P&G to roll out cheaper version of Tide
NEW YORK • Procter & Gamble will introduce a lower-priced version of Tide in 2014, a liquid detergent called "Tide Simply Clean and Fresh," as it seeks to attract shoppers on a budget.
P&G, the world’s largest consumer product maker, is known for its premium products like Tide and Bounty that cost more than competitors but are perceived by customers to be of higher quality.
But as growth in developed markets has slowed and P&G expands in emerging markets, the company has been working to become more balanced in its offerings, with more goods at both the low and high end of the price spectrum.
"There are consumers for whom a lower price is a more critical element of their personal value equation," said CEO A.G. Lafley at a Barclays conference in Boston on Wednesday. "We need to have brands and products that are relevant for them as well, and we increasingly will."
Tide Simply Clean and Fresh is one of a number of new detergent products P&G plans to introduce in February 2014, Lafley said at the conference. Other new products include a new Tide Plus collection that updates all existing liquid Tide detergents; Tide Ultra Stain release, which can be used both as a pretreatment for stains as well as as a detergent; extra-large tubs of Tide Pods; single-dose units of Gain detergent; and Tide Oxy, a stain remover that can be used on laundry as well as around the house.
Lafley said he hopes Tide Simply Clean and Fresh will succeed similar to the model of Bounty Basic and Charmin Basic, both introduced in 2005. Those products are offered for 25 percent less than normal Bounty and Charmin and now make up about 15 percent of overall brand sales, with better profit margins than their parent brands.
P&G didn’t give specific pricing information for Tide Simply Clean and Fresh but said it will be "mid-tier" as opposed to premium. P&G sells the most laundry detergent in North America by far, with 56 percent of the market, according to Euromonitor.
P&G’s other detergent brands in North America include detergent brands include Cheer, Era and Dreft. Its closest competitors, Sun Products, which makes All and Wisk and Church & Dwight, which makes Arm & Hammer detergent, have market share percentages only in the teens.
But the "mid-tier" North American laundry segment is about a $2 billion segment that P&G is "underdeveloped" in, Lafley said. Total spending on laundry detergent in North America is about $8.6 billion, according to research firm Euromonitor International.
But some fear that a lower-priced Tide will eat into regular-priced Tide revenue.
"I think it’s an appropriate admittance that they have to go after a lower price point," said Bernstein analyst Ali Dibadj. "The issue is you will get some cannibalization of the high-end brand."
In fact, the company has tried this before: In 2009, the company tested Tide Basic, a powder detergent that sold for 20 percent less than the regular powder form and lacked the latest cleaning ingredients, but never launched it nationally.
Still, Lafley says a lower-priced Tide will not eat into other Tide sales.
"We’re confident that our consumer understanding in premarket testing has helped us design a mid-tier Tide, Simply Tide, that is very attractive to mid-tier consumers, but not very interesting to current regular Tide users," he said. "This is exactly the same approach we use with Bounty and Charmin Basic."
Lafley was CEO at Cincinnati-based P&G from 2000 to 2009, and replaced his predecessor Bob McDonald in May. Earlier this month the company reported its fiscal fourth-quarter net income dropped 48 percent due to a write-down related to its Braun Appliance business and other one-time costs, but its adjusted profit and revenue beat Wall Street expectations.
P&G is in the midst of a turnaround plan aimed at cutting costs and improving productivity. Also during the conference, Chief Financial Officer Jon Moeller said the company was working on localizing and regionalizing its supply chain in developing markets and reducing manufacturing plants and distribution centers in developed markets such as the U.S. and Europe.
Shares fell 34 cents to $77.43 in afternoon trading. The stock has traded between $65.83 and $82.54 over the past year.