Unilever Brazil Essay Example for Free

Unilever brazil nut Essay decision declarer SummaryUnilever is assessing whether to don the low-income NE food market. Our analysis shows that there is a profitable opportunity to offer detersive demolish to low-income customers living in Northeast Brazil and capture market lot in a high-margin, high-growth market. We recommend that the firm keeps the existing brands but deploy a horizontal credit of the Campeiro brand adding discover scent / softness and utilizing specialty statistical distribution network, thereby marginalizing Invicto, an inferior but better-known competitor.Situation OverviewNE Brazil has long lagged behind the rest of the country in terms of technology and income. However, economic reforms instituted by Finance Minister Cardoso has seen the purchase power of the poorest Brazilians increase dramatically. These reforms, combined with tax incentives for investment in the NE has led to a 17% annual growth in detersive powder.In NE Brazil, detergent is heretofore primarily used to supplement soap in order to make the clothes whiter and timber better. Campeiro, Unilevers current bud come in offering detergent powder, competes primarily with Invicto. These products are offered at the same scathe ($1.7/kg) and have roughly the same market penetration (6% for Campeiro vs. 5% for Invicto) even as consumers view Campeiro as a superior brand. The problem for Unilever is Campeiros brand penetration, which lags approximately 15% behind Invicto. This is because of the decentralized purchasing habits of women in NE Brazil. This situation is an opportunity because if Unilever improves market penetration, it will drive sales in this high-margin, high-growth segment of the laundry industry.By contrast, the soap industry has slower growth (6%) and lower barrier to entry, which makes it tough to halt high margin. In addition, the market is very fragmented, with early(a) producers supplying 64% of the market, making it tough to systematic ally beat competitors and capture market part. Therefore, at this time we do not think it makes sense to enter this market. natural action OverviewStrategyWe will target the following marketCustomer Low-income consumers in NE BrazilCompany UnileverCollaborators Special store owners as low-income consumers do not shop in wholesale and get financing and advice from specialty owners Competitor InvictoContext Increasing purchasing power in NE and place of powder as fragrance / softening agentsOur value proposition to this segment will be An affordable detergent powder with a special touch.We will deploy the strategy as followsTacticsProducts modern and improved Campeiro with enhanced smell and softness oSmell / softness is ranked second only to whiteness in perceived importance by consumers, but going after whiteness has potential to cannibalize OMO (see Action Rationale section for more details) oThe added fragrance should be at a level just plenty to set Campeiro apart from Invic to, but far enough from Minerva to prevent cannibalization Brand CampeiroPrice Same charge whole sale of 1.7 / kg scattering Specialized distributors that can increase knowingness of target auditory sense at a lower variable cost than generalist wholesaler specialized stores are fundamental influencers of target customers behaviors Incentives Launch new Campeiro via specialized distribution as larger disturb to influence small shop owners give away free samples to specialized store to promote awareness to small shops use more point-of-purchase marketing as small shop owners are more convincible to such tactics Communication New and Improved Campeiro or add something special to your clothes at affordable priceAction RationaleThe proposed strategy is best suited for Unilevers goal of purpose a profitable entry into low-income NE market because Profit growth from increasing market share in Campeiro is significantly higher than Minerva soap oMargins for laundry detergent is supe rior to soap ($2520 per ton vs. $1250 per ton) oPowder market is experiencing a higher growth (17%) compared to that of soap (6%) o Increase New Campeiro market share by 6% would have and additional benefit of 1.38MM in course 1 and 2.21 MM in year 3, compared to 1.19 and 1.42 if we increase Minerva soap market share by 5% (See exhibit 2) Increasing market share in soap is already a big challenge given the fragmented market Campeiro has a strong brand name by giving it a new feature such as smell, it can separate itself from the generic Invicto and other smaller producers of no frills powdersRD cost of formulating should be low as Unilever already has a fragrance-based brand Minerva Cost of matching fragrance / softness is too prohibitive for ASA and other small, regional competitors Cannibalization is optimized cannibalization % is better if Campeiro targets smell / softness instead of whiteness (see Exhibit 1) Campeiro is a better extension candidate than Minerva as Campeiro ha s a better break-even cannibalization rate (See Exhibit 1) Significant barriers to entry also make it difficult for additional firms to compete at this price point Using specialty store distribution makes sense as low-income NE residents tend to shop at smaller supermarkets Improvement to Unilever brand visualise as being at the forefront of helping rural BrazilPotential DrawbacksThere is still risk that a fragrance / softness based brand extension will cannibalize Minerva beyond the threshold calculated, thereby decreasing profit Cost of re-formulating Campeiro may be higher than expected Unilever already owns a 75% market share therefore, there is a finite additional share for Campeiro to steep Unilever premium brand equity may suffer as Unilever makes investment in lower-end products Most low-income business firm do not own washing machines, so it would be hard to absorb additional market share currently owned by competitors soap brands with a powder product There is ever the risk that ever-changing socioeconomic and political factors will defer target segment from purchasing powderConclusionBased on the analysis above, our team believes that the appropriate strategy to grow in the low-income NE market would be to extend the existing Campeiro brand while keeping the same price point. Distribution through specialty stores instead of wholesale will best position Unilever to grow in this high-margin, high-growth market.