Inflation tests Tide Maker’s laundry detergent dominance

Procter & Gamble Co.

PG -1.78%

tests the limits of what consumers are willing to pay for high-end household products.

For decades, P&G has dominated laundry aisles with detergents that often cost more than double those of competing brands. It has raised prices in recent years on products like Tide with little resistance from consumers, increasing sales volume and gaining market share in the process.

But in recent weeks, sales of high-end detergents have declined, according to industry data, and consumers are increasingly choosing cheaper brands or powdered detergents. It’s the latest sign shoppers are changing the way they spend money, even on essentials, as inflation remains near four-decade highs.

“I won’t deny at all that some consumers will make changes to the margins,” said P&G chief executive Jon Moeller. P&G’s strategy, he said, focuses on producing products that outperform competitors and are essential to everyday life. “It’s hard for me to understand how superiority in these categories becomes irrelevant,” he said.

U.S. sales of high-end detergent brands fell nearly 3% in the four weeks to August 7, while the cheapest price categories were either flat or growing, the firm says. of IRI studies.

Recent changes in laundry detergent purchasing are unlikely to change P&G’s market dominance. P&G has nearly 60% of the U.S. market for liquid detergents and 80% of the market for single-dose laundry pods, which are typically more expensive per load than liquid detergents. The company also manufactures low-cost detergents.

Rising prices helped boost quarterly sales for the Cincinnati company’s fabrics and home care unit, which includes laundry products.

P&G raised detergent prices this summer by nearly 10% from a year ago, according to companies tracking retail data.

Despite the higher prices, organic sales, a measure that excludes transactions and currency movements, for the unit rose 9% in the June quarter from a year earlier. But for the first time since the summer of 2018, sales volumes fell for the unit, falling 1%.

For years, Diana Bianrosa has called herself a “Tide girl,” a loyal shopper of P&G’s pricey orange-bottled liquid laundry detergent. Ms. Bianrosa, a bank clerk living in New York’s Bronx borough with her 3-year-old daughter, now hunts for bargains and generally buys brands on the cheap.

“I was, like, ‘You know, let’s do something cheaper,'” Ms Bianrosa, 40, said. She often used Tide or Dreft, a P&G detergent designed for children’s clothes. “Everything is getting so expensive.”

Prices for laundry soap vary widely. Liquid detergent ranges from less than $1 for 16 ounces of detergent for the lowest priced brands, including Arm & Hammer, to over $2 for the same amount for premium brands like Tide and Persil, owned from German Henkel.,

according to market research firm IRI. Single-dose packets are more expensive, ranging from around $3 for 16 ounces of detergent to over $6. Powdered detergent is generally less expensive than liquid alternatives.

As more Americans draw a line on how much they’ll spend on household basics, cracks are forming in P&G’s laundry soap superiority. P&G’s share of the $11 billion U.S. liquid detergent market in August was about 2 percentage points lower than a year ago, according to analysts, business executives and data from the Nielsen research company.

Procter & Gamble also sells Gain at a low price.


Photo:

Tiffany Hagler-Geard/Bloomberg News

General dollar Corp.

said last month that more and more people are buying washing powder at low prices. Leaders at Church & Dwight Co.

maker of low-cost Arm & Hammer products, including laundry detergent, said it saw sales take off.

“The decline in detergent value has started,” Church & Dwight chief executive Matthew Farrell said on a conference call with analysts in July. The company’s growth is facilitated by good timing: it recently integrated the manufacture of its laundry capsules, which gives it more control to increase its ability to meet demand. It also recently launched a detergent designed for babies’ clothes and equipment.

Mr. Farrell said that in the industry as a whole, in the quarter ended June 30, dollar sales of liquid laundry detergent were up 7% overall. Sales were up 11% for value brands and 4% for premium offerings, he said.

P&G, the world’s largest consumer products company by sales, managed to make gains while raising prices, in part because few corners of the economy have resisted inflation as strongly as the household staples. Buyers pay more for less goods. They prioritized food and basic necessities based on need rather than clothes and gadgets.

P&G executives say they believe Americans will continue to spend on household products, even as inflation and the overall economy worsen. The company, which makes everything from Gillette razors to Pampers diapers, is much better prepared for a downturn than it was before the Great Recession, they say.

In advertisements, the company promotes the economic benefits of its products, such as a detergent that cleans items in cold water cycles, which could help households save on energy bills. It offers lower-cost alternatives in its Gain and Era brands and in Tide Simply, a lower-cost version of Tide that comes in a bright yellow bottle.

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P&G said it’s also offering more products in smaller packages, aimed at people who can’t or don’t want to spend that much at a time. Small packages are usually more expensive per unit.

Tide, in some ways, benefits from its high price, as people might be hesitant to opt for cheaper brands due to fears of a sharp drop in quality, said Truist analyst Bill Chappell. He predicts that Tide would only suffer serious sales losses in a long, deep recession.

Another bright spot for P&G: While some consumers are looking for cheaper detergents, another consumer segment is turning to its pricey detergent pods, according to the company.

“There is a very strong labor market; consumer balance sheets are very healthy,” said CEO Moeller. “What happens tomorrow? Who knows.”

Write to Sharon Terlep at [email protected]

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