Marketing Lipton Iced Tea in Brazil

1
Marketing Lipton Iced Tea in Brazil

• Compiled by
• Tara Badri
• Steve Gojak
• Lilly Nicolen
• Kathleen Gulitus
• Stephanie Webb

2
Target Market

• Our target market will include the younger
  generation ranging from age 18 to 39.
• This group is the largest segment at 68 of the
  total population (184 million).
• The younger generation is our best option for a
  target market because they are less set in their
  ways, are more open to trying new things, and are
  more easily influenced by the media. These
  characteristics makes them more susceptible to
  changing their preferences from the common soft
  drinks, juice, and coffee to a new aged beverage
  such as iced tea.

3
Product

• Brazilians enjoy sweeter tasting beverages
  therefore the products that could be introduced
  include the Brisk product line or a modified
  version of regular iced tea in which it would be
  made sweeter.
• Unsweetened iced tea would be unsuccessful.
• Due to an abundance of oranges in Brazil the
  development of an orange flavored tea may prove
  successful by adapting to local taste and showing
  support for local industry.
• Since juices are a large part of the culture,
  adding orange flavor would increase the chance of
  success among the Brazilian people.

4
Packaging

• The label needs to be in Brazils official
  language Portuguese
• The national colors are green and yellow and are
  considered offensive when used together on
  products so it is necessary to ensure that they
  do not appear together on the label.
• National law requires easily readable information
  about the products quality, quantity,
  composition, price, guarantee, shelf life,
  origin, and risks to consumers health and
  safety.
• The current colors and designs of the label can
  remain the same if we carry the brisk lime, but
  if we use regular Lipton iced tea, the colors
  must change. For both brands, we need to edit the
  information on the product label to conform to
  national law.
• All units should be metric or show a metric
  equivalent as this is the measurement system that
  Brazil uses.
• The refrigerator in the average home in Brazil is
  standard to US sizes, therefore no change of the
  shape and size of the bottle is necessary.

5
Packaging Material

• Presently only 75 of the population has trash
  collection services. Recycling is found in
  minimal areas across the country, primarily
  government buildings.
• Therefore, choosing recyclable materials is not a
  concern. The best material to use to package the
  product is simply the cheapest and most readily
  available, which narrows our options to plastic
  or paper cartons.
• Plastic and paper cartons are lightweight and
  cheaper to transport than glass.
• Paper cartons are more easily packed into a
  shipment because of their square shape.
• Plastics are more readily available than paper
  cartons, and most manufacturing firms choose
  plastic.
• Therefore we have decided to use plastic bottles

6
Place Production

• Produce product in the United States and export.
• Wait for FTAA (Free Trade Association of the
  Americas), a trade agreement that would make the
  Western Hemisphere a free trade zone.
• Brazil is hesitant to accept the agreement and
  allow foreign competitors to freely enter the
  country.
• The benefit of importing iced tea is the ability
  to use current production facilities with the
  possibility of no import tariffs.
• Drawbacks include high freight expenses(25
  Merchant Marine Tax on Ocean Freight), a general
  lack of knowledge about local practices, and that
  the FTAA is slow moving and cannot be relied upon.

7
National Production Facility

• Potential partnership with AmBev, a producer of
  beer, soft drinks, and iced tea in Latin America,
  where they benefit from the brand equity of
  Lipton and we benefit from the use of their
  distribution channels.
• Possibility of using information gained from this
  partnership to open our production facilities and
  distribution channels in the future.

8
Place

• By using AmBev, we would not need to find storage
  facilities because the entire channel could be
  outsourced.
• This would be ideal because of the limited number
  of trucks as well as the limitations of Brazils
  infrastructure.
• Approximately 20,000 trucks exist, all of which
  have been in use for an average of 18 years.
• Infrastructure is poor with many of the roads
  being privately owned.
• Iced tea should be stored at room temperature,
  therefore refrigerated trucks are not necessary.
  However it is important to ensure that the
  product is not allowed to sit in the sun while
  being transported.

9
Distribution Centers

• PepsiCo and Unilever recently created a joint
  venture to expand Lipton into new markets which
  include Brazil.
• Pepsi gains use of Liptons R D expertise along
  with their health conscience brand image.
• Unilever gains use of Pepsis distribution
  network and bottling facilities.
• This is beneficial because the production
  facilities and distribution channels are already
  in place, resulting in lower startup costs.

10
Retail Options

• Carrefour is the second largest retail outlet in
  Brazil.
• 96 Hypermarkets
• 122 Supermarkets
• 100 Discount Stores
• 7 distribution centers (located in Sao Paulo and
  Vitoria)
• The Sao Paulo distribution center reaches half of
  their stores.
• Deciding to use Carrefour as a retail outlet
  would be beneficial because of their expansive
  distribution network that reaches hypermarkets,
  supermarkets, and discount stores. The discount
  stores are ideal because of their appeal to lower
  income consumers which accounts for 90 of
  Brazils population.

11
Retail Options

• Advanced technology such as barcode scanners and
  radio frequency transmitters have resulted in
  accurate inventory counts and lower costs.
• Carrefour has begun to outsource to Cotia Penske
  as a logistics provider to some of its stores.
• Thus, Carrefour has perfected their distribution
  channels giving it the ability to reach most of
  our market through superstores and hypermarkets,
  and in addition to this, the ability to reach the
  poor market segments through its discount stores.
  

12
Retail Options

• Pao de Acucar is the largest local chain with
  over 400 outlets nationwide.
• They have twice as many outlets as Carrefour, but
  both hold 14 of the market.
• Their distribution is handled by Brasilia de
  Distribuicao (also owns the retail chain).
• Being a Brazilian company, they have the trust of
  consumers. They also have the most retail
  outlets, making them a sound option.

13
Retail Options

• Wal-Mart currently has 2 of the market share but
  is growing.
• They also have a distribution center outside of
  Sao Paulo that has the capacity to reach 100
  outlets.
• Wal-Marts discount chain, Toda Dia, appeals to
  the low income level of the general population.
  Their many locations make it more convenient for
  those who cannot travel long distances.
• Although Wal-Mart is new to the Brazilian market,
  it is growing rapidly and has strong potential to
  compete with the other retail outlets in the
  country.

14
Distribution

• Cotia Penske, a logistics provider largely
  developed in Brazil, has distribution centers,
  warehouses, and transportation (18,000 trucks)
  available.
• They have developed the distribution channels for
  100 Carrefour outlets.
• Familiar with Brazilian distribution channels,
  they can provide the services that would be
  needed if production were to take place in
  Brazil.
• They have connections with local, third party
  distributors.

15
Price

• Currently in Brazil there are 65 million
  consumers with a disposable income of 14,812 per
  household annually.
• 20 of the families live on a per capita income
  that is less than the minimum wage. However with
  a population of 178.5 million and a per capita
  income of 4,336, Brazils large population
  leaves them with a high market potential.
• The gap between the rich and the poor is one of
  the largest in the world, showing the substantial
  differences in the different economic classes.

16
Price

• This leads us to price our item competitively,
  but on the lower end of the price spectrum. Due
  to our target markets wide range of incomes, a
  price on the lower end will include the lower
  income individuals of our target market.
• In addition to our low competitive prices, we
  will markup our product 60 for retailer and 30
  for wholesaler depending on which distribution
  option is chosen.
• For example, if the cost per bottle of iced tea
  is 40 cents
• 40 (cost) .6(40) (Retailer) .30(40)
  (Wholesaler)
• Then the total price for one bottle would be 75
  cents

17
Economic Conditions

• The Brazilian economy has proven to be very
  unstable over the past decade. Inflation rates
  are volatile.
• With the introduction of a new currency in 1990,
  the annual rate of inflation was 2,947.73 which
  severely crippled the economy.
• In the mid 1990s as the inflation rate
  stabilized, many Brazilians moved from the
  working poor to the lower middle class.
• Since 1990, the inflation rate has been
  stabilizing and is currently at 8.45.
• The shaky economy and unstable inflation rates
  make it risky to enter the countrys market.
  With fluctuating inflation rates, it is more
  difficult to predict price changes, which creates
  the danger of our product becoming too expensive
  for consumers to purchase.

18
Security Concerns

• Brazils borders with Argentina and Paraguay have
  problems with money laundering, smuggling, arms
  and drug trafficking, as well as fundraising for
  extremist organizations.
• This raises important security issues of product
  theft when transporting goods across borders.
  Even though iced tea is not a precious commodity,
  it would be a safer alternative to produce the
  product within the country.
• We would be affected if the product were to be
  stolen, or we would have to employ security,
  price to consumers would have to be increased

19
Promotion-Media Types

• Newspaper and Billboards
• With a literacy rate of 86, print media is an
  effective form of advertising in Brazil.
• Currently 25 of advertising dollars are put into
  newspaper ads. It is the second largest form of
  advertising expenditure.
• In 1992, the cost for one billboard for one month
  was 150.
• With high literacy rates and a relatively cheap
  cost of print advertising, this would be an
  effective way to introduce iced tea.
• Radio
• Advertising on Brazils primary radio station,
  which is already segmented by target market,
  would make it easier to reach our market.

20
Promotion-Media Types

• Television
• 96 of households in major cities own a
  television.
• Brazil has the 4th largest television
  broadcasting system in the world.
• The cost of 30 seconds on prime time television
  in 1992 was 34,000.
• Though these costs are dated and have most likely
  increased, it is still necessary to create
  television ads because most households have a
  television.
• Cell Phone Advertisements
• 60 million cell phones are expected to be in use
  by 2005.
• SMS(short message service) and short video clips
  of advertisements have become increasingly
  popular. This new technology is expensive but
  the price is decreasing as the number of cell
  phones increases. This could be an effective way
  to reach our target market since cell phones are
  mostly used by younger people.

21
Promotion-Media Types

• Cinemas
• Brazil has 408 cinemas that accept advertising.
• Cinema advertisements reach 21 of the adult
  population within one month.
• Restrictions require that 2/3 of foreign
  advertising material must be produced in Brazil.
• In 1992 the cost of a 4 week schedule at
  approximately 20 theaters was 2800.
• This is a good option because it is relatively
  cheap and reaches our young target market.
• Internet
• Brazil has the most advanced internet industry in
  Latin America.
• 61 of Latin American websites are Brazilian.
• As of 2002, 14.3 million Brazilians have internet
  access.
• On-line ads would be effective with Brazils
  highly accessible internet because most users are
  from the younger generation that is included in
  our target market.

22
Sales Promotions

• Event Sponsoring
• Soccer is the most popular sport in Brazil so
  purchasing ad space in soccer stadiums would
  quickly and easily reach a large number of
  people.
• Celebrity Endorsements
• Soccer celebrities could be hired to endorse
  products in commercials and advertisements.
• Use of models in ads to promote beauty and health
  which are aspects of Brazilian culture.
• Many of the people who attend sporting events
  make up a large portion of our target market so
  this would be a good way to reach them.

23
Message

• Promotion of the product should emphasize it as a
  healthier alternative to soft drinks and a
  sportier alternative to juice due to the growing
  concern over health and body image in Brazil.
• Promote the beverage as a youthful drink since
  the majority of the Brazilian population is
  younger.
• Due to the Brazilian desire to be fashionable,
  promotion of the product as a trendy addition to
  the new age beverage line could be very effective.

24
Language and Dialect

• Portuguese is the primary language.
• Although most people in Brazil are multilingual,
  with English, French, Italian and Spanish being
  popular second languages, Portuguese should be
  used in all ads because it is spoken by the
  entire population and Brazilians find it
  offensive to be spoken to in Spanish, which would
  be our next best alternative.

25
Conclusion

• With 68 of Brazils population being between
  18-39 years old, they make up a large target
  market.
• The possibilities of joint ventures or
  partnerships would be an effective way to combat
  the poor infrastructure in Brazil.
• The availability of retailers makes it easier to
  have our product available to consumers.
• A struggling economy, high inflation rates and a
  large low income population may make it hard to
  sell a non-necessity good.