The hyper-competitive laundry detergent market is set to see a major shake-up during the recession, spearheaded by a rationalisation in products by Procter & Gamble. The company is planning to scrap several of its format lines across its laundry brands, Ariel, Bold, Fairy and Daz (MW last week).
The strategy begins this summer when P&G introduces its low-temperature Excel Gel format across its other brands to add to its flagship Ariel Excel Gel, which was launched in October.
Over the next three to five years, all tablet and liquid detergent formats will be phased out, leaving P&G’s range of formats across all brands consisting of gel, powder and liquitabs (as the only single dose format).
P&G hails the Excel Gel, which can be used at temperatures as low as 15 degrees, as a “next-generation” detergent and claims it is a “major environmental milestone”.
The decision to scrap other formats will answer critics such as Brand Union chairman Terry Tyrrell, who says of the plethora of products in the detergents market/ “Some manufacturers speak with one voice and act with another. If a new format is truly innovative and better for the environment, then why don’t they discontinue the old ones?”As well as pleasing green campaigners, the streamlining move will allow P&G to develop some real differentiation with arch-rival Unilever, whose most recent detergent innovation has been the successful Small & Mighty concentrated liquid format across Persil and Surf brands.
In troubled times, stealing a march on competitors matters like never before. But in the world of consumer goods, experts maintain that because investment in innovation typically generates low returns, companies cut research and development budgets, giving themselves less chance of making breakthrough innovations. The result is a proliferation of incremental innovations, variants and formats that can be copied easily by competitors and own-label ranges.
P&G’s focus on Excel Gel technology, which requires more advanced techniques to manufacture, may delay copycats and buy enough time for a decent return, say observers.
Yet there is a risk in P&G cutting popular format lines. Powder detergents still account for almost 40% of the total detergents market, worth £857m in 2007, according to Mintel, although its popularity is waning. Liquid formats, such as Unilever’s Small & Mighty sub brands, have seen the fastest growth – from 18% to 22% of the total market between 2005 and 2007.
Still, experts feel P&G’s strategy will be effective. One laundry industry observer says: “With a liquid format absent in P&G brands, liquid might start to look a bit dated in other brands, as if they’ve been left behind a bit.”
Vice-president at commercial consultancy Booz & Co, Barry Jaruzelski agrees rationalisation makes sense, especially in a downturn: “It is possible to migrate the segments so there is no substantial loss. Companies are often selling a product that people buy, but they would be just as happy with another version.”
What customers want
Though Jaruzelski says that this aspect makes following consumer insight and understanding the value proposition crucial, he also points out: “There is a limitation in market research into what consumers want. Sometimes it’s just what they say they want, based on what they know. Sometimes you have got to assert what they want.”
P&G is pinning its hopes on being right in its conviction that Excel Gel is what consumers want.