Unexpected markets

In the case of Coca-cola in Brazil, a huge and new emerging consumer segment with enhanced purchasing power, the Social Class C,  resulted from the economic stabilization plan. Coca-cola usually battles with Pepsi in the so-called "Cola war" and other powerful global players; it has, however, been overlooked that another big unexpected competitor, Tubainas, is encroaching on the market with different business model. Unexpected changes in the economic conditions necessitate company's strategic moves against new competitors.

Then, what about cosmetics market?

Luxury cosmetics markets has shown significant growth in asian countries, including china and south korea despite recession, while in american markets, luxury cosmetics brands have faced a big challenge resulting from the unexpected change in consumer's behavior. Women have gravitated toward lipsticks and other inexpensive pick-me-ups during recession. This resulted in the Drug stores' expansion of their beauty sections. This is compelling news for L'oreal (brand) and P&G that are gaining higher margin from mass retailers, compared to department stores Estee lauder relies heavily on. For this reason, Estee lauder (brand) took a move downscale to grocery stores like Wal-Mart; however, it might have been a myopic strategy ruining its first-ranked brand image. Furthermore, P&G started to flirt with luxury cosmetics to broaden its portfolio, thereby raising competition in the luxury cosmetics market.

(Whether a move downscale works or not depends on the market - For your information, some luxurious brands, such as Hermes and BMW, attracts a lot of Korean customers by launching inexpensive "entry-level" products without cannibalization as a Masstiage strategy, which means downward brand extension, knowing that there exists strong Veblen effect.)

I learned from the case of Coca-Cola Brazil that a short-term strategy can affect product's profitability eventually. There is no magic to this. Consumer's perceived value should come first for a long-term success without affecting emotional value.