P&G and Other CPGs Cut Prices to Combat Store Brands

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May 4, 2010

Robert McDonald

Procter & Gamble Co. is leading a price-cutting market share charge to win back customers who migrated to lower cost rivals and store brands during the recession.

Simultaneously, the company is accelerating new product introductions and boosting advertising spending to support its new price promotion campaigns, according to Wall Street Journal report.

"We're doing what we have to do price-wise to stay price competitive," P&G's CEO Robert McDonald said during a recent investor call.

According to a Sanford Bernstein analysis of data collected by Nielsen Co., P&G has lowered prices this year across nearly every category in which is does business.

Initial price cuts made last quarter are paying off with P&G reporting a 7 percent increase in same-quarter sales, its best results in 18 quarters, according to the report. P&G’s rivals such as Colgate-Palmolive and Unilever also realized improved sales due to high promotional activity last quarter. Both companies have lowered prices between 3.3 and 3.5 percent versus last year.

P&G price cuts are running as deep as 12.7 percent on batteries to 4.6 percent on laundry detergent, 4.3 percent on shampoo and to as little as 1.3 percent on diapers compared to last year’s prices.
McDonald "has put the industry on notice, essentially saying, 'You can't just take our market share by discounting and promoting around us,'" Bill Chappell, an analyst at SunTrust Robinson Humphrey, told the Wall Street Journal. "They're now going to focus on market share first, and profitability seems to be somewhere behind that."

Read These Related Articles:

• Food Deflation Could Hurt Store Bands More Than CPGs
• Store Brands Drive Differentiation and Profit
• Store Brand Savings Still Beat Aggressive CPG Discounting
• National Brands Prepare for War With Store Brands
• PLMA Live: Nielsen V.P. Says Store Brands Will Remain Strong After the Recession

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