Duracell vs. Energizer -- One Charges Up, One Sputters
Duracell grows share, sales with perfect storm
Retail partnerships, innovation yield best brand performance in decades -- without a disaster
It usually takes a hurricane to produce eye-popping growth for a battery brand. But Duracell has produced a storm of its own by muscling Energizer out of Sam's Club and launching super-premium line extension Quantum.
Sales jumped 15.7% for the four weeks ended Sept. 28 and 5.7% for the 12 weeks ended the same period, according to Nielsen data from Deutsche Bank. In addition, Duracell's market share rose 6.5 and 4.2 points, respectively, during those periods. It's the best news in decades for a brand long seen by analysts as a problem.
If Duracell can sustain its recent share gains -- it's now up to 46% of the alkaline-battery category, a level not seen in more than a decade -- it would be worth an added $140 million in sales for Duracell in a $2.2 billion category.
"We're just sticking to a very simple strategy, which is building strong retailer partnerships, innovation and brand building," said Duracell Marketing Director Jeff Jarrett. "When retailers have gotten behind the Duracell brand, their business has grown." Others may see a category in decline, but he said, "We see different subsegments going different directions" and the number of alkaline-battery-operated devices increasing thanks to trends in health care, sports and educational toys.
As Duracell's sales soared, its price per battery fell 10.1% the last four weeks, per Nielsen data. Mr. Jarrett said the shift to larger packs at Sam's played a role, as have retailer promotions around the Quantum launch. On innovation, he cites Duralock -- a technology that keeps batteries fresh in storage up to 10 years -- and now Quantum, which it bills as "the best alkaline battery ever." Duracell has shied from performance comparisons, because consumers are tired of the "longevity arms race" in ads over the prior three decades.
Duracell is focused on digital and social, racking up 4.7 million Facebook fans. Sticking with its 11-year-old "Trusted Everywhere" ads from Acme Idea Co., Duracell last year added "Trust Your Power" videos featuring NFL players by digital shop Saatchi & Saatchi. Citizen Paine handles PR and social media; Gigunda Group handles "experiential" efforts supporting first responders to emergencies.
Energizer Bunny still going, but much slower
Battery maker manages its brand for category decline, putting itself in the middle of the retail pack
The Energizer Bunny may still be going, but he doesn't have quite the same spring in his step lately.
Energizer Holdings CEO Ward Klein frankly told the Consumer Analyst Group of New York's conference last February he expects the battery business will keep declining 2% to 3% annually as consumers shift toward smartphones and tablets that take batteries other than replaceable alkalines. Notwithstanding reprieves from the likes of ZhuZhu Pets in 2009 or Superstorm Sandy last year, that decline has seemed inexorable.
"The cash flow off the battery business is outstanding," Mr. Klein said. "The challenge is to maintain that profitability in an environment that's declining … and that is what this division is now focused on."
How do you milk a bunny? Very carefully. Mr. Klein has stepped up focus on a personal-care business that's now about double the $1.7 billion global battery business, eliminated production capacity and relied more on third-party suppliers who can be pared back easily. But Energizer's decline has accelerated since he spoke.
First, Spectrum Brands' lower-priced Rayovac took a bite out of Energizer's display space at Walmart, according to analysts. Then in August Sam's Club began shifting from Energizer as its exclusive branded battery to premium-price category leader Duracell. Combined with Duracell's launch of Quantum, that sent Energizer U.S. alkaline sales plummeting 10.2% for the 12 weeks ended Sept. 28, according to Nielsen data from Deutsche Bank.
Sanford C. Bernstein analyst Ali Dibadj said retailers are dealing with the category decline by cutting or changing assortment, either focusing on the low-cost Rayovac or the even more premium Duracell to pursue profitability. That leaves Energizer "stuck in the middle," he said.
Energizer, which reports quarterly earnings Nov. 5, declined to comment. But the brand, backed by Omnicom's TBWA, Playa Del Rey, Calif., remains iconic, with $43.8 million in advertising last year, per Kantar Media.