Duracell has lost market share in seven of 10 months and each of the past five four-week periods since shifting its marketing strategy, according to figures from VNU's ACNielsen Corp., reported by Banc of America Securities.
competitors swoop in
While share losses earlier in the year were a percentage point or less, Duracell has lost 2.7 and 3 points, respectively, in the four-week periods ending Nov. 2 and Nov. 30, encompassing most of the category's all-important fourth quarter. That would appear to be sending Duracell to its worst fourth-quarter showing in several years, with a market share under 45%.
As Duracell zigged toward advertising, value-priced rival Rayovac Corp. zagged toward increased promotion and free goods, taking share from the premium-price market leader. No. 2 Energizer, which adopted a model similar to Duracell's three years ago by reducing promotion and special packs with free-battery giveaways while boosting ad spending, saw share gains of under a point in October and November.
"Despite Gillette's assertion that it will hold pricing if it can maintain value share, we doubt the company is pleased with the latest month's results," Banc of America analyst Bill Steele said in a research note. Mr. Steele said in an interview last month that he believes Gillette may step up promotion in early 2004 if dollar shares keep sagging.
"We do not intend to lose dollar share," said Chris Jakubik, Gillette VP-investor relations in a November conference call, adding that Duracell had been holding its share but that price gaps vs. competition had risen to historical highs. Those comments came before scanner data for October and November was reported showing widening loss of share. A Duracell spokeswoman didn't return calls for comment.
But CIBC World Markets analyst Joe Altobello, working from Information Resources Inc. numbers showing Duracell's fourth-quarter shares around 47% and lesser share losses, isn't sure the recent numbers are enough to make Gillette change course.
stepped-up ad spending
A year ago, Gillette cut list prices, aligned pricing across all of its battery packs and scaled back promotion spending, particularly bonus packs, which Mr. Jakubik said have fallen from 30% of Duracell volume to 5%. But Rayovac has stepped up use of bonus packs, bringing its average price down 11% in the four weeks ended Nov. 30.
Meanwhile, Duracell raised ad spending 15% through the first nine months of 2003 to $23 million as Energizer cut spending 15% to $34 million and Rayovac spent nothing, according to TNS Media Research/CMR.
Gillette executives have spoken highly of the "Trusted Everywhere" campaign by Acme Idea Co., South Norwalk, Conn., which wrested the account from Omnicom Group's BBDO Worldwide, New York, more than two years ago based on the spec creative concept.
While previous attempts at making comparative claims have landed Gillette and Energizer in court, "Trusted Everywhere" has taken the bulletproof tack of implying superiority based on factual claims that such users as hospital intensive-care units, rock band Bon Jovi and makers of Time Warner's "Lord of the Rings" use Duracell exclusively.