P&G brand values slide
Nielsen figures show P&G price-slashing strategy is stumbling, as value share of top brands drops
Procter & Gamble’s year-old UK policy of slashing prices on its top brands appears to have backfired after the latest research shows their value has gone down.
Brands including Ariel washing detergent, Fairy Liquid and Pampers nappies have seen up to seven per cent wiped from their value a year after the US home products company introduced the every day low pricing (EDLP) policy. It was aimed at driving up sales and fighting back against retailers’ own brands.
The figures, compiled by AC Nielsen for the Top 100 Grocery Brands, show that the three brands have all seen millions of pounds wiped off their value.
Sales of Fairy Liquid are down almost seven per cent to 64.6m compared with last year, and the brand has fallen from 32nd top brand to 34th. Ariel’s sales have fallen by nearly six per cent to 216.8m in the same period, while two per cent has been wiped off the value of Pampers, which fell to 163.1m.
P&G introduced the EDLP strategy to the US six years ago, where it is credited with considerable success. The strategy depends on axing price promotions, reining in media budgets and then ploughing the savings into permanent price cuts.
The strategy is supposed to cut costs, enhance customer loyalty and encourage greater sales. However, it may take time for these effects to feed through to the bottom line and improve profits.
P&G in the UK says the three brands “have never been healthier” and that sales volumes and market shares are at strong levels.
The company attributes the declining values to the introduction of value pricing, which is what P&G calls EDLP, and the heavy use of multiple pack promotions by competitors, such as retailers’ own brands. It also argues that the detergents category is down by ten per cent in value owing to multipacks.
