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In major growth markets, the mid-price market segments are growing at practically the same pace as incomes. In order to capture larger market shares in dynamically growing product categories, an increasing number of companies are relying on a strategy known as “category flooding”. They aim at several target groups at the same level of the income pyramid, but also address other levels of the income pyramid. By offering more than one brand in the same category, they can achieve greater market share. You know: who only uses one single brand cannot increase sales above a certain level. The main reason for this natural “cap effect” is that consumers have different psychological needs and expectations compared to their preferred brand. Since brands also have a kind of personality, there are correspondingly many people who do not want to commit themselves to a certain brand. Therefore, it is sometimes advisable to build up different brands that operate in the same market and serve the same functional needs, but have a range of brand personality profiles or different brand emphases. This strategy is used in particular in rapidly growing consumer goods markets where financially strong global champions such as Procter & Gamble, Unilever and Pepsi Foods are fighting for market leadership.

The flooding of categories should ultimately lead to such a dominant role in a specific market that consumers cannot evade the company’s brands. Even if they reject a particular brand, they are likely to buy a sister brand without knowing that it is manufactured by the same company. Of course, category flooding also takes place at different price levels. This enables companies to target more affluent consumers with a premium brand while offering consumers in the mid-market or mass market normal or cheap brands. Three methods are particularly popular to reach your goal. Dr. Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group) describe in detail the category flooding in our new Springer publication “Successful brand development in the major emerging markets” (written in German).

Method 1: Tetra-Pack’s success with different package sizes

Coca-Cola markets Thums Up in India as a major local cola brand with a local flavor. Strategically, Thums Up focuses on traditional consumers, while Coca-Cola itself mostly appeals to younger and more modern consumers. In the more traditional and lower income groups, Coca-Cola also offers beverages such as Minute Maid with guava flavor, which can be enjoyed with
a “Made with Nature” promise and should promote a healthy lifestyle. To appeal to less affluent consumers, Minute Maid is available in a smaller Tetra-Pack format with less content. The small package is offered at a price of less than a quarter of the larger package. Minute Maid Guava was initially only available in selected cities in Punjab, Delhi, Uttar Pradesh and Kolkata (formerly Calcutta).

Method 2: With the multi-segment strategy to market leadership

The flooding of whole categories can also be observed with toilet soaps. Unilever offers Liril and Dove in the premium segment, LUX as a mid-range brand and Lifebuoy in the low-price segment. This strategy helped Unilever to become the market leader in this category in India and to achieve similar success in the detergent category.

Method 3: Expand the portfolio with acquisitions of local competitors

In the categories of household applications and appliances, the acquisition of local competitors – and their integration into the existing portfolio – is a widespread strategy in large emerging markets such as Brazil. Two major groups, US-based Whirlpool and Mexico´s Mabe, control more than 60% of the national market in Brazil. Whirlpool acquired the local brands Brastemp (market leader in household and kitchen appliances since 1973) and Consul, the first Brazilian refrigerator manufacturer. Both domestic companies merged to form Multibras in the early 1990s. Under the leadership of Whirlpool, Brastemp and Consul fundamentally changed their corporate culture. They strengthened their consumer orientation and became more innovative. Today they are an integral part of the worldwide Whirlpool Group. In the Brazilian market, where competition is becoming increasingly fierce, companies such as Bosch, Elektrolux and General Electric have also taken over local manufacturers. Consul and Brastemp enabled Whirlpool to flood the category “white goods” – i.e. household appliances of all kinds – and to be successful even in a weakened economy. Consul is the brand for the mid-market segment, while Brastemp was positioned as a premium brand. Brastemp is mainly marketed with quality and innovation as its most important features, while Consul is advertised for simply being part of the household. The advertising messages refer mainly to the functionality and simplicity of the products.

The flooding of categories can appeal to very different groups with different consumer motives. Two of the most important groups in the major growth markets are almost always in the target radar of marketing departments. One is a rather young, career-conscious group with a good education and rising incomes. It has a tendency towards a more prestigious consumption because it aims for a higher social status. This target group clearly prefers well-known foreign quality brands. The other important group is older, less brand-oriented and less demanding buyers.