Havaianas The World at its Feet

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Havaianas The World at its Feet
case study Havaianas
World
at its
The
Feet
Executive Summary: Until the early 1990s,
Brazil’s Havaianas slippers were perceived as a poor
man’s product. In appearance, these slippers, made by
São Paulo Alpargatas, are very similar to India’s
ubiquitous ‘Hawai chappals’. A sharp drop in sales in
1993 forced the company to revamp the brand’s
image. Today, while it is still a product for the masses,
Havaianas has come to be perceived as a premium
brand as well. And Alpargatas is taking it global. This
is the story of that remarkable transformation.
By Niraj Khalpada, Rajesh Lakhanpal, Luiz Moreira,
Jitendra Singh and Yogesh Sontakke
I
Latin America. In 2011, its net sales
rose 15.4 per cent to approximately
$1.27 billion while net income, at
approximately $152 million, was the
highest in its history. Today, the
company, renamed Alpargatas, has
six manufacturing plants in Brazil
and eight in Argentina. It manages a
portfolio of eight major brands:
Rainha, Sete Léguas, Topper, Dupe,
Havaianas, Timberland, Mizuno and
Meggashop. Of these, it is best known
for the Havaianas brand of “flipflops” or slippers.
Launched in 1962, the
Havaianas flip-flops are similar in
appearance to India’s ubiquitous
Hawai brand of chappals. Within a
year of launch, the simple and cheap
sandals were selling like hot cakes,
racking up sales of more than a
thousand pairs a day. However, as
such, there was no marketing
strategy for the brand. Alpargatas
had not given much consideration to
customer perceptions and did not
invest in the brand. In part this was
because of the difficult economic
illustrations by santosh
n 1883 two immigrant
Argentines, Juan Echegaray,
who hailed from Spain’s
Basque region, and Robert
Fraser, a Scotsman whose
family was in the textile business,
formed a partnership to manufacture
low-cost footwear. Little did they
know then that Alpargatas, the
company they formed, would spawn
a business empire and a footwear
brand that would become famous
worldwide. In 1907, the company
set up a unit in São Paulo, Brazil. The
subsidiary, São Paulo Alpargatas,
was taken over by Brazilian investors
in the 1980s and has become the
largest public footwear company in
September 2 2012 Business today 99
case study Havaianas
brands should be linked
to a country’s culture
“Havaianas has
a cultural edge
that cannot be
copied by the
Chinese”
Jan-Benedict E.M.
Steenkamp
C. Knox Massey
Distinguished Professor of
Marketing, and Area Chair
of Marketing, KenanFlagler Business School,
University of North
Carolina at Chapel Hill
W
hat makes the Havaianas case so
interesting is that at first sight, it
has no clear advantages vis-a-vis its
competitors, at least outside its Brazilian/
Latin American home turf. It cannot
compete on costs with Chinese
manufacturers, and Brazil is not wellknown for footwear. Moreover, in
markets such as the US, flip-flops have
been around for ages. So, Alpargatas
faced well-entrenched incumbents. Its
answer was to employ cultural branding.
There are several positive cultural
meanings that consumers around the
world associate with Brazil: vibrant
colours, sensuality, youth, joy, fun, and a
sense of humour. Alpargatas used this
identity to gain a global advantage. It was
able to transfer these cultural associations
to Havaianas with a cleverly designed
marketing strategy.
Havaianas has done with flip-flops
what brands such as Harley-Davidson,
Nike, Ray-Ban, and Levi’s have done with
American cultural connects to gain a
unique point of differentiation in the
conditions prevailing in Brazil during
the 1980s. As a consequence, the
flip-flops were sold to customers in
every socio-economic category with
no differentiation.
To be fair, the company did not
need a strategy at the time; it
controlled 90 per cent of the
domestic market and was selling
nearly 100 million pairs of slippers
each year.
global arena. The Brazilian brand now
has an edge that cannot be copied by the
Chinese. In turn, this allowed Havaianas
to boldly attack the prejudice that
emerging market brands sell only at a low
price – Havaianas’s pricing starts at $16
and extends all the way up to $200.
What is the lesson here for other
emerging market companies? They
should look at whether there are aspects
of their country’s culture that can be used
to culturally brand their product. By
doing so, they can differentiate their
brand and overcome the stigma that is
often, albeit unjustly, attached to brands
from emerging markets.
If there is one emerging market that
can put cultural branding in practice
today, it is India. Its symbols and myths
are known around the world. Dabur, a
leader in herbal, nature-based products is
doing some of this. Its products are
derivatives of ayurveda, an ancient system
of medicine based on natural and holistic
living. The world is waiting for more such
cultural branding from India.
However, Brazil’s economy
began to improve in the early 1990s,
and ordinary citizens started to reap
the benefits of the resurgence and
had more money to spend. Ironically,
this improvement also saw
consumers deserting the “cheap”
Havaianas slippers, which were seen
as something worn by maids and
construction workers. This
development also coincided with the
Until the 1990s, Havaianas was
perceived as a brand for the
poor, worn by maids and
construction workers
entry of new unbranded competitors
in the domestic market.
Consequently, Havaianas’s sales
suffered, dropping 35 per cent in
1993 to 65 million pairs.
The loss in sales forced the
Alpargatas management to radically
change the way it thought about the
simple rubber flip-flops. It was clear
that Havaianas needed a marketing
push and could no longer survive as
just a commodity.
The company revamped the
brand by introducing new colours,
new packaging and displays and
investing heavily in promotional
campaigns. Over time, customers
came to associate Havaianas with a
relaxed and irreverent attitude. This
perception was driven by a series of
case study Havaianas
“Customers ask for
Havaianas in much
the same way a
teenager asks for
an iPod, not an
MP3 player”
Carlos Silva lopes
Global Marketing Director
Personal, Home and
Industrial Care,
Dow Chemical
havaianas has become
a cult brand
H
avaianas’s clear vision and longterm perspective makes it a strong
leader. Its geographical and branding
expansion shows how the company
understands customer benefits, channelto-market and positioning.
What started as a basic functional
benefit, wearing something to protect
one’s feet, has evolved into a very
convenient flip-flop with an emotional
appeal. It was widely available at a
competitive price, and ultimately
became a trendy fashion item that
matches consumer aspirations.
Havaianas has created a category – it is
funny advertisements that depicted
artistes wearing Havaianas outdoors
– at the beach, while shopping, etc.
Simultaneously, a media campaign
was launched with celebrities
endorsing the product. These
advertisements caught the attention
of consumers and helped reinforce
the new brand associations.
The Havaianas range grew from
just two models to over 25 (and
many more, later), in a variety of
colours. While the cheap,
commoditised mass model was
retained, the new ones were priced
five to six times higher. The
premium products were packaged in
boxes similar to those of shoes. Soon,
the slippers began to appear in
display windows.
not only a product but a desired cult
brand. Consumers ask for it in much the
same way a teenager asks for an iPod,
not an MP3 player.
Good product technology mixed with
art and science has created a strong
brand that touches consumers’ hearts.
It shows how creativity, innovative
thinking and perseverance can create a
buzz that transcends one’s initial
territory. The success encourages other
brands from rapidly developing
economies such as India, China and
Brazil to become global power brands
built on transformative ideas.
In just six years, São Paulo
Alpargatas managed to reverse the
decline in sales. From 65 million
pairs in 1993, sales rose up to 105
million pairs in 1999. Havaianas
was back. Today, Brazil continues to
be its largest market, accounting for
72 per cent per cent of Havaianas’s
total sales.
Even as the Havaianas brand
regained its dominance over the
Brazilian domestic market,
Alpargatas began eyeing its Latin
American neighbourhood. The
company’s experience licensing
foreign brands such as Nike and
Timberland in Brazil, and
representing them in other Latin
American countries, helped. The
proximity and cultural similarities of
Havaianas was repositioned and
transformed into a sought-after
brand with sustained
promotion and celebrity
endorsements
these markets to Brazil, combined
with its knowledge of this regional
market made it logical for Alpargatas
to expand Havaianas into the region.
The next frontier is the international market. While it sells directly
and indirectly in around 82 countries, revenues from international
markets account for just 28 per cent
per cent of São Paulo Alpargatas’s
total sales. Argentina accounts for 68
per cent of the international revenues
while the rest mostly comes from the
US and Europe.
In 2007 and 2008, the company
launched the Havaianas brand in
New York and Paris, respectively.
The brand was positioned at the
higher end, as there was an
abundance of low-cost competitors.
The makeover of Havaianas in Brazil
had already catapulted it into the
premium segment. Besides, US
consumers had greater purchasing
power compared with consumers in
Latin America.
The company has taken great
care to identify Havaianas with the
Brazilian spirit. This is in line with
what consumers love about Brazil:
vibrant colours, youthfulness,
case study Havaianas
sensuality, joy and fun, among other
positive characteristics.
Since Havaianas was being
marketed as a high-end item in the
US, it was restricted to chains such as
Saks Fifth Avenue. As sales
increased in the US , Havaianas
opened its first retail shop in
Huntington Beach, California. The
sleek 1,250 square foot store
featured the brand’s largest US
selection, with over 150 styles.
Prices started from $16 and
went up to $200 for customdesigned Swarovski crystal studded
sandals and shoes. The wide price
range was aimed at capturing
different customer segments with
different expectations – from the
casual fashion seeker to the ‘willbuy-at-any-cost’ type. But the entry
price point was still $16 to
differentiate Havaianas from the
lower end market.
The Brazilian company recently
revealed plans to launch Havaianas
in India and Pakistan, two highly
populated countries where it has no
presence, and where such slippers
are very popular. It is planning to
partner with local distributors, as the
before 1994
Havaianas sandals were sold
to every socio-economic class
with no differentiation. They
were considered practical
footwear offering value for
money. But this led to the
sandals being perceived as a
brand for the poor.
after 1994
The brand is still perceived as
durable, hygienic and offering
excellent value for money.
But it has also come to be
associated with the Brazilian
identity – youthful, happy,
relaxed and stylish. It has
become an outdoors product,
comfortable for the beach,
heat and holidays. Today,
Havaianas has
more than 80 models
in 60,000 colours.
majority of sales in both countries
still take place through traditional
retail channels, as opposed to the
online route popular in some
countries. In June 2008, Bata India
sold its Hawai brand to Alpargatas,
for a reported $0.9 million.
The internationalisation strategy
has not diverted Alpargatas’s
attention from its domestic
customers in Brazil. The company
continues to pay special attention to
its home market, which also acts as
a test bed for new product launches.
An example being a tote bag
launched first in Brazil and
elsewhere a year later. Havaianas’s
international recognition has also
had a positive effect back home,
making domestic consumers proud
of its success. The result of all of this
hard work is that Havaianas
accounts for almost 85 per cent of
the sandals sold in Brazil today.
For Havaianas, the future is
very much in its present. As long
as it remains true to its Brazilian
roots, it will continue to sell the
idea that is Brazil. ~
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