Pepto Beats Private-Label Despite 60% Price Premium

Recession, Ad Effort Help P&G's Old Reliable See Share Gains in OTC Aisle

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BATAVIA, Ohio ( -- Private label is on the attack as never before this recession, particularly in over-the-counter drugs, so why is Procter & Gamble Co.'s Pepto-Bismol gaining share?

VALUE PLAY: The recession itself may have helped. Consumers turned to a relatively cost-effective, multipurpose product during tough times.
VALUE PLAY: The recession itself may have helped. Consumers turned to a relatively cost-effective, multipurpose product during tough times.
Procter & Gamble Co.'s 108-year-old standby has added 0.7 share points in its original stomach remedy liquid and 2.5 share points in stomach remedy tablets in the 52 weeks ended Sept. 6.

That's despite the fact that the products are priced roughly 60% more than private label in an over-the-counter drug business that's been hardest hit in all of package goods by those lower-priced rivals. An IRI report earlier this month found private-label shares in healthcare products overall are up 1.5 points across all channels in the past year.

What's behind that success seems to mystify even Pepto Brand Manager Nathan Fox somewhat, but he largely credits an ad campaign from Publicis Worldwide, New York, that took flight into the worst headwinds of the recession last fall. The recession itself may have helped, too, he said, as consumers turned to a relatively cost-effective multipurpose product at a time when a plummeting economy was literally making some of them sick.

Mr. Fox believes the "Coverage" TV campaign that launched last fall has made a difference. One reason to believe: It's the best-scoring Pepto campaign on copy tests since P&G acquired the brand 28 years ago.

The brand spent $24 million in measured media in 2008, according to TNS Media Intelligence, down 18% from 2007.

Lest anyone conclude the high-scoring campaign must be formulaic, "Coverage" actually breaks with an OTC business that often produces cookie-cutter ads. It features a headset-wearing, pink-vested "Pepto Guy" fielding calls and offering humorous advice to gastrointestinally-challenged callers, including most recently a driver stuck in a car with a flatulent passenger in a donkey suit.

"Coverage" replaced the 5-year-old "Singing the Praises" campaign from Publicis, which was successful in its own right. The commercials, featuring singers highlighting the five symptoms Pepto treats, took hold in pop culture, spawning copycats everywhere from schoolyards to YouTube.

But it was getting old. Mr. Fox said copy-test scores on ads were declining, a sign the campaign itself was wearing out.

"We wanted a more emotional approach," Mr. Fox said, "something that said using Pepto is almost like a good insurance policy."

The campaign also makes it easier to cover the full Pepto product lineup beyond the liquid in the bottle, including the launch last year of cherry-flavor Pepto Max and the rest of the cherry-flavor lineup, which has fueled much of the brand's growth, he said.

Holding and building
And Mr. Fox said he suspects the economy too has helped the brand. The most recent "Donkey" ad hits hard on a value message, using one product to treat multiple problems. "We believed we had the momentum and tried to build on that," he said.

Pepto didn't hike its media spending, mostly TV, but didn't cut significantly, either, Mr. Fox said. "Having an older brand, we've got a lot of experience on what levels of media work well for us," he said, adding that Pepto is still "learning its way into digital," including some search ads. WPP's Bridge Worldwide, Cincinnati, handles digital for the brand.

He also believes Pepto's advanced age may have helped rather than hurt against private label. "That equity has really benefited us quite a bit," he said, "particularly as people hearken back to solutions that are tried, true and trusted."

But the brand is looking to contemporize that image with a recently shipped product, Insta-Cool chewable tablets, which produce a cool sensation in the mouth, backed by a marketing plan that includes a tie-in with P&G's sponsorship of the U.S. Olympic Committee for the 2010 Winter Games.

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