Coming Clean

By Tom Branna, Editorial Director | January 10, 2011

After surviving the recession, the laundry detergent category has been hurt by price wars and a dearth of innovation. But a few observers insist there are signs that things are beginning to improve.

The great recession pounded most consumer packaged goods manufacturers, including major laundry detergent makers in developed markets.

Consumers in Western Europe and the U.S. either shifted to lower-tier brands or private label offerings, or decided that maybe those dirty clothes weren’t so dirty after all. Couple all that with a price war that has been raging for months in the U.S., and it’s no wonder why the industry has suffered through a dry spell in terms of market growth and product innovation.

In fact, one industry veteran who’s followed the laundry detergent business for more than two decades called Q3 2010 one of the worst ever for many CPG companies, pointing out that there’s been a growing disconnect between the haves and the have-nots. Luxury goods firms have bounced back in recent quarters, with Estée Lauder, L’Oréal and LVMH all posting favorable results, while disappointing results came in from the likes of Clorox, Colgate and Johnson & Johnson.

Last year, Romesh Wadhwani, chairman, SymphonyIRI Group, soberly announced that we are in an “Age of Thrift and Affordability” brought about by a major shift in consumer buying patterns.

More recently, a study by Booz & Company noted that consumer frugality persists in the post-recession U.S. economy. Consumers are said to be economizing broadly, deferring spending on discretionary items and trading down on essentials. More specifically, on household products, 28% of consumers reduced spending this year, compared to 21% in 2009.

“Consumers continue to pay down debt and build up their savings. There is little reason to believe that consumers will give up their frugal behaviors in the short term,” said Marcelo Tau, principal, Booz & Company. “Consumers remain cautious, especially following their disappointment with the slow pace of improvement over the past year.”

New Purex Complete Crystals Softener is 92% natural, according to Henkel.

In the past, when things got difficult, a cry went up from marketers and analysts for more innovation. But after being battered by the downturn for more than two years, some fear that consumers may not be willing to pay for bells and whistles in their detergents.

“There are really high levels of promotion; 35% of the category is now sold on promotion,” explained one observer. “Everybody talks about innovation, but at the same time, everyone is afraid of costs going up and not getting consumers to pay for it.”

Some statistics verify those fears. When it comes to laundry detergent, more consumers have become comfortable with private label products—even though private label still accounts for less than 10% of sales in the liquid laundry segment (see chart on p. 80). According to an August survey by Epsilon Targeting, more consumers switched to private labels in all product categories during the first six months of 2010. Epsilon found that 75% of respondents switched to store branded household products, with the highest number buying paper towels (49%), followed by bathroom tissue (43%), storage bags (42%) and laundry detergent (39%).

Eric Schwartz, vice president-U.S. laundry care marketing, The Dial Corporation, a Henkel Company, agreed that competition in the laundry aisle has intensified during the past year. Specifically, beginning in the second quarter of 2010, more marketers had to contend with increased promotions such as buy-one-get-one free and price rollbacks.

“What’s going on in our category is not due to the recession. There was high-single digit growth before Q2. It’s a new phenomenon that can’t be stopped until we stop it,” he told HAPPI. “The way out is through innovation.”

Good News

Longtime market leader Tide is feeling the heat from competitors.

The good news for national brand manufacturers is that some observers insist that the worst as over, as private label gains slip, price erosion subsides and consumer confidence returns. Indeed, as HAPPI went to press, the U.S. stock market was surging, holiday sales were beating estimates, and employment numbers were the best that they’ve been in years. Maybe, just maybe, that will signal the beginning of a return to normal.

“We are beginning to see a turnaround,” observed Ian Bell, head of home care, tissue and hygiene research at Euromonitor International. “Unit prices are stabilizing and are beginning to go up.”

According to Bell, the recession came on fast and furious and to compete in these turbulent times, marketers had a knee-jerk reaction and moved to reduce prices to maintain long-term share.

Recent data from SymphonyIRI, however, is mixed. For the year ended Nov. 1, 2010, U.S. sales of laundry detergent in food, drug and mass merchandisers (excluding Walmart) fell 3.14% to $3.6 billion.

“The category did not experience deep discounting in 2009, however, there has been some discounting in the past year,” observed Nancy Mills, industry manager, consumer products at Kline Group, the research firm based in Fairfield, NJ. For example, she noted that P&G reduced the price of its laundry detergents by approximately 4.5% during 2010 and Tide (100 oz.) saw a price cut at Walmart for several weeks. Meanwhile, P&G’s Cheer got a permanent price cut and was repositioned as a value brand. The company’s Era brand also had a permanent price reduction, she said.

Only a couple of years ago, no one questioned P&G’s dominance in the U.S. laundry sector—after all, every household in America, it seemed, relied on Tide to get out stains. But, some observers suggest that the high-powered cleaning Tide promises no longer fits in with today’s reality. Think about it, just how dirty do Americans, not to mention Western Europeans and Japanese, get over the course of a day? Most white-collar workers are glued to their computer screens from 9 to 5—that’s not exactly working in the fields or in factories like their parents and grandparents did. And what about kids? Have you driven down a suburban street in Anytown, U.S.A. lately? It’s a desolate place, as most children can be found transfixed on a video game screen in the family room or basement.

“There’s been a decline in usage as more people shift to white collar jobs,” noted one observer. “In the blue collar world, there’s been a shift to lower tier brands and private label products.”

Some Bright Spots

It’s not all bad news in the laundry sector, however. Sales of Purex Complete 3-in-1 posted sales in excess of $31 million for the 52 weeks ended Oct. 31, 2010, according to SymphonyIRI data, which puts that product in an “other” category that’s separate from liquids and powders. Purex Complete 3-in-1 leads the way in this “other” category, which had total sales of $54.7 million, an increase of more than 26%. Other brands in this segment that turned in strong results include Fels Naptha (+16.67%) and OneCare Bounce (+34.76%). According to Henkel, when all the retail outlet numbers are in, sales of Purex Complete 3-in-1 sales exceed $60 million for the most recent 52-week period.

“Combination products are doing better than the overall segment,” noted one observer. “P&G picked up some share with Tide with Febreeze, too.”

P&G may have added a point or two with combination products, but the biggest winner has been Henkel with its Purex Complete 3-in-1, which combines detergent, anti-static agent and fabric softener in a convenient sheet. After extensive consumer research, Henkel learned that most consumers consider doing the laundry a thankless task and would do anything to reduce their time spent completing the chore.

According to Henkel statistics, the company was the No. 3 player in the $52 billion global laundry care category in 2009. and Purex Complete contribute to growth as many consumers are still willing to pay a higher price for innovation,” noted Mills.

The Kline executive noted that while some may say that the category lacks innovation, there have been several launches that have helped to sustain a large part of the category’s growth during the past several years. Mills pointed out that innovation in this category is costly and the majority of these introductions have come from the major marketers with large R&D budgets. For example, P&G spent a tremendous amount of money to develop Tide Total Care, which surpassed sales of more than $100 million in its first full year. “Henkel’s Purex Complete registered more than $50 million in less than a year,”

she said. “Going back just a few years, Tide Coldwater and All Small & Mighty were highly successful launches that drove similar intros from competitors.”

Still, innovation does not necessarily result in growth.

“Despite the highly successful launch of the premium-priced Tide Total Care, the brand’s overall sales declined,” said Mills. “The majority of growth in the category over the past couple of years has come from mid- to lower-tier brands, she explained. While the recession has played a role in their growth, many consumers are also satisfied with product efficacy. Premium brands will be challenged to recapture former users and convince new buyers that there’s value in the higher-priced offering.”

In an effort to boost its share of the U.S. laundry category, Sun Products relaunched Wisk, which now features something called Stain Spectrum Technology. The formula promises to get out a wide range of stains including proteins, carbohydrates, oils and particulates, bio and synthetic. In addition to returning to its stain-fighting focus with a new formula, Wisk’s new red bottle is a return to its “ring-around-the-collar” roots from when the product was first launched in 1956.

Sun Products revamped Wisk.

“Wisk had lost its brand voice over the years,” said John Nunziato, creative director, Little Big Brands, the agency behind the redesign. “The brand is now a standout in the category—screaming premium and performance while remaining relevant and approachable to the consumer.”

According to Nunziato, the design was distilled down and each element was addressed for relevancy, current equity and impact. The result is a brand with renewed depth, dimension and energy. The bottle and label are rich reds and the label uses several reds to integrate seamlessly into the structure. The logo was redrawn and maximized in perspective form. The new white logo jumps off shelf, he said.

The addition of reflective foil adds to the premium appearance and strengthens cleaning cues. Smart, modern typography rounds out the label. Lastly, the design was stripped of unnecessary copy, drop shadows, inlines, and fluorescent colors, which made the previous design feel heavy and dated, according to Nunziato.

Disruptive Teclogy?

Bottle designs are nice, but it’s what’s inside that counts most once the consumer makes a purchasing decision. This month, Henkel will try to build on the momentum it generated with Purex Complete 3-in-1 with the launch of Purex Complete Crystals Softener, which is billed as 92% natural.

According to Henkel, the product’s unique crystal form works differently than traditional oil-based softeners that coat fabrics with oily residue. Purex Complete Crystals Softener is said to be easier to use than traditional softeners because it is added directly to the laundry load at the beginning of every wash cycle. Moreover, the softener promises to preserve flame retardant benefits of baby’s and children’s clothes, retain the wicking ability of athletic wear, maintain a towel’s built-in ability to absorb water and will keep white clothes from yellowing and graying. The launch is another sign that Henkel is ready to take on Tier 1 brands in the U.S.

“The turnaround will be based on innovation and marketers who are recommitted to the high road of innovation and differentiation,” explained Schwartz. “We are committed to the high road. It’s the primary way that we want to compete to build share.”

Schwartz called Purex 3-in-1 sheets “disruptive” technology, and he is confident that the same is true of the new softener. “In the U.S., it is inconvenient to use fabric softener,” he explained.

Despite the prevalence of new washing machines that feature built-in fabric softener dispensers, most people still play a waiting game.

“Moms are tethered to the machine waiting for the rinse cycle. That’s how liquids work,” he insisted.

Purex Complete Crystals Softener is available in three fragrances—Fresh Spring Waters, Lavender Blossom and Tropical Splash—and retails for $3.99-5.99.

To get the word out about the benefits of the new fabric softener, Henkel will redeploy the on-shelf LCD communication system in select retail locations. At the least, the novel, on-shelf education tool will have as high a return-on-investment as traditional television spend, and is much more effective than in-store demonstrations, according to Schwartz.

Innovation is the lifeblood of so many industries, but lately, the laundry detergent market has seemed to hit a dry spell.

Sustainable Innovation

Although consumer sentiment for green fell as the economy worsened, nearly everyone agrees that environmentally friendly initiatives are here to stay. Last fall, P&G announced wide-ranging sustainability goals (see HAPPI, November, p. 79), which included replacing 25% of petroleumbased material with sustainably sourced renewable materials by 2020.

More recently, in November, Seventh Generation, a Burlington, VT-based manufacturer of non-toxic household and personal care products, debuted innovative new packaging featuring 96% post-consumer recycled (PCR) content. Developed by Seventh Generation in collaboration with its packaging partner, Consolidated Container Company, the package is made of resin derived from recycled milk jugs and other plastic bottles and represents a quantum leap over the 25% recycled content often found in plastic packaging.

The new packaging, featured in the brand’s dish liquid and fabric softener, joins other high-PCR content bottles in Seventh Generation’s roster of products, including its 80% PCR 150oz. concentrated laundry liquid container.

Seventh Generation had one of its best years ever in 2009, insisted John Murphy, vice president of sales, and he suspects more gains to come as consumer interest in green solutions continues to grow.

Also this month, Henkel will roll out Purex with Zout, which is said to combine the proven performance of Purex detergent with the triple-enzyme, stain-fighting power of Zout stain remover. In fact, it is the first enzymatic detergent introduced in the U.S. by Henkel.

Enzyme-based Purex Complete with Zout is a detergent and pretreater.

Purex with Zout can be used as both a pre-treater and a detergent. It is available in Fresh Morning Burst and Free & Clear, a hypoallergenic formula.

Available nationwide by the end of March, Purex with Zout’s retail prices will range from $3.49 to $7.99 depending on size and retailer. The introduction underscores Henkel’s commitment to bringing innovation back to the laundry detergent aisle, according to Schwartz.

“Just because the consumer is focused on value, price alone isn’t the answer,” he insisted. “It’s more value.”

If more marketers can pull themselves out of a vicious promotion cycle, the laundry detergent segment should start growing again.

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