Unilever in Brazil (1997-2007): Marketing Strategies for Low-

Income Consumers

Brazil is by far the largest country in Latin America. It covers 8.5 million km²
(almost as big as the US and 35 times bigger than the UK) stretching 4,345km from
North to South and 4,330km from East to West. Its 170 million people live
predominantly in two clusters on the Atlantic coast: one concentrated in the
Southeast, home to Brazil’s two largest cities, São Paulo and Rio de Janeiro, and the
other in the Northeast, whose main cities are Salvador, Recife and Fortaleza.
Clothes Washing in the Southeast and Northeast of Brazil
The way clothes are washed in the Northeast and Southeast of Brazil is very
different. In Recife (NE), only 28% of households own a washing machine and 73%
of women think that bleach is necessary to remove fat stains. In São Paulo (SE),
67% of families own a washing machine and only 18% of women think that bleach
is necessary to remove fat stains. In general, women in the Northeast scrub clothes
using bars of laundry soap, a process which requires intense and sustained effort.
They then add bleach to remove tough stains and only add a little detergent powder
at the end, primarily to make the clothes smell good. In the Southeast, the process
is similar to European or North American habits: women mix powder detergent and
softener in a washing machine and use laundry soap and bleach only to remove the
toughest stains.
People in the NE and SE differ in the symbolic value they attach to cleanliness.
Many poor Northeasterners are proud of the fact that they keep themselves and their
families spotlessly clean despite their low income. Because it is so labour intensive,
many women see the cleanliness of clothes as an indication of the dedication of the
mother to her family. Personal and home cleanliness is a main subject of gossip. In
the Southeast, where most women own a washing 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
detergents on six key attributes The most important attribute is the perceived power
of the detergent (its ability to clean and whiten clothes with a small quantity of
product), which is often judged by the quantity of foam 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 to remove
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stains without the need for laundry soap and bleach. Next is the ease with which the
powder dissolves in water and the absence of residue on the fabric after rinsing, two
elements that 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-to- recognize packages 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 Market

Key Industry Players in Brazil

UNILEVER
Unilever 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 a portfolio of 1,600 brands worldwide, including 45 key
detergent brands .Unilever is a pioneer of the consumer goods industry in Brazil.
Lever Brothers started operations in Brazil in 1929 and opened their first plant in
São Paulo in 1930 to manufacture Sunlight soap. Omo, Unilever’s most successful
brand, was launched in 1957 and was the first detergent powder in the country.
Unilever acquired Cia Gessy Industrial and its rich portfolio of personal care brands
in the 1960s and started its food operations in the 1970s with the launch 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. Yet
detergents remain the cash cow of Unilever Brazil, providing fuel for growth in the
food and personal care categories. In 1996, Unilever was a clear leader in the
detergent powder category in Brazil, with an 81% market share achieved with three
brands: Omo (one of Brazil’s favorite brands across all categories), Minerva (the
only brand to be sold as both detergent powder and laundry soap), and Campeiro
(Unilever’s cheapest brand).2

Procter & Gamble

Procter & Gamble is a US$40 billion company, headquartered in Cincinnati (USA),
with 98,000 employees and operations in 80 countries. P&G started operations in
Brazil only in 1988. In 1996 they acquired the detergents business of Bombril, a
Brazilian company, and its three brands: Quanto, Odd Fases and Pop. After spending
a large amount on manufacturing improvements, P&G migrated Quanto towards
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Ace and Odd Fases towards Bold, two of its global brands, but kept the low-price
brand Pop. P&G is a distant second player with only a 15% share of the Brazilian
detergent market. However, the real threat is larger than its current market share
suggests because P&G Brazil can draw on the formidable R&D and marketing
expertise of the company worldwide.

Market Structure
The Brazilian fabric wash market consists of two categories: detergent powder and
laundry soap (sales of liquid laundry detergents are negligible).

Detergent Powder
In 1996, detergent powder was a $106 million (42,000 tons) market in the Northeast,
growing at the remarkable annual rate of 17% thanks to the economic upturn of the
Plano Real. The barriers 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. Premium products, like Unilever’s three detergents, also
contain specific enzymes and builders which improve the whitening power of the
detergent when it is used in a washing machine.

Laundry Soap
In 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 were lower in the laundry soap market than in the detergent powder
market because soap is relatively easy to produce from fats and oil. In fact, the
animal fat that is a primary component of soap is produced in large quantities by
slaughterhouses and meat processing plants. One of the limitations of laundry soaps
is that animal fat tends to leave the clothes yellow. They are also difficult to perfume
because the base has a very strong smell.3 Laundry soap was sold at a much lower
price than laundry detergent powders.
Laundry soap is a multi-use product which has many home and personal care uses.
People with washing machines primarily use it to remove tough stains (e.g., on shirt
collars); for those without, laundry soap is used to wash all clothes. The popularity
of laundry soaps in the NE is also due to the softness of the water in this region (i.e.,
its low calcium content), which helps the soap to dissolve and produces great
quantities of foam, thus reducing one of the key advantages of powders. In
comparison, most water in Europe, US and India is hard.

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Marketing Mix

Product
Unilever could produce a product comparable to Campeiro, its cheapest product, but
would it deliver the benefits that low-income consumers wanted? Alternatively,
Unilever could use Minerva’s formulation, but it might be too expensive for low-
income consumers. Unilever’s scientists could develop a third formula priced half-
way between Minerva and Campeiro if they could eliminate some ingredients. The
question was to determine which attributes could be eliminated, which should be
retained, and which, if any, would actually need to be improved relative to both
existing brands.

Selecting the right packaging size and type was another difficult task. Larger
packages would reduce the cost per kilo but could price the product out of the
weekly budget range of the poorest consumers. Unilever could use a plastic sachet,
which would cost 30% of the price of traditional cardboard boxes, but market
research data showed that low-income consumers were attached to boxes and
regarded anything else as good for only second-rate products. One solution might
be to launch multiple types and sizes.

Price
Choosing the wholesale price (the price paid by retailers) was the single most
important decision for Unilever. Priced too high, the product would be out of reach
for the target segment. Priced too low, it would increase the inevitable
cannibalization of existing Unilever brands. Should Unilever use coupons or other
means to reduce the cost of the product for low- income consumers? Should it
change the price of Omo, Minerva and Campeiro?

Promotion
What would be the objective of the communication? What should be the key
message? Low- income consumers 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 the other hand, using the classic aspirational
communication of most Brazilian brands could confuse consumers and lead to
unwanted cannibalization. What about packaging and point-of- purchase displays?
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 consumers
shopped? Getting buy-in from small store owners would be crucial because low-
income consumers relied on them for advice and for financing (which is widely used
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in Brazil, even for inexpensive consumer goods).

In regular detergent markets Unilever had established that the most effective
allocation of communication expenditure was 70% above-the-line (media
advertising) and 30% below-the- line (trade promotions, events, point-of-purchase
marketing). The advantages of using primarily media advertising were its low cost-
per-contact and high reach because almost all Brazilians, irrespective of income, are
avid television watchers. One alternative would be to use 70% below-the-line
communication. At $0.05 per kg, this plan would require only one third of the cost
of a traditional Unilever communication plan. On the other hand, it would lower the
reach and increase the cost-per-contact.

Distribution
Unilever did not have the ability to distribute to the approximately 75,000 small
outlets spread over the Northeast. Yet getting access to these stores was key because
low-income consumers rarely shopped in large supermarkets like Wal-Mart or
Carrefour. For distribution, Unilever could rely on its existing network of generalist
wholesalers, which supplied Unilever’s existing detergents and a wide variety of
products and had national coverage, but which sometimes had to rely on secondary,
smaller local wholesalers to reach all stores, which increased their cost.
Alternatively, it could contract with dozens of specialized distributors who would
get exclusive rights to sell all Unilever detergents in certain . Choosing the right
distribution channel was important because it was a large component of the product
cost, would be hard to reverse, and ultimately would have strong implications for
the ability to push sales and build brands at points of sale.

Colgate Max Fresh: Global Brand Roll-Out

Colgate was the world’s first commercial toothpaste; Colgate Dental Cream was
launched in 1873 in tins. In those days, dental creams provided little more than a
superficial cleaning and had few, if any, lasting therapeutic benefits, such as cavity or
gum-disease prevention.
Global Research and Development (R&D) worked with the CICs to develop new
products. Once a promising technology was identified, discussions between R&D and
the CICs were held to agree on the product formula, particularly the sourcing of
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ingredients and selection of flavors in light of local consumer preferences.
In late 2002, R&D invited the CIC directors to a briefing on a new toothpaste formula, a
sensorial- driven, breath-freshening product that was later launched as Colgate Max
Fresh. This product utilized its patented technology of dissolvable mini breath strips as
a point of differentiation. The breath strip category, which had been introduced to the
consumer in 200116 by a leading mouthwash manufacturer, was developed to provide
consumers with a convenient alternative to traditional mouth fresheners. The product
consisted of small pieces of “tape,” packaged in a convenient carrying case, which
dissolved on the tongue releasing a flavor designed to freshen breath. By 2002, the
product category was estimated to generate $250 million in retail sales globally and was
particularly successful in the U.S. where it obtained strong distribution and impulse sales
at retail check-out counters.
Regional interest in the “breath strip in toothpaste” technology was strong, but high
manufacturing costs were of concern to CP managers from emerging markets because
they could not be easily passed through in higher retail prices. The basic formula
contained a high-quality, high- cleaning silica with an expensive but effective whitening
ingredient. To address margin concerns, a cost-optimized formula was created for
emerging markets.

Colgate Max Fresh—Qualifying the Product for Market

In early 2004, Del Levin, CIC director for oral care in Asia, and his team briefed
R&D to begin the technology- and product-qualification processes. Technology
qualification typically took four months. Product validation required an additional
four months. The qualification process for Colgate Max Fresh was easier because
the technology for stabilizing the breath strips in the toothpaste had already been
developed and patented.
Regional management looked favorably on CMF because, compared to other
developing regions, Asia had a large freshness segment. CP management in Asia
felt, in retrospect, that they would have preferred to have participated earlier in the
CMF development process so that they could have launched the product sooner.
Communication challenges The biggest challenge in launching CMF was
getting the consumer communication right. First, Levin and his team discovered
that Colgate Max Fresh did not test as well as other names in China, which led to
the name being changed to “Icy Fresh.” Second, the term “breath strips” was
meaningless since the niche breath strip category was practically unknown in China.
“Cooling crystals” was identified and qualified as the most relevant and meaningful
phrase to describe the breath strips to Chinese consumers.

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Freshness was still a relatively new idea for Chinese consumers in the toothpaste category.
Accordingly, communicating freshness in advertising was expected to be challenging. CP’s
advertising agency believed they “needed to connect with youth at an emotional level” and that
rational arguments explaining cooling crystals were not going to work in advertising copy.

Mexico
Colgate dominated in Mexico with an 82% value share of the $348 million retail
toothpaste market in 2004.33 This, combined with relatively flat toothpaste demand,
meant it was hard to secure incremental shelf space to accommodate new product
launches. Crest market share approximated 10%.
The CMF launch in Mexico would neutralize the anticipated launch of CWE
(called Crest Cool Explosions in Mexico). A testing plan was executed to assess the
consumer appeal of the concept pre- and post-product use, expected sales volume,
sources of volume and optimal pricing. Management commissioned a BASES
simulated test market to assess the likelihood of long-term success; the key
performance measures were purchase intent, liking, value, and uniqueness.

Pricing CMF’s retail pricing objective was to achieve parity with Crest’s Cool
Explosions. Price/value perceptions were above average for CMF. In addition, few
consumers mentioned price as a like or dislike. However, further analysis revealed that
volume was maximized at 14.50–15.00 pesos. CMF was tested at a retail price of 15.99
pesos. It was estimated that CMF could increase volume by +25% if the price was
decreased from 15.99 to 14.99.
Advertising As in CP China, concerns over the transferability of the U.S. “Emily
Procter” advertising led the brand group to want to develop new advertising for the
Mexican market. The agency argued for advertising that combined the explosive power
to freshen with extreme living. They proposed an advertising idea, “a joy ride for your
mouth,” that was depicted in advertising entitled “Snowsurfer”. The brand group decided
to have it produced. Incremental production and talent costs combined were $500,000.

The Universalization of L’Oréal

In 2010, half of the world’s cosmetics sales came from the so-called emerging markets
for the first time; L’Oréal opened three new subsidiaries, in Egypt, Pakistan, and
Kazakhstan;2 and the Paris, France-based cosmetics and personal care powerhouse
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declared its intention to double its consumer base to two billion and increase its share of
sales from emerging markets.
Total Repair 5
Tailored to solve the five most common hair problems faced by the women of any given
country, Total Repair 5 was launched by L’Oréal Paris in 2008 in Brazil under the Elseve
brand name. In 2009 it rolled out elsewhere in Latin America, throughout Western
Europe (under the Elvive name), and in parts of Asia. The marketing campaign featured
a series of ads with the slogan “five problems, one solution.” Ads starred actresses and
models from around the world including Megan Gale in Australia, Anne Curtis in the
Philippines, Aishwarya Rai in India, and Ximena Navarrete in Mexico. In Mexico,
Navarrete told customers that it would solve hair loss, dryness, dullness, lack of
movement, and split ends. In Australia, Gale spoke of its power to fix damage, thinning,
dullness, brittleness, and split ends. All ads focused on the scientific and research
background of the product, which used “bio-ceramide” to repair damaged hair.
The product launch was very successful in in Brazil: in six months over 7 million units
were sold; in 2009, the Elseve brand posted more than 27% growth in Latin America.
Total Repair 5 was marketed as a franchise under the Elseve brand, and became its
number one product in 2008 in Brazil. Elseve had not been a particularly strong brand
for L’Oréal Paris, and before launching Total Repair 5, the company had wanted Elseve
to have greater brand awareness and a good reputation. As Brazil’s GDP per capita grew,
so did spending, and in cosmetics consumers migrated up from one segment to the next
in droves. Elseve was positioned as mass premium. L’Oréal Paris increased the price to
increase the appeal and also make it clear to consumers that they were paying for
technology as well as “something special inside,”. This reflected consumer behavior.
Unilever had been the segment’s historical leader in Latin America, via its shampoo sold
under the SEDA name in Brazil and as SEDAL in other countries in the region. By 2010,
however, Unilever had lost market share. L’Oréal’s management believed that in 2000
Unilever had been successful in targeting consumers in the bottom two layers, but lost
some of them as consumers’ disposable income and aspirations grew.

L’Oréal in India
Across the globe in India, an experiment and local adaptation had become the
base for a global franchise. L’Oréal India’s consumer products division included
L’Oréal Paris, Garnier, and Maybelline New York. After first venturing into India
with a distributor in 1991, Garnier India was established in 1994 with the launch of
conditioners. A year later the subsidiary launched the first anti- wrinkle cream in the
Indian market. In total L’Oréal had 25 million to 30 million customers and aimed
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 for 150 million in 2020 in two ways: by upgrading consumers from their current
product usage habits, and by reaching a larger number of consumers with lower-
priced products. Combined with rising disposable incomes, urbanization,
liberalization, and exposure to international media, these forces fueled growth in
sales of beauty products and services in India. What persisted was a holistic
approach to beauty. “It means that beauty is closely linked with wellness. So
customers expect ‘do-good’ benefits from beauty products. Also, beauty is
considered to be something to be acquired in harmony with nature. Hence, the belief
in natural ingredients and the premium placed on natural beauty over acquired
beauty. India presented beauty-related specificities. Skin color, which ranged from
fair to very dark, and hair that was brown or black, very long, and usually oiled,
created specific demands. Unlike Russia or China, when economic change in the
1990s suddenly made beauty brands available, in India consumers had always had
access to beauty brands from Indian and international companies. Consumption was
an evolution and not a revolution; there had been no “craze” for Western brands.

Total Repair 5 India

Hair was very important to women, and in 2010 L’Oréal commissioned a skin care
versus hair care market study to find an entry into the Indian market. They found that
Indians valued hair care more than skin care, and estimated 65% of the beauty market
lay in hair care. Most men and women in India had wavy hair with reddish/copper
undertones and diverse textures; it was difficult to straighten. While there were shorter
hairstyles, 80% of women kept their hair shoulder-length to long, precluding the use of
mousse, favoring instead products such as detanglers. Indian women also tended not to
change hair color, but rather just covered up grey.
Even though Indian hair was among the thickest in the world, many women
complained of thin hair, leading to see a “lot of untapped potential” for products with
thickening/anti- thinning benefits. Hair loss was a big concern among women, as
were split ends and premature gray. Total Repair 5 was sold as a generalist product,
while in the past damage and dryness might have required for two different
shampoos. Also the basic formula did not stay the same. L’Oréal India had the option
to use the China formula that contained a lot of silicon to account for the damage
blow drying did to Chinese hair; but Indians did not blow dry their hair as much. Two
years after the launch, L’Oréal Paris Hair Care had 6% market share in the bottle
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market.

GarnierMEN in India

An exploratory study on men in 2008 segmented “emerging” Indian men into three
categories: those with a functional approach (basic lifestyle) who tended to be value
conscious, believed it was important to be presentable, and used limited products; those
who were fashion conscious (trend follower) who tended to lead an active lifestyle, be
experimental and try new products; and the individual (trendsetter) who believed in his
own style and identity, was brand conscious, and used specific grooming for special
occasions. Men groomed to feel good from within (to boost confidence and enhance self-
identity) and to look good for others (to get compliments and gain advantage in
competitive situations). Grooming product usage rates varied by category, from 91% for
shaving to 8% for face masks/scrubs. L’Oréal considered the market potential to be
huge. The total Indian face care market was Rs 28.8 billion in 2010, growing at 25%, out
of which Rs.1.7 billion represented the men’s skin care market growing at 41%. Men’s
face care accounted for 4% of India’s total skin care market. Overall, Indian men
traditionally had a propensity for grooming. For example, the penetration of modern hair
color was slightly higher among men than women; men visited hairdressers more often
than women and had higher disposable income. The men’s beauty segment in India was
growing at twice the rate as the overall market.
The GarnierMEN brand imagery evoked a dynamic, trendy, modern, healthy, ultra-confident,
accessible and energetic “real guy’s guy.” A 2009 DMI presentation described the promise of
GarnierMEN as a dedicated brand; its attributes were simplicity, rapidity and efficacy, light texture
and naturalness. Indian actor and former model John Abraham was picked as superstar endorser,
using a fairness measuring ruler to show the impact of the cream on his skin color. Abraham had
made his film debut in 2003; L’Oréal described the 39-year-old as “athletic, young, and edgy,” “the
quintessential Bollywood hunk.”GarnierMEN did very well in India, reaching the number two
position after Fair & Handsome, a much cheaper brand sold by a local company Emami.

Li Ning – China – Local vs Global Brands

Li Ning was named for its founder and chairman of the board. Born in 1963, icon
gymnast Li Ning, in his 19-year international sports career, won 106 gold medals
and became a two-time World Cup champion in gymnastics. He made history and
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 was dubbed the “Prince of Gymnastics” after winning six out of seven gold medals
in artistic gymnastics at the 6th World Cup in 1982. At the 1984 Los Angeles
Olympics, Li won three gold and two silver medals and a bronze medal. He was
voted one of the top 25 athletes of the 20th century by the World Sports
Correspondent Association.
Li changed careers in 1989, establishing the Li Ning company in 1990 in
Guangdong province with the vision of creating the first national sporting goods
brand in the PRC. Brand awareness, reputation, and extensive retailing throughout
the country were the cornerstones of the company’s proposed strategy. Even before
the first formal product line was launched, Li Ning established itself as a brand by
sponsoring the PRC team for the 1990 Asian Games. The company continued to
sponsor the Chinese Olympic Team (in 1992, 1994, 2000, 2004, and beyond) even
as its own stores began to offer broad product lines that included sportswear,
leisurewear, and footwear.Li Ning’s sales organization numbered fewer than 300
employees, but more than 4,000 people were employed in direct channel operations.
The indirect channel was organized into eight regions. Provincial distributors
handled franchisees’ orders. The sporting goods industry had always been quite
open in the PRC. Widely recognized by association with its near universally known
slogan, “Just do it,” Nike held the largest market share. Adidas, which had adopted
in 2004 the slogan “Impossible is Nothing,” followed. Both firms had entered the
country in the early 1980s. Their global marketing campaigns were largely
responsible for Chinese consumers’ increasing awareness of sporting goods.
Students, who represented nearly 60% of those active in sports, were the core target
consumers of all major industry players. University students accounted for 45%,
middle and high school students for 55%, of the students active in sports. Li Ning
did not compete particularly strongly in the Nike- and Adidas-dominated mega-
cities of Shenzhen, Shanghai, Guangzhou, and Beijing, although the latter was a
strong market for the Chinese company. Local sporting goods companies competed
mainly in third-tier cities, in which winning market share was comparatively easy
for Li Ning, given its ability to open additional franchise stores.
Positioning
The first order of business was to convey an image of professionalism in footwear
and stimulate the perception that the brand was relevant and fashionable. Wu and
his team believed that this would entail more than ensuring competitiveness through
product quality, design, and innovation, that the brand’s deserved identity and
strength relied as well on making the right conceptual choices. To leverage the
“Made in China” aspect, the company gradually emphasized oriental elements in
all communications, with the goal of establishing the oriental theme as a key brand
association. In terms of positioning, the oriental theme itself doesn’t guarantee
success. But oriental with international design and international feeling will bring
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 us success. None of our local competitors has done it before in the sports goods
industry.
Product Portfolio
New products were designed to convey to target consumers the chosen positioning
and brand image, but choices regarding the product line were dictated by business
opportunity, accounting for the actions of competition. Since 2002, Li Ning had
focused on a portfolio of five key sports: running, basketball, tennis, soccer, and
fitness. Whereas Nike was strongly associated with basketball and Adidas with
soccer, brands positioned around running (such as Reebok, Asics, or New Balance)
remained highly discrete in the Chinese market, affording an opportunity for Li
Ning to build the category. Major R&D efforts undertaken to ensure that Li Ning
would “own” running in China yielded a core technology capable of adapting unique
and recognizable features for cushioning, support, control, and weight.

References: Various HBS cases and articles

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