History & Background
In 1883, two immigrant Argentines, Juan Echegaray (from Basque) and Robert Fraser (from Scotland), created a partnership for manufacturing low-cost jute soled canvas footwear – called Alpargatas – the inspiration for the name of the company. As immigrants flooded into Argentina, demand for this low-cost product grew quickly, allowing the company to first set up a facility in Uruguay in the 1890s and then in 1907 set up another facility in Sao Paulo. Over time, the company forayed into textiles, manufacturing denim, producing coffee storage bags and truck tarpaulins but footwear remained at its core. In 1962 the company launched its now internationally renowned brand Havaianas. Brazilian investors bought the Sao Paolo facility in the 1980s and in 2008 purchased a 35% stake in Alpargatas Argentina. At present, Alpargatas (Sao Paulo Alpargatas), is the largest public footwear company in Latin America. It also manufactures clothing and sporting goods.
In 1962 Alpargatas launched a new product, called Havaianas, made of rubber and enthused by the Japanese wooden sandals, Zori. On account of the products’ simplicity and cheap prices, Havaianas was selling in excess of a thousand pairs a day in small shops and local markets within a year. However, the very low prices quickly created a negative connotation – Havaianas were for poor people, housewives and people working at construction sites.
Economic conditions in Brazil began to deteriorate during the 1980s and the company began to struggle. The loss in sales of 1993 was a burning platform for Alpargatas. This forced the company to radically change the way it thought about a pair of rubber flip-flops. The management quickly realised that if the company was to survive it could not do it by just selling commodity products – it also required an effective marketing strategy. The transformation process that started during this crisis soon catapulted the company into a brand leader in Brazil and emboldened it to tap into international markets.
A new strategy
Alpargatas had not given much consideration to who really their customers were and what were their needs. The above associations led the brand to being linked to practicality and the “poor man’s slipper”. Clearly, the company was trapped in selling a “product” and not its “benefits”. These attributes offered no possibility of differentiation against the existing and new competitors who were entering the domestic market in Brazil. In the subsequent years, Alpargatas focused on identifying its customers and defining the relevant segments.
New colours, new packaging and displays along with a strong investment in promotion, associating the use of the product to a relaxed and irreverent attitude were the main changes perceived by consumers. The latter was delivered through a series of funny advertisements using artists wearing Havaianas outdoors, at the beach, shopping, etc. These advertisements caught the consumers’ attention and helped to reinforce the new associations with the brand. Simultaneously, a media campaign was launched with celebrities providing credibility and valorising the “wearing of these sandals and no longer…the product”.
Havaianas value proposition
Customer segmentation guided the type of value proposition the company and the brand was offering. The product range grew from 2 to over 25 distinct styles with numerous colours; allowing and helping the consumer to create his/her own identity with the product.
The higher end products were packaged in boxes – similar to those of shoes. Gone were the days when these products would be left lying in a bag or the stock room – they were now pushed to the forefront, in display windows and were the highlight in any shoe store. In order to re-build its brand image, TV advertisements were essentially upgraded from having “…the slapstick comedians of the popular, trashy shows of Brazil’s ubiquitous TV broadcaster, Globo…” to now having classy actors. All these are examples of attributes that were new and which the industry had never offered. The new products were priced 5-6 times higher than the basic products but Alpargatas kept the “commodity” products in their range so as to keep servicing the former customers.
As part of its push into the US market, the company used celebrities to upscale the brand. “Oscar gift basket sandals” were created, hand-stitched and studded with Swarovski crystals, and promoted in the Academy Awards. A similar strategy was applied in the Grammy Awards. This was aimed at paving the way for the brand to reach the top strata of the society which would ultimately help in generating a pull for the brand rather than actively pushing it through the channels.
Havaianas had a rich and varied product portfolio to cater to its different customer segments. It carried sandals and shoes for men and women, and sandals for kids and babies in different sizes. It also offered a variety in high-end sandals to suit special occasions such as wedding and parties where the sandals were studded with Swarovski crystals, pearls and other expensive decorations. It offered multiple models within sandals such as Metallic, Urban, Brazil, Luminous, Slim, etc. It also offered limited editions of sandals based on the latest ongoing trends in the fashion industry, cartoon characters for kids, etc. It offered university-specific sandals with university logos to cater to students of various US universities. In its stores and on the website, it offered a special facility called – “Make Your Own Havaianas” to allow the customers to design the sandals of their choice where they can choose the gender, the base, the straps and the jewellery. Thus, it offered a wide variety of products for almost every segment of the market.