Choosing the Right Metrics for Listerine Brand Management in Brazil _WK 2

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Choosing the Right Metrics for Listerine Brand Management in Brazil Listerine first became available to consumers in Brazil in 1987 and added this brand to its product portfolio worldwide after acquiring Pfizer’s Consumer Healthcare division in 2006. In Brazil, Listerine offered only mouthwash, whereas in the United States, the Listerine brand also offered toothpaste and other types of products. In 2010, Ronaldo Art, marketing manager at J&J, was hired to become product manager for the Listerine brand in Brazil. After spending two years working for Cadbury in Brazil (which was further acquired by Kraft Foods Group, Inc,) and seven years at Unilever, Art was faced with a difficult competitive landscape when he began working for J&J: unexpected growth of Colgate’s market share from 20.1% in 2009 to 26.9% in 2010. Art’s job was to lead Listerine’s efforts to achieve overall category growth in Brazil while maintaining its first position in mouthwashes and the brand’s profitability. As Art explained, “product innovation, consumer awareness of category, and visibility of the brand at the point of sale were the foundation to do so.” He also wanted to develop a long-term strategy for the brand rather that stimulating short-term increases in market share that could compromise the equity of the brand, its profitability, and its long-term competitive advantage. In Brazil historically, the brand’s primary consumer were from the A and B social classes. In 2010, however, to reach the potential middle class in Brazil, Listerine introduced a new product, Essential, which was roughly 15% cheaper than the average brand price (in terms of price per ounce) and was distributed through the poorest regions and neighborhoods in the country. The objective of Essential’s pricing strategy was to match Colgate’s lower average price in the category at that time. One year after the launch, the new product had already reached 2% volume market share. Art said that J&J had introduced Essential to increase market penetration and grow the category. Even though the plan for Essential had been designed before he joined the company, Art oversaw its execution. As it turned out, J&J realized that not only middle-class consumers were buying the new product—so were wealthier Brazilians. J&J did some research to understand the reason why this was happening, Although Essential formula contained alcohol (as did traditional Listerine Cool Mint), further investigation based on some market research led to the discovery that the perceived strong flavor of Listerine had been putting off new consumers, not he price. Also, some dentists had not been recommending the product to their patients because of the product’s alcohol-based formula. In 2013, to increase consumer awareness and trial rates in the mouthwash category overall that could benefit Listerine specifically, the brand rolled out the “21 day challenge” campaign, which promised consumers a refund if Page 1 of 3

Choosing the Right Metrics for Listerine Brand Management in Brazil they were not satisfied with their purchase after 21 days. Listerine increased TV spending, which resulted in higher gross rating points than any other brand in the mouthwash category had ever earned. The ability to reach such a large audience allowed them to successfully promote the campaign. According to Art: The campaign aimed at improving the oral care routine of Brazilians. This was our way to increase consumer’s confidence in the category lowering some perceived financial risks if someone had not found the product beneficial. It was a promotion without having to distribute free samples of the product that could have higher costs and less effectiveness. The 21-day challenge was very successful for the brand. Art believed that Listerine had to better balance the brand’s traditional rational copy messages with an emotional one. He explained, “Instead of communicating the use of Listerine by showing. The bathroom environment only, we (Listerine) need to be more connected with the day-to-day life.” To influence the trial rate, the company had intensified its efforts to put Listerine mouthwash in public bathrooms for free so consumers could try the product. In the meantime, Colgate had been using its complete oral care portfolio in Brazil (toothpaste, toothbrush, dental floss, and mouthwash) to strengthen its mouthwash product line by offering more promotion at retail stores than the competition. They started to offer free mouthwash when consumers had purchased other Colgate products. In response, Art’s next step was to encourage the brand to increase the visibility at the point of sale. In 2014, the brand introduced a new larger-size stock keeping unit SKU). The new package sizes helped to increase the brand’s in-store visibility and were used as a trigger to offer promotions that would not compromise the profitability of the brand, such as “purchase 750 ml., get 1.5L.” That is, rather than giving the frequency of use of the product. In fact, recency (i.e., the length of time since a customer’s last purchase) was a concern to market this category. The brand management realized that consumers of antiseptic mouthwashes were not going to retail stores to purchase this category, frequently. Larger package sizes and this type of sale promotion had allowed Listerine to increase the brand’s usage index. As a result, based on a survey purchase but J&J, Art mentioned that around 2014, Listerine had the highest penetration among category lovers—73%. This was approximately 1o percentage points greater than the second brand. Further, Listerine category lovers had spent 10% more that the competitor’s category lovers and had purchased, on average, 200 ml. per year more. At the end of 2013, Listerine had 12% of numeric distribution in the grocery channel and the relevant competing brand had 14%. By the end of 2014, Listerine had reached 13% of numeric distribution and the competing brand Page 2 of 3

Choosing the Right Metrics for Listerine Brand Management in Brazil had 11%. In the same period, Listerine had 96% of product category volume (i.e., numeric distribution weighted by personal outlets’ share of sales of all product categories), and the main competing brand had 94%. As a result of the marketing initiatives, Listerine was able to increase volume market share in the category from 37.7% (2013) to 38.4% (2014), and to 41.7% (2015). The main competitors share went down from 31.4% (2013) to 26.9% (2015). Page 3 of 3

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Choosing the Right Metrics for Listerine Brand Management in Brazil _WK 2

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