Tide Basic’s In, Brand Value is Out?


I share at least one thing with P&G’s Robert McDonald (CEO) and A.G. Lafley (Chairman):  We all worked on P&G’s flagship brand, Tide.  I’m sure they agonized over a decision, I never believed was possible.   This year, P&G launched into a US test market a lower cost/lower performing version of its #1 selling brand, Tide.  The new product has been (strangely) named Tide Basic.   

Like many other consumer packaged goods (CPG) companies, P&G fortunes have hit the skids due to the poor economy and the growing success of private label products in key retailers like Wal Mart, Kroger and Target.  These products deliver solid (or good enough) performance with pricing that is typically 20-25% lower than the leading brand.  The results have been sobering. P&G’s Q4 profit was down $2.5B (-18%) versus same quarter a year ago while revenues dropped -11%. For perspective, the $3B Tide business has lost approximately 10% of its market share since 2007, despite a flurry of product enhancements.    

P&G launched Tide Basic to attract consumers who would otherwise buy cheaper private label products or who were penny pinching Tide loyalists who would momentarily trade down within the Tide franchise.  Historically, P&G has been successful with a trade down strategy with brands like Pampers and Crest.  However, many financial analysts and marketers, myself included, have serious doubts about whether this move makes sense for Tide.  Here’s why:

Trades Down Revenue

Tide Basic may cannibalize more premium Tide consumers than attract new users from other brands.  Furthermore, there is a risk that when the economy improves Tide Basic consumers will never return to its premium and more costly cousin when they realize they could get a similar brand at a 20% discount.

Hurts Tide’s Brand Image

If line extensions and flankers often degrade the image and growth of premium brands, I can’t see how a lower performing line extension will help one of the World’s strongest brands.  P&G may have been better off using Cheer (the value brand in my day) or launching a new, value-focused brand.

Ignores Roots of the Problem

Launching Tide Basic may not address two of the fundamental issues.  Firstly, how do you counteract the ability of retailers to control the shelf and develop their own premium private label brands?  One way is to secure direct access to the consumer.  Some game-changing strategies could include direct selling via the Internet or through buying small equity stakes in key retailers. 

Secondly, how can P&G use advertising and product innovation to reignite consumer “pull,” forcing retailers to either exit this category or level the playing field?  Tide could take a page from P&G competitor Reckitt Benckiser and refocus their efforts on better delivering on new consumer needs and ratcheting up marketing investment. Reckitt Benckiser has successfully (sales +8%, profits +14% in Q2 versus year ago) addressed market challenges by moving up-market with improved products and a +25% increase in marketing spend.  

Overlooks Changing Consumer Perceptions

The worst recession since 1929 may have changed consumer perceptions of value and importance of the category, at least in the short term.   Consumers may be shunning premium brands because the alternatives are good enough or because they want to devote less (scarce) disposable income to premium brands, especially in non-sexy categories like detergents.  To address this, P&G may need to recast the value proposition of Tide. They could either: 1) enhance Tide’s performance and value through innovation to better justify the brand price premium (very difficult to accomplish) or;   2) reduce the shelf price to better bring the price-value equation in line with private label brands (very expensive to sustain).  This stategy has been followed in other categories by other CPG companies including Unilever.

Whatever path P&G takes, its shareholders, competitors and retailers will be paying close attention.

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3 comments so far

  1. Another Former-Tide Guy on

    A good analysis and well written. I would also add that P&G should find a way to drive Tide’s COG’s below non-branded competitors, then it can price at parity and still earn better margins (delivering value for both consumers and shareholders).

    • mitchellosak on

      Excellent additions. You obviously understand the Tide brand. Thanks for the input.

  2. […] admirer of almost everything the firm does. Well almost everything.  I was not a big fan of the Tide Basic introduction.  And, lending their reputation and strong brands to some consumer service industries may turn out […]


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