Amanco Brazil identified unmet needs; The Latin American pipe manufacturer challenged a market-leading brand

September 30, 2013 5:00 pm

Amanco Brazil identified unmet needs

By Paulo Rocha e Oliveira

The story. In early 2006, Amanco was Latin America’s leading manufacturer of pipes and fittings for water management systems. But in Brazil, despite a decade or so of operating there, Amanco was losing money. Grupo Nueva, Amanco’s Swiss owner, was preparing the company for an initial public offering and needed the balance sheet to be spotless. Roberto Salas, Amanco’s chief executive, had to decide on a strategy to turn things round. Should he propose selling the Brazilian subsidiary or present a plan for how to increase its 16 per cent market share? Staying in Brazil meant either competing on price (and lowering shareholder expectations), or developing a branded strategy to take on Tigre Tubos e Conexoes, which accounted for 61 per cent of sales in Brazil and had proved resilient to challengers.The challenge. Amanco’s recent move of its headquarters from Costa Rica to Brazil meant selling up would be problematic as well as missing out on the estimated R$2bn Brazilian market. In addition, Mr Salas knew Grupo Nueva was reluctant to build a brand from scratch.

In Brazil, the consumer sector represents 85 per cent of the pipes and fittings market, with 68 per cent of purchases based on the brand. After decades of advertising that implied it was the only reliable name, Tigre had nearly 100 per cent brand awareness and a strong reputation; competitors were viewed with suspicion.

Big retailers bought only branded products and did not work with price-based sales. Amanco must convince stores to switch brands or start carrying two – a tough sell since pipes and fittings stock is heavy and difficult to manage.

The strategy. Marise Barroso, Amanco marketing director, persuaded Mr Salas to choose a branded initiative. Drilling down into her research data showed that although Tigre was known for “high quality”, it was not entirely fulfilling customers’ needs.

By emphasising Amanco’s innovations, Ms Barroso believed it could make Tigre look outdated. She also included plans to address the needs that were not being met.

The marketing campaign focused on hot water pipes, an area where Amanco technology was better than Tigre’s. The aim was not to sell quantities of specific products – hot water was a niche market in Brazil – but to use them to build the brand.

Recognising that plumbers were a key influence on customers’, Amanco partnered with Senai, an educational institute, to create Brazil’s first professional plumbing course. By the end of 2006, more than 12,000 professionals had benefited from the programme, in which they used Amanco products and appreciated its contribution to their professional development,

Amanco also had an extensive distribution network, which meant it could sell directly to smaller retailers. It passed on the savings from missing out intermediaries to the retailers, which encouraged them to switch to its network. As the brand became better known, bigger retailers followed.

What happened next. Tigre started a price war for the rest of 2006 and 2007. But by the time Tigre raised its prices again, with Amanco following suit, Amanco’s strong relationships with retailers meant they championed Amanco.

It completed its IPO process, and in March 2007 was sold to Mexichem, the Mexican conglomerate.

By 2008, Amanco’s net sales had risen to $R623m from $R450m in 2005.
The lessons. The crucial factor in the strategy was the marketing team’s ability to identify that despite very high awareness among potential customers, Tigre’s brand had vulnerabilities that Amanco could exploit.

The successful implementation of the strategy was built on Amanco’s strong distribution channels. This was bolstered further by the new programme for plumbers.

The execution of the campaign was important, but it was founded on the work done directly with the distribution channels and the solid branding analysis that helped Amanco refine its message to consumers.

The writer is professor of marketing at Iese Business School