Unilever is assessing whether to enter the low-income NE market. Our analysis shows that there is a profitable opportunity to offer detergent powder to low-income customers living in Northeast Brazil and capture market share in a high-margin, high-growth market. We recommend that the firm keeps the existing brands but deploy a horizontal extension of the Campeiro brand - adding better scent / softness and utilizing specialty distribution network, thereby marginalizing Invicto, an inferior but better-known competitor.
NE 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 purchasing 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 detergent powder.
In NE Brazil, detergent is still primarily used to supplement soap in order to make the clothes whiter and smell better. Campeiro, Unilever’s current budget offering detergent powder, competes primarily with Invicto. These products are offered at the same price ($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 Campeiro’s 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 sustain high margin. In addition, the market is very fragmented, with “other” producers supplying 64% of the market, making it tough to systematically beat competitors and capture market share....
Please join StudyMode to read the full document