Bounty for premium consumers: Marketers go upscale with their package-goods brands

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Package-goods marketers want to make a buck in dollar stores, but Procter & Gamble Co. and rivals are putting a bigger priority on pushing premium-price products at other outlets as a way of generating sales growth.

P&G's goal is for such premium products as its Physique haircare line and Cascade Complete automatic dishwasher detergent to add 1% to 2% to its sales annually -- the same contribution expected from such areas as new brands and acquisitions.

PREMIUM-PRICE PRODUCTS

Premium-price products have been a mixed success for package-goods marketers. Physique, which shattered mass-market haircare price points with prices of $7 or more per bottle when it was launched in January, has done well for P&G and is on pace to top $100 million in sales its first year.

And Gillette Co.'s Duracell Ultra, priced about 20% per battery above the base brand, saw its share of the $2.5 billion category rise 2.5 points to 10.5% in the third quarter, according to Merrill Lynch & Co., though the base brand's share was down 3.3 points to 41.8%.

But P&G's Pampers Rash Guard, priced as much as 50% per diaper above regular Pampers, never saw its share rise higher than 2.7% and fell to 1.9% as some supermarket retailers began delisting the line. Likewise, Bounty Rinse & ReUse, a stronger version of Bounty towels priced roughly 20% higher per sheet, reached only a 2% share in 1998, the year after its launch, and has since fallen to an 0.8% share.

Meanwhile, value brands and private labels have made inroads in some of the same categories. Following Wal-Mart Stores' launch last year of White Cloud disposable diapers and EverActive alkaline batteries, private label has picked up roughly a percentage point in each category in the past year.

The most consistent gainer in batteries in recent years has been Ray-O-Vac, a value brand that went from a 10.9% share in 1996 to 13% in the third quarter. In paper towels, the big gainer in the past year has been Kimberly-Clark Corp.'s Scott value brand, which, after getting its first media advertising in more than a decade starting in summer 1999, has seen its share of the $2.6 billion category grow from 4.7% in the second quarter of 1999 to 7.3% in the second quarter of this year.

ROLLBACK ON BOUNTY PRICES

In response, P&G last week announced it's rolling back prices on Bounty by 4.5% following a 9% price hike earlier this year.

Yet, even in private label, the trend has been toward more premium products. For example, Wal-Mart's White Cloud diaper is priced higher than P&G's Luvs value brand, and EverActive batteries are priced higher than Ray-O-Vac.

"We've seen in private labels more of a shift to premium products," said Todd Hale, ACNielsen Corp.'s senior VP-consumer analytics. "[House] brands that were out there to offer consumers a lower price are out there with a quality play, trying to compete better with the national brands. Higher-income consumers like saving money, too."

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