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Deodorant Market Update

July 6, 2006

Will Henkel's new brands deliver the sweet smell of success in the crowded U.S. ap/deo market?

Deodorant Market Update

Will Henkel's new brands deliver the sweet smell of success in the crowded U.S. ap/deo market?

By Christine Esposito
Consulting Editor

Question: How can a European personal care company gain an impressive position in the $1.7 billion U.S. deodorant marketplace?

a) Sweat equity
b) Spend cold hard cash
c) A little bit of both.

For Henkel and Unilever, the answer is C.

Henkel’s $420 million purchase of three antiperspirant and deodorants brands from Procter & Gamble has given it a stable of products with sales of $275 million and moved the company into what it contends is the number three position in the U.S. deodorant market. Meanwhile, Unilever has built its Axe brand into a category favorite in less than four years via a smart marketing campaign focused on younger male consumers and a costly brand launch.

According to company officials, Henkel’s purchase of Right Guard, Soft & Dri and Dry Idea will help it expand the German company’s presence in the body care sector.

"This acquisition will enable us to significantly expand our body care business in North America and will further strengthen our participation in the growth of this segment. The strong brands involved provide a perfect fit with our existing personal cleansing business in the U.S.," explained Hans Van Bylen, executive vice president cosmetics/toiletries of Henkel KGaA in a press statement when the deal closed in May. "The deodorant and antiperspirant market is highly attractive and we are delighted to be able to substantially strengthen our Dial platform with these acquisitions. This transaction will take us to number three in the attractive U.S. deodorant market,” he added.

For Henkel, the most prominent brand in the deal, Right Guard, brings a viable contender in the male side category, which is new territory for the company.

“Dial and a lot of our current brands—Tone and Pure & Natural—are either female-skewing or are all-family brands. So now we have a strong male entry; the male personal-grooming segment is really growing. There's a growing trend where personal care brands are skewing either male or female, and with this stratification, we want brands that can play in either segment,” Scott Moffitt, Dial Corp.'s senior vice president for personal care and grooming told in early June.

Although a strong brand with a solid history, Right Guard’s sales have been sluggish at best in recent years. According to IRI, Right Guard’s sales have slipped 1.9% in the 52 weeks ended April 16, following a sales decline of 0.8% in 2005 and 7.1% in 2004.

The question is, can Dial can revive Right Guard and make it a formable candidate to P&G’s Old Spice and Unilever’s hot Axe brand?

“Right Guard has a strong brand equity. Henkel could grow that brand,” said Jason M. Gere, associate vice president, securities research-household products for A.G. Edwards & Son in New York City.

Unilever’s Axe has been one of the fastest growing brands in the ap/deo market, posting tremendous sales growth since it made its debut in the U.S. market in 2002(check date). According to IRI, its sales in supermarkets, drugstores and mass outlets excluding Wal-Mart have risen from just under $27 million in 2004 to nearly $60 million in the 52 weeks ending this April 16.    

What has fueled the Axe brand’s swift rise in the marketplace? An expensive launch and savvy integrated deodorant marketing focused on male-female relationships rather than traditional sports marketing. Among Unilever’s recent endeavors was work with MTV’s The Gamekillers, a reality-based television special during which characters from the show helped launch Axe Dry antiperspirant stick’s new advertising campaign. Now Axe has a tie in with and Christine Dolce. Known as Forbidden, Dolce—who reportedly claims 850,000 “friends” and 30 million page views, not to mention photos scheduled for a future issue of Playboy—is listed as the official myspace group moderator and spokesmodel for Axe Dry Gamekillers.

Unilever spent considerable cash—approximately $100 million—to bring the Axe brand to the U.S. market, which has added new dollars to the company’s coffers.

“They aren’t making a lot of money on it, but it’s growing well. They are building good brand equity,” said Mr. Gere, who contends that despite Axe’s success, efforts to revive Old Spice may have been a better deal for P&G’s bottom line.

“P&G took an old dead brand and they reinvented it. The margins are likely better for Old Spice,” he said.    

Still, Axe’s position in the marketplace is enviable.

“Everyone is trying to get a piece of the pie,” noted Mr. Gere, who said that companies are riding on Unilever’s coattails, especially in the body spray area.

But not every company is focused on body sprays for growth in the deodorant market. Colgate’s recent purchase of Tom’s of Maine’s provides it with an important brand in the ever-important natural personal care category, as well as increased presence in the deodorant sector, where it already competes with Speed Stick and Lady Speed Stick.

According to Susan Dewhirst, media and public relations leader for Tom’s of Maine, the brand’s newest entry in the category, a new long-lasting deodorant, is right on target for a demanding marketplace.

“Retailers are now more focused than ever on serving consumers needs and matching their lifestyle preferences. Consumers expect efficacy and the largest unmet need has been long-lasting performance. These products combine efficacy and natural ingredients, which is a winning combination,” she said.

Efficacy remains the key element with consumers, with recent launches in the women’s sector touting longer-lasting performance and invisible protection.

This spring, P&G restaged the Secret Platinum antiperspirant and deodorant line, which posted a 12.1% sales gain for the 52 weeks ended April 16.  The line includes Secret Platinum Invisible Solid, which boasts an improved formula that glides on clear for maximum protection—specifically “24-hour protection or your money back,” according to the company.

“The Secret Platinum line is the strongest, longest lasting protection you can get from Secret, offering stay strong odor and wetness protection with a brand new elegant look,” said Michelle Vaeth, communications director for Secret. The revamped line, which features sleek new platinum blue packaging, debuted on retail shelves March.

Also in March, Unilever launched Dove Ultimate Clear antiperspirant/deodorant, which it contends is a step above the so-called invisible products on the market. According to Unilever, 51% of women use invisible solids, but do not believe they are completely invisible. Once Dove Ultimate Clear is applied, translucent moisturizers form a barrier between skin and clothes, creating a layer that cares of skin and alleviates concerns about white marks on clothes.

Smaller Brands at Risk?

But as companies continue to roll out new products in this already-crowded marketplace, something has to give. And that could be shelf space.

According to industry experts, Walmart’s Remix program and other inventory efficiency initiatives could impact smaller brands in the marketplace. While these products are not in the top three in their respective categories, they still provide welcome cash flow to their owners.

“When you go down the aisle, it’s too crowded. “[Walmart] wants to free up shelf space and generate better cash flow. They want brands that turn over fast; ones that don’t collect dust,” said Mr. Gere, who added that brands such as Mitchum (Revlon) Ban (Kao), and Arm and Hammer (Church and Dwight) “could be at risk” if WalMart opts to cut back on SKUs.

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