Unilever in Brazil Low Income

UNILEVER MEMO

In order to gain market shares through the low-income segment of the Brazilian market, Unilever should launch a new Detergent Powder brand at an affordable price, which could replace in the long-run Campeiro, its cheapest brand. However this strategy is not without any risks, since it can lead to the cannibalization of Minerva.

With 81% of market shares in Brazil, Unilever is the leader of the Detergent Powder market. It owns three brands in Brazil: Omo, Minerva and Campeiro. Omo is the top brand of the portfolio and perceived as a high quality at a premium position. Minerva is a medium quality product with low brand awareness. Campeiro is a well-known cheapest product but with a low top of mind penetration. In order to develop its presence in Brazil and to gain market shares, Unilever’s top management wants now to target the low-income segment living in the Northeast region of the country. This is a very new segment that Unilever cannot market as the traditional one. There are 48 millions of low income consumers in Northeast of Brazil. This is an illiterate population, with an average per Capita income of $2,250. Northeasterners use more soap that powder to do their laundry, but the penetration rate of Detergent powder in the Northeast is almost as high as in the in the Southeast (respectively 97.2% against 97.6%). Besides the Northeast population tend to wash more often their clothes. Concerning the market structure, the Detergent powder market represents $106 million and growths at a rate of 17% per year. Unilever has in the NE a market share equal to 75% (52% with Omo, 17% with Minerva and 6% with Campeiro). See exhibit 1

Unilever shouldn’t change its strategy with its existing brand and should launch a new one which would be positioned between Campeiro and Minerva. This new brand should also take advantage of the brans awareness of Omo. In the long run this new brand should even replace Campeiro. Indeed we want the low-income consumer to switch for our new brand as their purchasing power will increase (they already beneficiated from the 1995-1996 boom). In term