For Proctor & Gamble’s EDLP, a sobering report

Over the past six months, Procter & Gamble has said that 50% of its volume was on “value pricing” its code for every-day low prices and that the company expected to save $175 million from its complete shift to EDLP. But a new report from Salomon Bros. offers a cautionary note. In 10 of 11 household-product categories the survey tracked, Procter’s dollar marketshare in supermarkets fell in 1992.
In powdered laundry detergents, Procter dropped from 62.7% to 60.3%. In disposable diapers, it went from 47% to 41.9%. In toothpaste, it went from 37.4% to 35.4%. Toilet tissue, cleaners, fabric softener, soap, hand dishwashing liquids and electric dishwashing detergents all declined, too. Only paper towels showed a gain, going from 29% to 31.7%.
The “private-label” bugaboo wasn’t all to blame. Kimberly-Clark went up a point in diapers to 36.9%. Unilever, Church & Dwight, Colgate and Dial went up in detergents. Even with the caveats, it’s a disquieting report. It is true that some big brands weren’t being value-priced; Tide and Cheer just recently went over, and buyers consulted last week were still waiting for Crest. Lower prices were expected to impact dollar share. “Still,” said Salomon analyst Heather Hay, “there shouldn’t be dramatic differences.”
Every-day low pricing and its various forms value pricing and contract pricing–have smoothed out the peaks and valleys in production. Quaker has put its savings from that at $5-10 million in a published report. The strategy has also aligned marketers with those on the fast-track of today’s retailing, including Wal-Mart and every-day low-pricing supermarkets that have taken up their lead.
But low prices, on their own, haven’t changed the basic trend. Brands that were doing well are continuing to do well; brands that weren’t, aren’t. Nor has EDLP served to check out-of-control trade spending, despite P& G’s success here. Many marketers are afraid that, if they pull the plug, the trade wfll have no incentive to push their products.
R&D, as always, can help a brand: Try as they might, as one marketer noted, private-label brands have never been able to replicate Nacho Cheese Doritos’ blend of spices or Cheerios’ gun-puffing manufacturing.
Copyright Adweek L.P. (1993)