South American Soap Opera - Unilever in Brazil: Marketing Strategies for Low-income Countries

Written by INSEAD's Pierre Chandon and McKinsey's Pedro Pacheco Guimaraes, the case - Unilever in Brazil: Marketing Strategies for Low-Income Consumers - articulately presents challenges faced by a multi-national as it markets to Brazil. Proctor & Gamble and Unilever are put under the microscope as they attempt entry into the lower end of a domestic market, challenging current market belief and adjusting to meet customer realities in low-income Brazilian households.

by Pierre Chandon, Pedro Pacheco Guimaraes
Last Updated: 23 Jul 2013

The biggest emerging markets are obviously very appealing to multinationals. But even the global players with the most sophisticated R&D departments or the longest experience in the developing world have seen their best efforts to reach the lower-income consumers go astray. The most popular brands that have succeeded in developed countries are typically far too expensive. But lower prices mean both lower margins and increased risks of cannibalising the profits of higher-priced brands.

Assistant Professor of Marketing Pierre Chandon and INSEAD Alumnus Pedro Pacheco Guimaraes study the recent experiences of the two biggest global players in the detergents industry - Unilever and Procter & Gamble -in trying to market washing powders to the tens of millions of poorer consumers in Brazil. The authors focus on Unilever's highly ambitious "Everyman" project of the mid-90s. This began with extensive field studies to help determine whether it was in the corporation's interests to enter the lower end of the domestic market.

The rivals had quite different statures within Brazil at the time. Unilever had achieved a quite remarkable 81% market share in the washing powder sector and was a consumer goods pioneer in the country. P&G was a very distant second and had entered the local market far later. However, it had a much-envied R&D unit as well as extensive marketing experience worldwide. Its potential long-term threat to Unilever was obvious.

Chandon and Guimaraes relate the experiences of the head of Unilever's Home Care division in Brazil, Laercio Cardoso, an alumnus of INSEAD's Advanced Management Program. Cardoso became increasingly convinced over time that, in light of its massive market dominance, pursuing the lower end of the detergents market was Unilever's only clear opportunity for domestic growth. He was extremely wary of seeing the company lose out to cheaper local brands, as had recently been the case in India and in Pakistan, from where he had just transferred. Cardoso soon faced stiff resistance from many colleagues, who felt that the premium brands Unilever already offered were the reason behind its enviable domestic position.

The author also cites the major marketing challenges that entry into such a market will near-inevitably present. The months spent living in the favelas slums with low-income consumers had taught Unilever that the attitudes and behaviour of this segment of consumers were very different from what they were used to.

Instead of using washing machines, mothers washed clothes by hand, using washboards, bars of laundry soap, and just a sprinkle of detergent to add perfume and whiteness. To them, washing was a major social event when they would come together and gossip by the river, taking pride in their hand-washing effort. Though many owned televisions, fewer were literate and it would be difficult to convince them to change their traditional washing habits with a few 30-second TV commercials. Deciding how to pitch the advertising would also be tricky, as the poor tended to associate cheaper products overtly targeting them with bad quality. Last but not least, low-income consumers overwhelmingly only shopped at local "mom-and-pop" stores, which are very difficult to reach through conventional wholesalers.

In short, this EFMD 2004 case competition winner explores how a world leader in a given industry can best adjust the fundamental rules of marketing it develops over decades in far richer countries to a very different environment. In the end, the case study and CD-ROM shows that marketing to low-income consumers is not a form of charity, and can be quite profitable, provided that one follows the types of rules that Chandon and Guimaraes relate in detail.

INSEAD 2004

Pierre Chandon, Pedro Pacheco Guimaraes recommends

Click here to read the full article on INSEAD Knowledge

Read more

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Upcoming Events

Subscribe

Get your essential reading delivered. Subscribe to Management Today