Written Case Analysis - Ad-Lider Embalagens, SA:

Marketing Research for Drawstring Trash Bags in Brazil

Executive Summary

The article is about Ad-Lider Embalagens, SA which produces plastic bags for Brazil’s industrial,

commercial and consumer division. Brazil, with a population of 170 million, has gone through

fluctuations in purchasing power, it generated US $120 million sales in 1997 only in the garbage

market alone.

The article discusses the problem faced by two executives who are faced with the dilemma of

introducing a new product line that will increase profitability and market share for the company,

whether they will be able to target the consumer segment effectively after analyzing the existing

demand in the market.

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Statement of the Problem

Brazil’s Socioeconomic Status

Brazil being one of the world’s largest countries, is a residence of approximately 170 million

people. It is divided into five regions, with its densely populated (43% or 72 million people) and

metropolitan areas lie in the Southeast. After Plano Real during the mid-1990s, purchasing power

had increased and became stable.

The five social classes that Brazil’s population was categorized on - A, B, C, D & E - were based

on income, education and material possessions; these factors contributed into defining the

purchasing power of each class. Class A and B comprised of 19% of the Brazilian households but

are contributing 52% to the national consumption figures. There is wide gap in the income

distribution in Brazil.

The Company

Ad-Lider Embalagens, SA, founded in 1970, is one of the Brazil’s largest manufacturers. It is

heavily based in the Southeast Region. It serves to Classes A and B. The product lines this

company had were

- Commercial Division

o Ad-Roll (meat and produce segment)

o Ad-Shop (boutiques, supermarkets etc.)

- Consumer Division

o Limp-O-Lixo (household garbage bags)

o Freezer (storage in freezers)

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 o Sacos Reforcados Ad-Lider (reinforced bags for hospitals, restaurants etc.)

- Industrial Division

o Automated packaging line

o Shrink Wraps

o Plastic to bundle products together (replacement for cardboard boxes

The company’s main focus had been to serve the big commercial firms and industries, and their

52% sales is derived from the commercial division. The consumer division also involved catering

to firms such as hospitals and restaurants. The company’s focus has been away from the consumer

division, which directly serves to the 170 million people living in Brazil.

The Garbage Market

Three major competitors in the market:

- Ad-Lider

- Fort-Roll

- Colmag

There were other brands in the market but were introduced by some supermarket chains such as

Sendas, Bom Preco and Extra.

Fort-Roll was the main competitor of Ad-Lider who not only catered to Classes A & B but C as

well whereas Ad-Lider’s main focus was on the former two.

Ad-Lider was impending a stage where it would reach saturation in sales, so it has decided to

explore the market for products that will penetrate the market share and sustain profitability.

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Therefore, Ad-Lider decided to introduce Climp Easy Garbage Bag – Climp Fecha Facil. The

purpose of this product line is to increase brand awareness and market share.

Now the executives, Lazlo Sved and Emilio Figer were faced with decision that the findings of

their research for the product line will be able to help them in target segmentation of the consumers

and help them create a strategy that makes sure to build on customer brand equity.

Causes of the Problem

With their investments heavily settled in this product line, Ad-Lider needed to identify the factors

consumers are looking for when buying plastic garbage bags in the consumer division. The idea

was to gauge the perception that consumers had, for the brand itself and the product lines.

For this, focus groups conducted gave us insights to the consumer behavior and their thought

process when purchasing plastic bags. 3 focus groups were conducted – two in Sao Paulo and one

in Rio de Janeiro, both are metropolitans that lie in the Southeast Region.

Key Findings Implications Recommended

Course of Action

1. Different demographics of Sao The two consumer sets may Product customization

Paolo and Rio De Janeiro – The be looking for different and customized

women who were the targeted features and added benefits marketing to target

consumer had two different in the product them separately

categories; those who lived in Rio

De Janeiro were more inclined

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 towards physical activities and

residents of Sao Paulo

2. Garbage Disposal Behavior – Different uses identify the Marketing strategy to

people used to purchase blue bags thought process behind the identify ad associate

(Rio De Janeiro) and black bags selection of each plastic bag strongly with the

(Sao Paulo) for different sizes and specific use

uses such as 50L and 100L were

used for major garbage disposals

while 15L and 30L were used in

kitchen and bathroom

3. Sensory branding – Color of the If blue bags were marketed in Color variants to be

plastic bags – The bags used Sao Paulo they would not be introduced according to

commonly were black and blue; in able to generate sales the specific geographic

Sao Paulo black bags were used use

while in Rio De Janeiro had an

absence of black bags so they

associated more with blue bags

4. Brand Awareness – the Awareness can be linked Sao Paulo and other

consumers were more in tuned with education as most of the areas needed to be

with brands in Rio as compared to women in Rio had a gauged on the level of

Sao Paolo university degree and were awareness and

somewhat verbalizers advertising budget

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 should be allocated

accordingly

5. Brand Association – each brand The means that the product is Re-positioning of the

was associated with a different not preferred over the other brand in customer’s

feature and Lixito was associated brand’s quality mind

with fragility

6. Cost Effect – There was no Since this is Class A and B, Focus of quality is

significant cost effect on the the consumers were not needed

brands but they did prefer cheaper affected by cost but by their

alternative that are durable quality

7. Unknown competition – Indirect competition with the Introduction of a

supermarket plastic bags – supermarket plastic bags product with handles to

Consumers prefer to utilize the they were cannibalizing sales close the top seems

supermarket bags for smaller for the 15L and 30L bags feasible

garbage disposals because of their because they already existed

handles for them

8. Placement of the product at This leads to zero brand Placement marketing

purchase points – usually the awareness and association with added printouts

products placed at retail shops and displays for the

were placed at the bottom of the product will create an

shelf with no subsequent name awareness of which

placement of the products hence brand exists

the consumers were unaware of

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 which brand catered to which

product.

Conclusions and/or Assumptions of Research

The basic assumptions of research were the factors of the consumer profile, mostly women that

are married and preferably have kids. The had at least high school education and lived in

metropolitan areas. Other than that they were general consumers of plastic bags for garbage

disposal.

The conclusion that can be derived from the research is that Climp is a product that would attract

consumers. Climp scored 59.76% on the practicality measure during intercept interviews. The

introduction of this value added product to the existing consumer profile that Ad-Lider targets is

going to increase sales. It will take over the existing sales from the indirect competition

(supermarket plastic bags).

Decision Criteria and Alternative Solutions

The decision criteria are based on:

- the consumer perception of the existing products

- their latent needs

- The return on their initial investment in setting up the production of the product ($1 million)

Alternatives could be:

- Product Testing and Improvements on the existing product line Climp

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 - Changing color of the trash bags – Black bags are perceived to be more durable in Sao

Paolo so they could play on the color variants

- Using the retail shop plastic bags manufacturing in the production of garbage disposal bags

so they can fulfill their need of having “ears” on the bags so that they are able to close them

Recommended Solution, Justification and Implementation

The product should first go through product testing to identify if this fulfills their need or not.

Since the consumer is insensitive to the cost, the value added feature is what will attract the

consumer.

The idea behind this product line is to increase market share and sales for the company if the test

fails, the initial investment can be salvaged through disposal of it but if the investment is only able

to break through in its initial years and sales are still dependent on their commercial division then

we have a problem.

Bibliography

Gertner, R., Guthery, D., & Ettenson, R. (October, 2009). Ad-Lider Emabalagens, SA:

Marketing Research for Drawstring Trash Bags in Brazil. Thunderbird School of Global

Management.