New tactics cut soap giants down to size

The soap war enters a new phase as P&G and Lever fight for market dominance with format, rather than brand.

A month after Procter & Gamble and Lever Brothers confirmed they were planning to axe sub brands to reduce “consumer confusion” in the laundry detergents market (MW August 16) it has become clear a fresh battle is taking place among the soap giants based on format.

When Marketing Week first revealed Lever’s intention to drop its New Generation sub-brand in favour of the straight Persil name (MW December 15 1995), and P&G’s plans to axe Ariel Ultra (MW August 2), it appeared the soap giants intended a clean-up exercise aimed at refocusing on core brand support.

However, this week’s revelation that P&G has informed supermarkets that it intends to drop the big box powder format from Daz and Bold, and eventually withdraw altogether from the big box sector, signals a divergence in strategy between the soap giants.

Amidst all the furore about brand culling, P&G is systematically trying to undermine the big box sector which its rival Lever Brothers Persil dominates. At the time of the closure of Ariel Ultra and Ariel Colour, P&G also announced that the price of the big box would increase to the same level as the concentrates.

Persil is very weak in the concentrates market, a legacy of the Persil Power fiasco. But it is very strong in the big box sector where it is market leader with 25 per cent.

During the Persil Power débâcle Lever relaunched big box Persil Automatic and even launched a big box version of Persil Colour in an attempt to rebuild consumer trust in the Persil brand (MW May 19 1995). However, big box powders are less profitable than concentrates. And the same is true for the supermarkets own-brand detergents.

Tesco has more than 170 detergent product lines, including branded and own label.

Sainsbury’s began slashing the lines in its Novon range in July and there are plans to cut peripheral products even further. A spokesman says there will be further opportunities to cut detergent brands. “We need to reduce the number of lines in soap powders. We want to provide choice so that whatever consumers can buy in branded (detergents) they should be able to get in the Novon range.”

Although some of the other supermarkets are reluctant to disclose their plans to reduce own-label products, most are keeping a close eye on the effects of the move to cut subbrands by P&G and Lever Brothers. Safeway insists it has no plans to rationalise its brands, highlighting the fact that it has only 44 products in the Cyclon range.

In the Eighties, detergent manufacturers launched a series of brand extensions which multiplied the number of products on supermarket shelves several times over. This was done with a view to increasing marketshare. Now, with a mature market where the margins seem to be smaller, they have decided extra lines don’t necessarily deliver.

This adds to the increased pressure to improve profits, especially in the case of Lever.

P&G has been consistent all along. In 1994, its top executives tried to discourage Unilever from launching Persil Power because it would damage consumer confidence in brands and affect the prospects of the format P&G had made the greatest technological commitment to: concentrates.

P&G’s prophecy came true; the share of concentrates fell in the wake of the Persil Power fiasco and big box powders and liquids experienced a resurgence in sales.

However, P&G believes this resurgence will be short-lived and that concentrates will replace big box.

On the other hand, Lever believes big box variants will stay strong because of value for money perceptions. This is one of the reasons P&G made a move to introduce pricing parity between big box and concentrates. Consumers will compare the number of washes per product, rather than the price.

Retailers have been instrumental in assisting some of these moves. P&G and Lever have been frustrated and pressurised by the seemingly endless rows of product lines and the fact that comparatively low-margin products take up so much space.

Concentrated detergents are preferred by manufacturers and retailers because they are more profitable. Carrying fewer detergent lines, both branded and own label, not only allows them to maximise returns but also frees shelf space for higher margin products, such as perfumes or cosmetics. For manufacturers there is less packaging, costs are reduced when fewer lines are needed.

But Lever has been structurally weak in this market, ever since P&G beat it to market with Ariel Ultra in 1989. It was the need to pick up Persil’s sales in concentrates that led Lever to rush the inadequately tested Persil Power to market. Lever’s soft-sell marketing has therefore focused on brand values, rather than performance.

From now on it seems the soap war has reached a new phase. Rather than attempting a big push, like the great offensive of 1994, from now on it will be a war of position with each side trying to score small tactical victories in favour of their own particular format.

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