PLAYTEX SLAMS P&G'S TAMPON MARKETING AS 'SHAMEFUL'

Sales Drop 20% Since Rollout of Rival's Pearl Brand

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CINCINNATI (AdAge.com) -- Buffeted by huge sales declines due to the launch of Procter & Gamble Co.'s Tampax Pearl tampons, Playtex Products' chief executive
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today lashed out at P&G, questioning the ethics and business judgment of his rival -- and former employer.

'Shameful'
"It's shameful, in my opinion, that a company of the size and reputation of a P&G would spend as much money in trying to just basically unseat a much smaller competitor in a category such as this and in our opinion resort to ... false and misleading advertising and the infringement of a patent of ours in order to take this kind of attack," said Playtex Products CEO Michael Gallagher, who began his career with P&G in the 1970s. "This is not the kind of ethical company I was used to when I worked for them."

"Our claims have been fully tested with women who used the product," a P&G spokeswoman said. "The [ad] statements are true and this will be proven in court." P&G also has denied it infringed Playtex's patents regarding plastic-applicator tampons.

Court hearing
A hearing on Playtex's motion for a preliminary injunction for the suit is set for next month in U.S. District Court in the Southern District of New York. A trial for Playtex's patent infringement suit against P&G is set for June 2004 in U.S. District Court in Cincinnati.

Sales down 20%
Playtex's tampon sales fell 20.2% in the first quarter to $48.8 million.

Overall, Playtex earnings fell 29.2% to $11.4 million for the quarter, or 19 cents a share on sales of $180.9 million, down 8.1%.

Mr. Gallagher went on to say that he estimates Tampax is spending $80 million in marketing and promotional support to launch Pearl, but stands to generate only $65 million in incremental sales, as 76% of Pearl's volume is coming from the Tampax base brand. With the heavy marketing spending, Mr. Gallagher estimates the Pearl launch will generate a $50 million loss in its first 12 months for P&G.

A P&G spokeswoman said P&G senior executives have spoken positively of Tampax Pearl on recent quarterly conference calls. Overall, Tampax's dollar share was up 5.1 points to 44.8% in the first quarter, Mr. Gallagher acknowledged, while Playtex's share was down 2.7 points to 25.3%.

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