P&G will launch cheaper products, Lafley says

Procter Gamble & (P&G), the largest manufacturer of consumer products in the world, will launch in 2014 a cheaper version of Tide liquid detergent, called Tide Simply Clean and Fresh (something like Tide Just clean and fresh).
The P&G is known for its sophisticated products like Tide and Bounty, which cost more than those of competitors, but are perceived by customers as being of high quality.
The pace of growth in developed markets, however, has decreased and the P&G is expanding in emerging markets. The company works to make it balanced its portfolio, with more products on tracks high and low prices.
"There are consumers for which a lower price is a more critical element in your personal value equation," said AG Lafley, CEO of P&G, a Barclays Conference in Boston on Wednesday. "We need to have brands and products that are relevant to them, and we do this more and more," he said.
The new Tide is a series of new products detergents that P&G plans to launch in February 2014, Lafley said. Other new products include a new collection that updates all existing Tide liquid detergents.
Lafley said he expects Tide Simply Clean and Fresh will succeed, as occurred with the Bounty Basic models and Charmin Basic, released in 2005. These products are offered at a price 25% lower than that of the Bounty and Charmin normal and now represent about 15% of the sales of the brand worldwide, with better profit margins than their main brands.
The P&G did not give pricing information specific to the Tide Simply Clean and Fresh, but said that will be a "medium level", not "premium". The P&G is by far the largest seller of washing detergent in North America, with 56% of the market, according to Euromonitor.
The other brands of detergents of P&G in North America include brands like Cheer, Era and Dreft. Their closest competitors, Sun Products, which produces All and Wisk, and Church Dwight &, which manufactures detergent Arm & Hammer, have market share of around 15%.
In the "middle" of laundry in North America, about $ 2 billion, the P&G "is underdeveloped," Lafley said. Total spending with detergents in North America is $ 8.6 billion, according to Euromonitor.
Some fear that a Tide will cannibalize this cheap recipe from the Tide of regular price. "I think it's an appropriate admission, the fact that they have to go looking for a lower price," said Ali Dibadj, an analyst with Bernstein. "The point is that you will have some cannibalization of top brand".
In fact, the company has already tried this before: in 2009, the company tested the Tide Basic, a powdered detergent sold 20% cheaper than the normal detergent and that did not contain the latest cleaning ingredients, but never released nationally.
Lafley says the Tide not cheap will undermine other sales of the Tide. "We are confident that our consumer understanding pre-market tests helped us devise a Tide for the middle market, Simply Tide, which is very attractive to average consumers, but not very interesting for the current regular users of Tide," he said. "This is exactly the same approach we use with the Bounty and Charmin Basic".
Lafley was CEO of P&G in Cincinnati from 2000 to 2009 and replaced his predecessor, Bob McDonald, in May. This month, the company disclosed that its net profit in the fiscal fourth quarter fell 48 percent due to a write-down of assets related to its business with the brand Braun appliances and other non-recurring costs, but its adjusted profit and its revenue surpassed Wall Street expectations.
The P&G is in the midst of a recovery plan that aims to reduce costs and improve their productivity. At the Conference in Boston, the Chief Financial Officer Jon Moeller said the company is working on "location" and regionalization of its supply chain in developing markets and in reducing the number of factories and distribution centers in developed markets such as the United States and Europe.