Unilever in Brazil Case
November 14, 2011
Unilever in Brazil Case Write-up
Background:
Unilever is a $56 billion company that sells a wide variety of consumer goods. One of their most well-known products is powdered detergent. At the time this article was written, Unilever operated in over 150 countries worldwide. One of the countries that they have had particular success in was Brazil, where they controlled 81% of the market. The problem was that they were having trouble capturing the entire market, as the rest of the market was purchasing a lower priced detergent. Recommendation:
I recommend that Unilever should not create a new detergent in an effort to capture more of the lower-end of the market. I believe that their best course of action to capture the lower-income segment is to decrease the price of their cheapest detergent, Campeiro.
Basis for Recommendation:
The reason why I believe Unilever should not sell a new laundry detergent target to the lower-income market segment is because of the risk of cannibalization. Currently, Unilever has 81% of the market share in Brazil, and if they were to introduce a new detergent at a lower price, they would be losing sales to themselves. The remaining potential market share in my opinion is not large enough to risk the possibility of losing sales to your own less profitable brand. If Unilever were to introduce a new detergent to cater to the lowest income segment, then they would only be stealing sales from Campeiro. But, by lowering the price of Campeiro, they can incorporate the two segments and effectively capture them both. Furthermore, by lowering the price of this detergent, they can also cut back the quality of the detergent itself, which can help them keep the price down.
Alternatives, Risks, and Assumptions:
The main assumption that I made in creating my recommendation is that people’s demand for detergent is solely based on price. I did not consider advertising or brand recognition in my
Unilever in Brazil Case Write-up
Background:
Unilever is a $56 billion company that sells a wide variety of consumer goods. One of their most well-known products is powdered detergent. At the time this article was written, Unilever operated in over 150 countries worldwide. One of the countries that they have had particular success in was Brazil, where they controlled 81% of the market. The problem was that they were having trouble capturing the entire market, as the rest of the market was purchasing a lower priced detergent. Recommendation:
I recommend that Unilever should not create a new detergent in an effort to capture more of the lower-end of the market. I believe that their best course of action to capture the lower-income segment is to decrease the price of their cheapest detergent, Campeiro.
Basis for Recommendation:
The reason why I believe Unilever should not sell a new laundry detergent target to the lower-income market segment is because of the risk of cannibalization. Currently, Unilever has 81% of the market share in Brazil, and if they were to introduce a new detergent at a lower price, they would be losing sales to themselves. The remaining potential market share in my opinion is not large enough to risk the possibility of losing sales to your own less profitable brand. If Unilever were to introduce a new detergent to cater to the lowest income segment, then they would only be stealing sales from Campeiro. But, by lowering the price of Campeiro, they can incorporate the two segments and effectively capture them both. Furthermore, by lowering the price of this detergent, they can also cut back the quality of the detergent itself, which can help them keep the price down.
Alternatives, Risks, and Assumptions:
The main assumption that I made in creating my recommendation is that people’s demand for detergent is solely based on price. I did not consider advertising or brand recognition in my