)Southeast NortheastSocial classes(income as multipleof minimum salary)Copyright © INSEAD 10For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.Exhibit 3Penetration and Consumption of Laundry Soapand Detergent Powder in 1996Exhibit 4Laercio Cardoso Visiting a Low-Income Family88.7%96.6% 97.6% 97.2%6.820.412.911.40%25%50%75%100%Southeast Northeast Southeast NortheastLaundry Soap Detergent Powder0 kg6 kg12 kg18 kg24 kg Penetration (% of consumers buying at least once per year) Consumption (kg per year per buyer)Copyright © INSEAD 11For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.Exhibit 5Attribute Importance, Brand Positioning,and Consumer Expectations in the NortheastSource: Unilever research.Cleanliness,whitening,productivitySmell,softnessAbility toremovestainsDissolvingpowerPackagingHarm tocolorsImportance: 24% 20% 16% 16% 13% 11%ConsumerExpectationsRange-100-80-60-40-20020406080100OmoAceBoldMinervaCampeiroPopInvictoCopyright © INSEAD 12For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.Exhibit 6Key Unilever Detergent Brands Worldwide (1996)Source: Unilever (list not exhaustive).Region Brand Price Index Region Brand Price IndexSkip 100 - 115 Skip 100 - 115Omo 100 Omo 100 - 115Surf 100 Via 100 - 115Brilliant 100 Enka 100 - 115Surf 85 - 100 Omo 100Sunlight 85 - 100 Persil 85 - 100Le Coq 85 - 100 Rinso 85 - 100Key 60 - 85 Bio Luvil 85 - 100Rin 60 - 85 Polenna 85 - 100Lang 60 - 85 Bona 85 - 100Maluwa 60 - 85 Bio Pon 85 - 100Zamwasha 60 - 85 Surf 60 - 85Chik 60 - 85 Sunil 60 - 85Dambo 60 - 85 Omo 60 - 85Omo 100 Bio Presto 60 - 85Surf 100 Radion 60 - 85Breeze 100 Luzil 60 - 85Rinso 100 Dero 60 - 85Bailan 100 Skip 100 - 115Tip 100 Omo 100Persil 100 Rinso 100Omo 85 - 100 Drive 100Rin 85 - 100 Puro 100Persil 85 - 100 Unox 100Viso 85 - 100 Omo 85 - 100Rinso 85 - 100 Ala 85 - 100OK 60 - 85 Nevex 85 - 100Sunlight 60 - 85 Marsella 85 - 100Surf 60 - 85 Campeiro 60 - 85Ekonomy 60 - 85 Opal 60 - 85Fangcao 60 - 85 Rinso 60 - 85Biomat 60 - 85 ABC 60 - 85Drive 100 Wisk 100Omo 85 - 100 Sunlight 100Persil 85 - 100 Surf 60 - 85Surf 60 - 85 All 60 - 85AfricaAsiaOceaniaEuropeLatin AmericaNorth AmericaCopyright © INSEAD 13For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.Exhibit 7Market Share and Wholesale Price of Major Brands in the Laundry Soap andDetergent Powder Categories in the Northeast in 1996Detergent PowderOthers3%Invicto ($1.7/kg)5%Other P&G($2.3/kg)6%Ace ($2.4/kg)11%Campeiro($1.7/kg)6%Minerva($2.4/kg)17%OMO ($3/kg)52%Source: Nielsen.Laundry SoapOthers($1.2/kg)63.6%Flora($1.2/kg)6.0%Bem-te-vi($1.2/kg)11.3%Minerva($1.7/kg)19.1%Copyright © INSEAD 14For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.Exhibit 8Brand Knowledge, Market Penetration, and Top-of-Mind Awareness6 of MajorDetergent Brands in the Northeast in 1996Exhibit 9Perceived Quality and Perceived Price of Major Detergent Brandsin the Northeast in 19966 Top-of-mind awareness is the percentage of consumers citing the brand first. Brand knowledge is thepercentage of consumers declaring knowing the brand. Market penetration is the percentage of consumershaving bought at least one unit of the brand in the past year. Source: Unilever Research.0%20%40%60%80%100%Omo Minerva Invicto Ace Campeiro Bold PopBrand knowledge Market penetration Top-of-mind awareness01002000 100 200Price indexPerceived quality indexInvictoPopCampeiroBoldMinervaAceOmo01002000 100 200Price indexPerceived quality indexInvictoPopCampeiroBoldMinervaAceOmoCopyright © INSEAD 15For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.Exhibit 10Key Information for Detergent Powder and Laundry Soap Brands in BrazilDetergent PowderBrand Packaging Positioning Key Brand Facts Key Data7Cardboardpack: 1 kg &500 g.Removes stains with lowquantity of product whenused in washingmachines, thus reducingthe need for soap orbleach.One of Brazil’s top brandsacross all categories.Market pioneer.Technology oriented.Owned by Unilever.4 brand extensions.8S: 55.12WP: 3.00FC: 1.65PKC: 0.35PC: 0.35Cardboardpack: 1kg &500g..Emotional appeal.Delivers a pleasantperfume and softness toyour clothes.“New perfume:Aphrodite’s touch inyour clothes”.Traditional brand of CiaGessy Industrial.Acquired by Unilever in1960.S: 17.60WP: 2.40FC: 1.40PKC: 0.35PC: 0.30Cardboardpack: 1kg &500g.Price brand.Focus on cost reductionacross all dimensionsvalued by consumers.Acquired by Unilever fromHenkel in 1984.Its name evokes thecountryside and fields.S: 6.05WP: 1.70FC: 0.90PKC: 0.35PC: 0.20Cardboardpack: 1kg &500g.Offers superiorwhiteness.Removes the dirt andprotects the fabrics.Belonged to Bombril.Acquired by P&G in 1996as Quanto.S: 11.80WP: 2.357 S = Sales ($ million), WP = Wholesale price ($ per kg), i.e., the price at which the retailer buys the product,FC = Formulation costs ($ per kg), PKC = Packaging costs ($ per kg), PC = Promotional costs ($ per kg).8 In the 1990s, Omo launched four brand extensions: Omo Multiação, the standard version; Omo Progress, toremove the most difficult stains without bleach and laundry soap; Omo Cores, for colored clothes, and OmoMáquina, with less foam which can harm washing machines. For the sake of simplicity, we group these fourbrands under the umbrella brand Omo.Copyright © INSEAD 16For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.Exhibit 10 (Cont’d)Brand Packaging POSITIONING Key Brand Facts Key DataCardboardpack: 1kg &500g.Key competitor ofMinerva with a similarpositioning.Focus on softness.Belonged to Bombril.Acquired by P&G in 1996as Odd Fases.S: 5.35WP: 2.50Cardboardpack: 1kg &500g.Price brand with smallsales in the Northeast.Focus on cost reductionacross all dimensionsvalued by consumers.Belonged to Bombril.Acquired by P&G in 1996.S: 1.40WP: 1.70Cardboardpack: 1kg &500g.Entry-level detergent.Key competitor ofCampeiro.Focus on cost reductionacross all dimensions,valued by consumers.Name means undefeated(e.g., for a football teamthat wins the championshipwithout losing one singlematch). Only popular in theNortheast. Owned by ASA.S: 5.20WP: 1.70Laundry SoapBrand Packaging POSITIONING Key Brand Facts Key DataPlastic packwith 5 barsof 200g..Intends to leverage itsbrand equity as adetergent powder inthe laundry soapmarket.Traditional brand of CiaGessy Industrial.Acquired by Unilever in1960.S: 19.40WP: 1.70FC: 1.00PKC: 0.15PC: 0.25(Bem-te-vi)Plastic packwith 5 barsof 200g orsingle bar of200g.Multi-uses (perceivedas killing bacteria) andtraditional andregional values.The traditional laundrysoap brand in Brazil’sNortheast.S: 11.45WP: 1.15Source: Nielsen and case writer analysis.Copyright © INSEAD 17For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.Exhibit 11Examples of Advertising for Laundry Soapand Detergent Powder Brands in Brazil99 Key Messages: “New Omo with Blue Powder. Removes stains on pockets, cuffs and collars”.“Get yourself comfortable. New Minerva. Irresistible comfort, incomparable softness”Copyright © INSEAD 18For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.Exhibit 11 (Cont’d)1010 Key message: “Merry Christmas with Ace”“Summer Promotion with Viva! and Pop: Contest for 200 washing machines. One can be yours!”Copyright © INSEAD 19For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.Exhibit 11 (Cont’d)11Exhibit 12Small Retail Store in Brazil11 Key message: “Nobody can block this brand. Bem-te-vi. Our people’s soap”Copyright © INSEAD 20For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.Exhibit 13Key Differences between Generalist Wholesalersand Specialized Distributors in BrazilDimension Generalist Wholesaler Specialized DistributorsArea or reach Wide FocusedPortfolio Focused on top 3 brands inmany categoriesAll brands from a manufacturerin a few categoriesSize Mid-sized / large SmallNumber of SKUsdistributedHundreds 20 to 40Customers Supermarkets with 3 to 9checkouts.Traditional retail stores andsupermarkets with 1 or 2checkoutsPoint-of-purchaseactivity (merchandising,category management).Limited, focused on gainingdistribution.Extensive.Relationship withmanufacturerOpportunistic, price driven Partnership, informationexchangeVariable cost (to reachthe smallest stores)$ 0.10 per kg. $ 0.05 per kg.Source: Case writer analysis.Copyright © INSEAD 21For the exclusive use of S. Tsai, 2015.This document is authorized for use only by Sandy. Tsai in 2015.9-805-086REV: FEBRUARY 2, 2006

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