Proctor and Gamble Hopes to Turn the Tide

Proctor and Gamble has been stung by consumers turning to low cost brands. In response, P&G Plots Course to Turn Lackluster Tide.

Procter & Gamble Co.'s chief executive on Thursday laid out measures to address lackluster profits and sagging market share, including price cuts, overseas expansion and plans to reposition the Cheer brand as a low-price detergent.

Robert McDonald, who assumed the post of CEO in July, offered his most detailed plan yet on how to reignite flagging sales as cash-strapped shoppers forgo the company's premium products for less-expensive options. Speaking at a conference, he assured investors that P&G was "in touch with reality," and had "a sense of urgency."

P&G has resisted cutting prices because of factors such as high commodity costs and a fear of hurting its brands' image of superiority. But throughout the recession, less-expensive versions of household staples have dented the dominant market share that P&G's products have long held. To narrow the price differences with competitors, the company said it would reduce prices or increase promotional spending on about 10% of its business.

Tide and Cheer laundry detergents are among the brands targeted for reductions. Tide, which can cost more than twice as much as private-label detergents, will have "targeted interventions" on its larger sizes, the company said.

P&G also is testing Tide Basic, a version that costs about 20% less than regular Tide. Meanwhile, P&G plans to reposition Cheer as a value brand, cutting its price by about 13%.

Some analysts remain skeptical of P&G's plans. "The company is broadly losing share across its portfolio in the core U.S. market, and emerging-market sales have lagged peers," Goldman Sachs analyst Andrew Sawyer wrote in a research note. "Although the company is clearly devoting more resources to brand support, many of its key competitors are doing the same on a proportionate basis."

Tide Basic?

Will Tide Basic be any different that regular Tide? Assuming it it, then it will be missing a brightener or something else that consumers will quickly figure out. Customers may then think of it as inferior yet not want to pay more for the high power stuff.

Tinkering with successful formulas sounds suspiciously like the disaster that quickly forced Coca-Cola back to Coke Classic.

Here's the deal: customers want cheaper prices not gimmicks. Tide Basic sounds like a gimmick that will have many wondering "what's wrong with it?" Yet if there are no differences, why buy Tide Classic? The confusion alone will cost sales.

P&G Brands and Controversy

Here is List of Procter & Gamble brands. Inquiring minds might be interested in some facts about Herbal Essence.

The brand is noted for its advertisements featuring women mimicking various states of sexual arousal including orgasm when washing their hair with the shampoo.

Herbal Essences was the sponsor of Desperate Housewives for the first four seasons in the United Kingdom. It was also shown in the TV show What I Like About You. The episode was about how Holly wanted to win a contest to be in an Herbal Essences commercial.

Herbal Essences openly tests their shampoo on animals including force-feeding butylparaben to pregnant rats before removing their fetuses for further tests.

Here is a study on Butylparaben.

For those concerned about either costs or animal rights, you can get White Rain for perhaps 1/6th the cost and White Rain claims to not test the products on animals or use animal products in the products.

What are you getting for expensive brands? One word: advertising. The problem facing P&G is cost conscious consumers are now interested in value, not clever ads.

By the way, I am not going to get involved in a debate on moral issues regarding shampoo. I do not have time and besides is an economic forum. I am simply pointing out what I discovered while researching Tide. Some people may be interested in those things so I mentioned them.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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