Editor's Choice, March 2017: Delving inside the down-pyramid marketing strategies of Unilever and Tetra Pak
My Editor's Choice this month covers two reports which delve into the strategies of two multinationals as they engage with base-of-pyramid consumers. They unveil the techniques that Unilever is using to reach rural markets and that Tetra Pak embraces to reach 'Deeper into the Pyramid'.
Both pieces are unashamedly about the commercial side - how to grow markets among consumers who have limited cash, little access, constrained choice, but aspirations to match anyone's. But both companies also have products in their huge basket that clearly deliver social value (think hygiene products for Unilever, hygienically-packed milk and nutritious yoghurt for Tetra Pak), they recognise the importance of product quality, and also have many tips that are useful to other companies with less experience in marketing at the BoP.
How Unilever Reaches Rural Consumers in Emerging Market is an article in Harvard Business Review, by Vijay Mahajan, an author of many a business book and article. It was the process of researching a book on the rise of the rural consumer that led him to focus on Unilever's rural marketing as 'one of the standouts'.
Drawing on Unilever experience across many products and markets, Vijay draws out the top tips:
- Tap women to power sales: the well known example of Shakti women selling door to door in India has been adapted to different models in new countries.
- Find grassroots distribution strategies: by working with existing local retailers who in turn supply sari-sari stores in the Philippines, Unilever doubled its distribution coverage while reducing costs.
- Offer services that rural consumers need: this is all about getting the product and quality right. As we have said so often before on the Hub, low-income consumers want value not cheap tack. In Thailand, the 'Platinum' initiative signifies a store with extra quality and services, and is growing faster than other channels.
- Create new channels for advertising: conventional advertising is limited in areas where consumers have little electricity and mass media. Offering audio entertainment via mobile phones, using free ring back services, has been a huge success.
- Design products (and set prices) for rural consumers: the single-use sachets are now well known, and indeed well-sold (Unilever sells 27 billion sachets a year). They now go way beyond soap, with an example of deodorant in the Philippines showing how a 10cent sachet instead of a 35cent mini-stick sales unblock demand. Market penetration leapt by 10 percentage points.
- Help managers adopt a rural mind-set: managers are required to spend a month in their first year living in a village. The author, and several of his interviewees, credit programme success to this requirement for personal experience.
Most of these points have been heard before, but the article illustrates them convincingly with examples of how sales have accelerated for specific products and markets. The most original issue for me covered advertising via mobile phones. By offering entertainment on a (free to the consumer) ring-back service, Hindustan Unilever got 16 million calls in the first 4 months, as part of Active Wheel detergent promotion. An expanded concept using 18-minute blocks of audio entertainment interspersed with ads had grown to 35 mn subscribers by 2015, growing at 25,000 per day.
Whether it's new ways of tapping mobile phone users, or reinforcement of the other messages about women, existing networks, quality products and product design, there will be something to spark thinking for any business challenged in its rural markets.
The second part of my Editor's Choice is somewhat similar, focusing on Tetra Pak strategies to go down pyramid, although this one is produced by Tetra Pak itself. It's a 2015 edition of 'Tetra Pak Magazine' entitled Deeper in the Pyramid. Though not so recent, it's also an invaluable insight into how a successful company thinks about adapting its products and strategies for lower-income consumers (who in this case are those above extreme poverty, but still counted as low-income by UN and World Bank definitions). It's a chatty accessible document, in 10 short chunks; not excessively advertorial, though certainly a company output.
Some of the themes are similar, but I find the packaging angle fascinating: how packaging transforms food products and access to quality food, particularly for dairy products (Tetra Pak's focus); and also, how packaging is related to cost-efficiency and catering to constraints in low-income markets. Efficient safe packaging makes it possible to handle, transport and sell food and drink products in entirely new ways, particularly in remote areas. It represents the sweet spot between giving consumers more hygienic and accessible products and driving Tetra Pak's business model.
The fourth piece in the magazine was fascinating on how the 'quest to preserve food and drink' has evolved over millennia, from prehistoric dehydration to salting, pickling and now aseptic packaging which keeps foods fresh without refrigeration for up to a year. The eighth piece goes into more detail on how features of Tetra Pak packaging have been exploited and refined for low-income markets: the aseptic packaging is cut to make wedges or tetrahedrons with minimal material waste, so keeping costs down. It works for smaller product sizes and various versions of the aseptic packaging have other features that work in BoP markets: ease of hanging on a string, so not taking up space for a micro-retailer; a broad consumer-facing surface for promotions. TetraFino is used for a pouch made from the lowest-weight paperboard, and is extremely robust to survive rough handling in the distribution chain.
Tetra Pak's range of products for low-income consumers also evolve, often with partners. They include milk with quinoa, used in Ecuador’s school feeding programme, fortified UHT yoghurt in Ecuador (partnering with GAIN), white cheese in Egypt (a traditional household product, now sold in packaging), and dairy hubs in Bangladesh (where the farmers supplying milk have seen their yields rise from 4.5 to 10 litres per day). I would have loved to hear about the products launched that didn't work as well as these ones of course (none are mentioned, I simply assume they exist)!
The overall story is a fascinating blend of Tetra Pak USP (aseptic packaging and focus on dairy), with incremental innovation, and company recognition of the huge market potential of going 'deeper in the pyramid. Low-income consumers represent 39% of the market in liquid dairy consumption (milk and more), so the business case is indisputable.
There are plenty of ideas that will be useful to other companies with different USP. Tetra Pak outlines the size and growth potential of the down-pyramid markets and typifies different profiles of down-pyramid consumers, emphasising how they differ. They also draw on examples from other companies to show how this market has evolved, referencing how Unilever was forced into sachets to keep up with a low-cost competitor, how Microsoft rolled out a $26 Nokia smart-phone. Of course, we hear relatively little candid reflection on the challenges, but if you want an accessible piece that shows how it can work, and shares insight on innovation in a large company, enjoy this.
Read the Unilever article written for the December 2016 edition of the Harvard Business: How Unilever Reaches Rural Consumers in Emerging Market
Read the Tetra Pak magazine No. 104 (2015): Deeper in the Pyramid
Visit our Editor's Choice page to read previous reviews of useful resources
This blog is a part of the March 2017 series on how businesses in the FMCG sector are including the BoP in their value chain. Read more here.