Laundry Giants Bounce Back by Playing Both Ends Against Middle

P&G Goes a Bit More For Value While Church & Dwight Ventures Slightly More Upscale

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Laundry products long seemed relatively recession-proof. After all, people had to do laundry, right?

Not necessarily. The Great Recession proved people really could – and did – use less detergent, or at least spend less for it. Now, the category is growing again. But it's not about a rising Tide lifting all boats. It's from both ends playing against the middle, as premium behemoth Procter & Gamble Co. and scrappy value player Church & Dwight Co. make gains.

In a recent presentation at the Consumer Analyst Group of New York, P&G Chairman-CEO A.G. Lafley said the category has struggled since 2007, when Unilever exited and "the middle of the market disappeared," leaving P&G and value competitors. Heavily leveraged value player Sun Products took over ex-Unilever brands Wisk and All, but has since lost ground to freer spending P&G and C&D. Henkel's Purex value brand also has lost some momentum.

Loads per week declined because of high-efficiency machines that needed less detergent per load, and retailers widened the price gap between P&G and value brands with promotions of the latter designed to reverse declining traffic, he said.

"The result, of course, was a downward spiral," Mr. Lafley said. While P&G started to arrest the decline with the launch of high-end Tide Pods in 2012, now nearly 10% of the U.S. market and closing in on becoming a $1.5 billion brand, it also did so launching Tide Simply Clean & Fresh in 2013 as a value brand. Meanwhile, the 2012 launch of Downy Unstopables fragrance beads – succeeded by similar Gain and Bounce products – helped arrest a post-recession decline in enhancers. Purex launched such products first in 2010, but P&G grabbed most of the growth.

"We're seeing the first indications of category sales growth in the last seven years," Mr. Lafley said, with recent record-high P&G U.S. dollar shares above 60% and P&G earning 85% of category profit. Tide alone now has a 40% dollar share.

Not surprisingly, Church & Dwight CEO Jim Craigie sees it differently. Also speaking at CAGNY, he noted that his company was the only one to gain share between 2009 and 2014 – up 3.6 points to 14.2%. Counting additives, his company has doubled its laundry business since 2009, largely from value-conscious consumers trading down.

But one of those detergent share points came from going upscale with last year's launch of Oxi Clean as a premium product. It's now the second most advertised brand overall in laundry after Tide at $87 million to $100 million in spending last year, he said. That, combined with new Arm & Hammer products, fended off P&G's value assault.

Looking to reclaim lost ground, Henkel last week launched its high-end Persil laundry detergent, which is a billion-dollar global brand in 60 countries outside the U.S., as an exclusive in Walmart. It follows a similar move by Henkel with Schwarzkopf hair colorants earlier this year, backed by TV and print ads featuring Claudia Schiffer.

Schwarzkopf has carved around 1.5 share points off the collective women's hair color shares of P&G, L'Oreal and Revlon for the four weeks ended Feb. 21, according to Nielsen data from Deutsche Bank. Any similar impact in laundry would be big for Henkel, whose share is down 0.5 points for the latest 52 weeks in liquid laundry detergent. A Henkel spokeswoman said the company will back Persil with "a unique and disruptive TV campaign."

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