Q and A: Condom Social Marketing Boosts Entire Condom Market in Brazil

Since DKT do Brasil began marketing low-priced, high-quality condoms for HIV/AIDS prevention, total condom sales have more than tripled in Brazil, which once had one of the lowest national condom use rates in the world.

Dozens of condom social marketing (CSM) projects are helping people around the world protect themselves against HIV infection. By using commercial distribution channels and standard private-sector marketing and advertising techniques to sell condoms at subsidized prices, these projects make condoms more accessible and affordable to those who need them most.

With the practice, however, has come controversy: Do these subsidized sales undercut for-profit condom sales? Just the opposite is true, DKT do Brasil has found, as Country Director Carlos Ferreros explains in the following interview.

Ferreros worked on successful social marketing projects in Ethiopia and Zaire before becoming director of DKT do Brasil, a subsidiary of the nonprofit DKT International, in October 1994. In addition to its social marketing work in other parts of Brazil, DKT carries out the condom social marketing component of the AIDS Control and Prevention (AIDSCAP) Project in São Paulo and Rio de Janeiro states under a subcontract to Population Services International, an AIDSCAP partner.

What does DKT do Brasil do?

We're doing full-time consumer marketing, albeit at a very low price. We do targeting, distribution, promotions and special campaigns.

It's like running a commercial company. The main difference is that we are probably the most active organization working with NGOs [nongovernmental organizations] to disseminate information on AIDS.

It's also a general application of marketing principles. You have to think like a soft drink manufacturer. The idea is to match Coca-Cola distribution. Then you've really got increased access to condoms. You've also got to get men to use them. That's where you use a lot of the persuasion, the advertising, the promotions, the work with NGOs.

We've also borrowed from commercial marketing the idea of events marketing, sponsoring carnival or town festivals. That's been fairly successful here.

Has the demand for condoms gone up?

Yes. When DKT came into Brazil in 1991, the country had a commercial presence for condoms, but they were very high priced, about one dollar [U.S.] each. The market was about 50 million condoms per year. It's now about 160 million condoms. We think we were very instrumental in expanding the market.

We know there's a "halo effect" [with the social marketing program increasing commercial sales as well as its own], and we feel very strongly we're part of it. Other things affect us, too, such as efforts by NGOs and the government on AIDS awareness and prevention.

How did you expand the condom market in Brazil?

We broke barriers in terms of being one of the first to be able to import condoms in what had been a protected market. We also had one of our local companies in Malaysia precertified. That is, they have "local manufacturing treatment" in Brazil. This saves us a lot of time in testing.

Normally when you import a product, they test it lot by lot before it's released for sale. We've been able to get the Brazilian government's manufacturing auditors to go to Malaysia, inspect the factories and issue a certificate. This is the first company that's been able to obtain that certification.

How big is your market share now?

Last year we distributed about 18 million condoms. This year we'll distribute about 26 million. According to Nielsen research data, we have about a 13 to 14 percent market share. That makes us the third-largest condom brand in this country.

How has the for-profit sector responded to you?

If we were smaller -- say just five percent of the market -- they'd probably ignore us. Once you get up to ten percent, they notice you. There's a fight for distribution and shelf space, but that's good. It keeps everybody on their toes.

The more marketing there is, the better it is for the population as a whole. They get to know more about condoms, about AIDS.

Prior to our entry here, nobody did anything with condoms. About 50 million a year were sold without much effort. Now, the three local manufacturers are producing to capacity, and some are importing bulk condoms to package here. It's a nice fight in the marketplace now.

Who do you target with your marketing?

We do a lot of our marketing to specific groups, through NGOs, or NGOs that go to schools, that work with gay groups, that cater to prostitutes and adolescents and street children. Eighty to 90 percent of the condoms go through the regular commercial structure, so we have to do a lot of marketing to the general public as well.

Have you made special efforts to reach women?

Yes, we did that several years ago, when the condom market wasn't so strong. Women didn't usually go to pharmacies and buy condoms, so they wanted to reach women through beauty shops and boutiques, where the prevailing mentality was, "that's where women go." We developed a condom package that was attractive but inconspicuous.

We decided to drop that special marketing. Research showed that women were about 40 to 50 percent of the buyers of condoms in pharmacies, so there was no need to develop special packaging just for them.

What marketing messages do you use?

The key message is protection against HIV/AIDS. None of the other brands do that. We're not afraid to push that message, and they are.

Do you advertise a lot on television?

Television isn't traditionally a very strong market for condoms In Brazil. It's rare to see a condom ad on TV, except at carnival time. The fight is out in distribution, at point of display.

Where are your condoms sold?

Between January and August of this year, about 51 percent were sold in drugstores and 20 percent in supermarkets. The rest were in nontraditional outlets, such as hotels, bars and saunas.

You always try to open up new types of outlets, to get mass distribution. You want availability "next door" and you want a good price. For the various target groups, you look at where they go and you market and sell there.

How much do the DKT condoms cost?

We have a suggested retail price of 20 cents, but the retailers can charge up to 35 cents. About 60 to 70 percent of the sales are in the 25- to 35-cent price range.

Has DKT International subsidized your Brazil operations by donating condoms? Yes and no. The condoms are donated, but then they're sold, and the revenues from the condom sales finance the marketing we do. As the volume of sales has gone up, the subsidies have gone down. We expect to have full sustainability in two to three years.

Does DKT do Brasil sell anything besides condoms?

We want to sell other products here and cross-subsidize our condom sales activity and eventually get it on a totally self-sufficient basis. Right now, though, we're concentrating on the condoms because there's a long way to go. We want to let the market double to 300 to 400 million condoms.

Also, we're not yet satisfied with our presence on a national basis. We're very strong in a lot of the coastal urban areas, but we haven't really penetrated the middle and western parts of Brazil. We're concentrating on that now.

We haven't been able to get a sufficient flow into the country. The certification helps a lot because it eases delays at the testing laboratories. Now, we can sell the condoms as soon as they arrive at the port. That's helping us to build up a level of inventory sufficient for more expansion. Before this year we averaged three or four stockouts a year, where we ran out of supplies. This year, we've only had one of those.

What other challenges does DKT do Brasil face?

There's an absurdly high cost of marketing condoms. Forty-five percent of our costs are taxes of one sort or another. There's an import tax of about ten percent. The value-added tax applies even if I get a donated product. That adds up. In value-added taxes we're paying about $800,000 this year.

We have to get the government to realize that condoms are an integral part of AIDS prevention, and hopefully they'll lower the value-added taxes and some of the import taxes.

We also need to fight to get more companies from the outside certified so they can sell in Brazil without the burden of lot by lot testing, which adds to the product cost.

But weren't you able to get some of the import taxes reduced?

Yes. In 1989, there was a 60 percent duty. And in 1995, Brazil's president issued a decree and gave a tax holiday for imported condoms. DKT had prepared a position paper on the import tax and sent it to the office of the president.

The tax holiday expired after a year, and the duty is now back to 10 percent.

Have you encountered any opposition from religious groups, as has happened in some countries?

No, the church traditionally doesn't meddle in what are commercial ventures, such as condom sales. It's a private thing, and there's private enterprise in this country.

Have there been other condom controversies?

Yes, about condom quality. There was a time when a lot of poorer-quality condoms came across the border from Paraguay. The consumer protection agency was very concerned. We worked with them, along with other importers and local manufacturers, to develop a whole series of control measures.

Now condoms must have a special kind of seal that means they're approved for sale in this country and have passed a testing procedure. You have inspectors going into stores and even saunas and hotels and demanding to see what kinds of condoms are there.

Is social marketing in Brazil different from the work you did in Africa?

Yes. The commercial distribution infrastructure in Brazil is far more advanced than it is in Africa. People think of Brazil as an underdeveloped country, but if you come to São Paulo, you think you're in New York. It's highly developed commercially. For example, the cost of a prime time TV spot is about $65,000 for a 30-second spot. In Guatemala or another Central American country, that would cost $3,000 or $4,000.

The marketing is very different here too. For distribution we rely on a whole series of wholesalers and redistributors, whereas in Africa we would have our own distribution sales persons. Here, we have our own direct salesmen, but they mainly cover hotels and saunas, which are nontraditional commercial outlets.

For the commercial sales, we rely on wholesalers and distributors all over the country. You're talking about a potential of some 45,000 drug outlets and about 250,000 non-drug outlets.

What role does DKT's condom social marketing play in the AIDS epidemic in Brazil?

The role we play is important because we're targeting lower-income segments of the population. The commercial market -- whose prices are about three times higher than ours -- targets the middle and upper class segments of the population.

Second, we work a lot with NGOs that are able to disseminate information to their particular target groups or their members. We sometimes provide them with free condoms. This year alone we've provided about 200,000 condoms free to NGOs.

Why do you think your sales have grown so much in recent years?

There was an unserved population, the lower-income classes. They couldn't afford a $1 condom. We've expanded the number of users and dominated the lower-income segments of the market. Also, more people have become aware of condoms and AIDS and sexually transmitted diseases, so more people want to protect themselves.

-- Carlos Ferreros