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A N N UA L M A R K E T I N G M E E T I N GD E T E R G E N T S D I V I S I O N

Unilever in Brazil

Agenda

3. Tactics3. Tactics

4. Operative Stage4. Operative Stage

1. Analysis1. Analysis

2. Strategy2. Strategy

• Current Situation• External Analysis• Consumers• Products• Call to Action

• Market opportunities• Objective• Marketing Strategies• S-T-P

• Marketing Mix (4p’s)

• Timing• Controls • Contingency Plan

1. Analysis

CURRENT SITUATION

EXTERNAL ANALYSIS

CONSUMERS

PRODUCTS

COMPETITION

CALL TO ACTION

Our Current Situation

Extensive experience in detergent category and Brazilian market; launched OMO, the first detergent powder in 1957

Market leader: 81% share of the detergent powder category in Brazil vs. closest competitor P&G with only 15%

The detergent category is the cash cow for the company and fuels the home care, personal care & food category

In the NE region our market share of 75% is below the national average

Lack of experience in low-income segment

1. Situation Analysis


External Analysis

170 million people living in Brazil, distributed between the Northeast and the Southeast region

The Plano Real initiative, introduced a new currency in 1994 which led to an increase in purchasing power amongst low-income consumers

Brazil’s Northeast and Southeast regions have large differences in income, literacy, culture and history



Consumers

NORTHEAST SOUTHEAST

Per capita income: $2,250 Per capita income: $6,600

Consume 11.4 kg/per year per buyer Consume 12.9 kg/per year per buyer

28% of households own a washing machine

67% own a washing machine

28% think bleach is necessary to remove stains

18% think bleach is necessary

Use bars of soap to wash clothes, bleach to remove stains and detergent for smell

Mix powder detergent and softener in washing machines

Clothes are washed 5 times per week 3.9 times per week in Sao Paulo

Women enjoy washing clothes, it is a social activity

Washing clothes is perceived as a chore, look for convenience

Cleanliness has great relevance for self-esteem and is a status symbol and subject of gossip

Cleanliness less relevant



Unilever Detergent Products

Sales Market Share Wholesale Price

Contribution Margin

% Contribution

55.20 52% $3 $0.70 23.33%

17.60 17% $2.40 $0.70 29.17%

6.05 6% $1.70 $0.60 35.29%

19.40 N/A $1.70 $0.55 32.35%



Competition

Sales Market Share Wholesale Price

11.80 11% 2.35

5.35 5% 2.50

1.40 1.32% 1.70

5.20 4.90% 1.70

POP

1.Situation Analysis

1.Situation Analysis

Call to Action

As a growth strategy for the detergent powder category, should we target low-income consumers in Brazil’s

northeast region? And if so what marketing strategy would work best to reach this consumer?

1. SituationAnalysis

1. SituationAnalysis

Recommended Course of Action:Target low-income consumers with the

most effective marketing strategy

2. Strategy

MARKET OPPORTUNITIES

OBJECTIVES

MARKETING STRATEGIES

S-T-P

Market Opportunities

48 million low-income Brazilians in the Northeast region who are currently using powder detergent from local, lower-priced competitors

17% annual growth rate for detergent powder in Brazil’s NE region

P&G’s limited experience in BrazilFirst mover advantage in Brazil’s low-income

segment for a multinationalPrevent similar situation that occurred in India


Objectives

Increase Unilever’s detergent category’s market share in the NE market by 10% in the next 3 years

Maintain leadership position in the NE detergent market


Unilever Strategy

Objective 1:Increase market share by 3%Objective 2:Maintain leadership in the NE market

Product StrategyProduct Strategy

Market StrategyMarket Strategy

Customer StrategyCustomer Strategy

Create a brand

extension

Create a brand

extension

Modify

consumerwashing habits

Modify

consumerwashing habits

Market penetratio

n by increasing

OMOs market share in the low-income

segment

Market penetratio

n by increasing

OMOs market share in the low-income

segment


Segmentation

Demographic Education 40% illiterate residents60% literate residents

Social Class/ Income Level

A $1400/mo B $700-1400/moC $350-700/mo D $140-350/mo

E+ $70-$140/mo E less than $70/mo

Psychographic

Motivations and attitudes

–Women who view washing clothes as pleasurable activity–Women who associate cleanliness with self-esteem and social status

Behavioral Benefits sought, usage rate

–73% of women in NE who use bleach to remove stains–28% owning a washing machine–72% who do not own a washing machine–Those seeking powerful detergents with a pleasant smell, ability to remove stains and dissolving power.–Consumers washing clothes 5 times a week


Target

Social Classes C, D, E+, and E- and women who associate cleanliness with self-esteem and status

Why? The segment is large: 83% of NE Population (40 million people) which

represents 24% of the entire population of Brazil Their Purchasing Power has increased by 27% this year

What are they seeking? Value for money in an affordable high quality detergent that is powerful, smells

good, and has the ability to remove stains and dissolving power.


Target

How can we reach them? Through the development of a brand extension, OMO mini, that can not only meet their needs but also provides a specially formulated detergent powder for hand washing in affordable sizes which is line with their current usage of detergent powder when combined with laundry soap and bleach.


Why Omo Mini?

OMO is an aspirational product. Our target would use it if they could afford it and given the fact that they use small quantities of detergent the economical sizes and hand wash formulation would be the perfect solution.

“ I would love to buy Omo, but with my tight budget, I can only afford cheaper local

brands”

-- Maria Conceicao


Why Omo Mini?

1.Will not damage OMO’s premium brand image given that:

It will be distributed in a different channel Targeted to a different segment in the Northeast of Brazil Offered in a smaller package with different formulation

2. Will not negatively affect stockholder ROI

3. Will not harm corporate reputation due to our House of Brands architecture


Positioning

MINI

0 100 150


OMO Mini Positioning

Value Proposition: The high quality attributes

of OMO original with bleaching power in

affordable sizes for the NE low-income segment

Brand Positioning:

For women who associate

cleanliness with self-esteem and

status, OMO mini offers unmatched

cleansing and bleaching power

with a fresh scent in affordable sizes

Brand ImageHigh quality for a low

price

Firm Consumers


Tactic Stage

PRODUCT

PLACE

PROMOTION

PRICE

Product Product Place Place Price Price

Strategy 1:Brand Extension

Strategy 1:Brand Extension

Strategy 2:Market Penetration

Strategy 2:Market Penetration

Promotion Promotion

Tactics

Strategy 3:Modify consumer behavior

Strategy 3:Modify consumer behavior

Modify attributes Modify attributes

Cost-based Cost-

based

Introduce new channels

Introduce new channels

Package developme

nt

Package developme

nt

Revise trade promotions

Revise trade promotions

Sampling, POP displays, events and media ads,

bundling, education

Sampling, POP displays, events and media ads,

bundling, education

Modify communication

expenditure

Modify communication

expenditure

Product

Modify attributes Design detergent for hand washing which reduces

production costsModify packaging

Discontinue traditional cardboard boxes Use 150g plastic sachets which would cost 30% of the price

of the boxes

Formulation Cost

Packaging Cost

OMO 1,000 g $1.70 $0.35

OMO 150 g $0.21* $0.02**

• Assuming a $0.05 decrease in productions costs due to hand wash formula** Plastic packaging is cheaper than cardboard boxes


Strategy 1: brand extension


Place

Introduce new channels Specialized distributors such as:

Small retail stores and supermarkets with 1 or 2 checkouts

In line with our promotional strategy due to their extensive POP activities

Focused reach will allow us to target our selected customers

Involves an additional cost of $0.05 per kg


Strategy 2: Market Penetration


Promotions

Offer trade promotions:

Develop relationships with store owners by offering them exclusivity to sell all Unilever detergents in certain areas

Emphasize the minimal shelf space required for OMO Mini

Provide samples and training to store owners so they recommend the products to their customers




Promotions

Modify communication expenditures 30% above the line (media advertisement)

70% below the line (trade promotions, events, POP)

Reduces communication expenses by half but increases the cost per contact, which will be addressed by distribution through specialized and focused channels

3. Tactics3. Tactics3. Tactics3. Tactics

Strategy 3: Modify Behaviors

Strategy 3: Modify Behaviors

Promotions

Sampling: Provide sample sizes in large events such as Carnival, concerts

and in-store as well

Bundling: Initially bundle trial size OMO with laundry soap to increase

awareness of new productPOP Displays

Highlighting the differences in quality of clothing when using OMO vs. the local competitors

Media Advertisements Include OMO mini in OMO Original TV spots and mention new

packaging and product capabilities:

“And now OMO mini with bleach available in affordable sizes for hand washing”

3. Tactics3. Tactics3. Tactics3. Tactics

Strategy 3: Modify behaviors


Promotions

Promotional giveaways: “For every 10 OMO mini sachets you collect, you get a plastic storage bin to store your OMO detergent”

Contests: With 5 empty OMO mini sachets, enter to win a TV set, a

stereo or a refrigerator

Word of Mouth We will leverage the product’s aspirational nature and strong

brand awareness to create significant promotion through WOM, mainly by creating evangelists who are enthusiastic about the product and tell their friends about it




Promotions

Consumer education: OMO Mini eliminates the need for using bleach

thereby removing that step and the need to purchase bleach

Consumers need to be educated on the following 3-step process for washing:

• Wash clothes with laundry soap

Step 1

• Use OMO Mini to remove stains & add scent

Step 2

• Rinse to remove detergent

Step 3

* Omo Mini does not replace laundry soap, therefore cannibalization is avoided




Promotions

Demonstrations:

As many of our customers are illiterate, demonstrations and visuals will allow us to effectively communicate OMO Mini’s capabilities

Demonstrate the 3-step process when using OMO Mini vs. the 4-step process when using other brands

Highlight the cleanliness and scent attributes of OMO Mini vs. other brands.




Price

Cost-based pricing: Each 150g package will be sold at a price of $0.60, to

gain a margin of 35%

Wholesale Price

Formulation

Packaging

Promotional

Distribution

Total Cost

Contribution Margin

% Contribution Margin

OMO 150 g

0.60 $0.21 $0.02 $0.02 $0.15 $0.40

$0.20 35.08%




Operative Stage

TIMING

CONTROLS & FINANCIALS

CONTINGENCY PLAN

Timing4. Operative Stage4. Operative Stage

TACTIC M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12

Design Packaging

Modify Attributes

Bundling

Distributor Partnerships

Distribute Samples

"Win a Stereo" Contest

Win Tickets to a concert

"Win a TV" Contest

Promotional Giveaways

Demonstrations

TV Ads

Measurements of Control

Profitability- Product

-Customer Segment

Market Share- OMO Mini

- OMO brand- Overall detergent

category

Efficiency- Sales promotions

-Distribution channels- Advertisements


Financial Results

OMO MINI 1997% of sales 1998 % of sales 1999

% of sales

Revenues $8,681,400 100.00% $24,580,516 100.00% $19,999,021 100%

Cost of Goods Sold

Formulation $303,849 3.50% $860,318 3.50% $699,966 3.50%

Packaging $227,887 2.63% $645,238.54 2.63% $524,974 2.63%

Total Cost of Goods Sold $531,736 6.13% $1,505,556.60 6.13% $1,224,940 6.13%

Gross Margin $8,149,664 93.88% $23,074,959.36 93.88% $18,774,081 93.88%

Operating Expenses

Distribution $325,553 3.75% $921,769.35 3.75% $749,963 3.75%

Promotional $271,294 3.13% $768,141.12 3.13% $4,166 0.02%

Total Operating Expenses $596,846 6.88% $1,689,910.47 6.88% $754,130 3.77%

Net Profit $7,552,818 87.00% $21,385,048.89 87.00% $18,019,951 90.10%


Financial Results

In millions of $Market

Share 1996 1996

Market Share 1997 1997



Market Size $ $106.00 $124 $145 $170

OMO 52.00% $55.12 52.00% $64.49 52% $75 52.00% $88.28

MINERVA 17.00% $18.02 17.00% $21.08 17% $12.83 17.00% $28.86

CAMPEIRO 6.00% $6.36 5.00% $6.20 5% $7 4.50% $7.64

ACE 11.00% $11.66 11.00% $13.64 11% $16 10.00% $16.98

BOLD 5.00% $5.30 4% $5 3% $4 2.50% $4.24

POP 1.32% $1.40 0.32% $0.40 0.32% $0.46 0.32% $0.54

INVICTO 4.90% $5.19 3.90% $4.84 2.90% $4.21 1.90% $3.23

OMO MINI 0.00% $0.00 7% $8.68 17% $24.58 11.78% $20.00

Unilever Market Share in NE

75.00% 81.00% 90.94% 85.28%


*Assuming premium brands OMO, MINERVA, and ACE will maintain the same market share as in 1996 and cheaper brands will lose market share with the competition from OMO MINI

Financial Highlights

OMO MINI Market Share is expected to increase by almost 5% in 3 years

Unilever’s Market Share in the NE Detergent market is projected to increase by more than 10% in 3 years to 85% in 1999 (more than the national average of 81%)

Net Profits for OMO Mini are expected to double from 1997 to 1999

Number of OMO MINI units sold is also forecasted to increase by more than half from 1997 to 1999


Contingency Plan

If OMO Mini does not meet the forecasted profitability the following actions are recommended: Target segments with more buying power, such as

segments A & B Increase the sachet amount to 300g Price the new packaging at $0.90

Wholesale Price

Formulation

Packaging

Promotions

Distribution

Total Cost

Contribution Margin

% Contribution Margin

OMO 300 g 0.9 0.51 0.03 0.05 0.04 0.62 0.28 30.7%


Contingency Plan4. Operative Stage4. Operative Stage

in millions of $





Market Size $ $106 $124 $145 $170

OMO 52.00% $55 52.00% $64.49 52% $75 52.00% $88.28

MINERVA 17.00% $18 17.00% $21.08 17% $12.83 17.00% $28.86

CAMPEIRO 6.00% $6 6.00% $7.44 6% $9 6.00% $10.19

ACE 11.00% $12 10.00% $13.64 9% $13 8.00% $13.58

BOLD 5.00% $5 4% $5 3% $4 2.50% $4.24

POP 1.32% $1 1.32% $1.64 1.32% $1.92 1.32% $2.24

INVICTO 4.90% $5 4.90% $6.08 4.90% $7.11 4.90% $8.32

OMO 300 0.00% $0 4% $4.96 15% $21.68 8.28% $14.06

Unilever Market Share in NE 75.00% 79.00% 89.94% 83.28%

*Assuming cheapest brands, POP and INVICTO and premium brands OMO and MINERVA, will maintain the same market share as in 1996 and OMO300 will compete with ACE and BOLD

Contingency Plan

If introduced in 1997, OMO 300g will directly compete with P&G’s Ace and Bold and will produce the following impact on revenues and market shares as compared to OMO Mini with 150g:

Sales for 1997: $4.96 million as compared with OMO Mini’s $8.68 million

Market share for 1997: 4% as compared to OMO Mini’s 7% Sales for 1998: $21.68 million as compared to OMO Mini’s

$24.58 million Market share for 1998: 8.28% as compared to OMO Mini’s

11.78% Increases Unilever’s detergent category market share to

83%

Q & A

Guimaraes, Pedro Pacheco and Pierre Chandon. Unilever in Brazil: Marketing Strategies for Low-Income Consumers. INSEAD. (2007).

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