Nestlé's Micro-distribution Efforts to Serve the Low Income Consumers in Brazil

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"People of low income are being incorporated more and more now that there is a larger supply of products at a competitive price and quality. The quality is the same; that doesn't change, because the poor aren't going to buy lower-quality products just because they are poor."

-Ivan Zurita, President & CEO, Nestlé Brazil, in 2007.

"Adding nutrients to junk food is just another marketing maneuver by Nestlé to sell its products by suggesting that there are health benefits from junk food. But adding nutrients to junk food is one step forward and two steps backward -- no amount of added nutrients will negate the ill effects of junk food."

-Amit Srivastava, coordinator of India Resource Center , in 2010.

By mid-2012, Nestlé Brasil, the Brazilian subsidiary of the world’s largest nutrition and wellbeing company, had made significant inroads into Brazilian households with its wide range of products. Its Popularly Positioned Products (PPP) coupled with its unique micro-distribution network that targeted low income consumers ensured that the company achieved good penetration levels in Brazil. Earlier in July 2010, taking its micro-distribution model to the next level, Nestlé Brasil launched a floating supermarket to cater to the needs of the people in the Amazon area.

The floating supermarket, a barge of 27.5 meters, stocked more than 300 Nestlé products. The boat passed through and docked at 18 different municipalities in the Amazon area to sell the products. These areas had till then remained inaccessible to organized retailers in Brazil. Nestlé's next challenge was to create more micro-distributors who would take its products to even more distant locations in this key emerging market.

From the beginning of the new millennium, Nestlé had concentrated on developing products specifically for consumers in the emerging markets and those from the low income groups. It had also established a regionalization unit, which concentrated on developing products to meet the needs of each region in the emerging markets where Nestlé operated. The first such unit was started in Brazil in 2005. While developing and distributing products for Brazil, Nestlé took into consideration the tastes and preferences of the people in different regions of the country. These products, popularly called PPPs were enriched with micronutrients to help address the nutritional deficiencies that existed among low income consumers.

In Brazil, as in many other developing countries, Nestlé found it difficult to distribute these products to the targeted customers. In the urban slums or 'favelas' of Brazil, organized retail was almost nonexistent. Nestlé's existing distribution system wherein large quantities of single products were delivered through trucks could not travel through the narrow bylanes of the favelas. Another challenge that Nestlé faced was the preference for varied products and small quantities among the residents there.

In order to address this issue, Nestlé came up with a distribution system called Nestlé até Você, which was a door-to-door micro-distribution system involving people from the local community. The micro-distributors recruited resellers who were women from the favelas. These women acted as Nestlé's sales representatives in the neighborhood and peddled the company's products door-to-door. Nestlé was able to reach new customers in both the urban and rural areas of Brazil and it made the low income segment a part of its value chain in the form of consumers and distributors. The challenge before the management now was how to take this model to the next level.

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