Unilever Case Analysis

Q1. Should Unilever target the low-income segment consumers of north-east?

Ans: Yes, Unilever should target the low-income segment of the north-east market.

Its good to be a market leader with 82% share in south and 53% share in northeast but there is nothing like monopoly!

Unilever has a very strong market presence in both the sectors however the competition is getting stronger in the northeast area with other brands getting closer to Unilever, In case Unilever ignores this segment there is a strong possibility that some other brand would be able to gain a stronghold over the northeast part.

 This would not just jeopardize Unilever’s standing but would also create a future ground for the same competitors attacking the brand for gaining a share in the southeast region as well. It is always good to weaken the competition before it gets too stronger.

 Furthermore, as an answer to the concern that the sector is not much profitable, we should also keep in mind the “law of marginal cost” which states that the cost of manufacturing a particular product keeps on decreasing till the number of units manufactured is increased.

This in turn means that by gaining a bigger market share in the northeast segment, the cost of manufacturing the detergent would further decrease for Unilever as the number of units manufactured increases which in turn would help in generating more profits as a whole for all the brand.

There is also a possibilility that the cost of manufacturing would decrease to such an extend further that Unilever would be able to introduce the premium brand OMO and Minerva at a lower price for both the segments in the future with the same profit margin thus making it further affordable.

Q2. Is a new brand necessary for low-income segment or could Unilever reposition one of its existing brands or simply launch a brand extension? 

Ans: Considering the details from the Exhibit 7, two things come out to be pretty apparent that:

1. The detergent sector is already dominated by Unilever to a major extend with 52% share being held by OMO, 17% by Minerva and 6% by Campiero totaling to a share of 85% in the detergents market, thus there is a very mild possibility of expansion in this segment

1. However, once we investigate the data from the Laundry Soap segment, we can see that it is majorly dominated by the local bars (Others 63.6%) and Unilever is at a meagre 19.1% share through Minerva. Hence, the possibility of expansion in this segment is huge.

53% of North East segment is dominated by the people belonging to E+ and E- classes (Exhibit 2) which most probably use laundry soap for the washing needs. This makes up for more than 50% of the North East segment majority of which dominated by the local soap manufacturers owing to the lower entry barrier and hence the potential for expansion in this segment is huge.