Saturday, March 23, 2002

P&G detergent brings Tide-al wave of profits

Maintaining growth is priority now

By Cliff Peale
The Cincinnati Enquirer

        If any Procter & Gamble Co. brand doesn't seem to need fixing, it's Tide.

        With $2.4 billion in North American sales, Tide is a Fortune 600 company on its own, and it's been the market leader since 1949.

        But in a world where Wall Street demands continuous growth, the pressure still is on the company's highest-profile brand to get even bigger.

        That leaves P&G to roll out new scents — a new Tide Clean Breeze will hit store shelves in April — and other minor extensions to keep Tide growing.

        Tide is exhibit No. 1 in chief executive A.G. Lafley's strategy to bolster P&G's biggest brands. And the company's ability to boost Tide sales will show whether it can increase sales of all its brands that compete in mature markets.

        That long-term problem pushed P&G to neglect its biggest brands to focus on innovation in the late 1990s. That got P&G in some well-documented trouble, but Mr. Lafley is back to emphasizing brands such as Tide.

        P&G said last week that growth in Tide sales was one the factors in an encouraging third-quarter earnings prediction.

        Although P&G doesn't break out Tide earnings separately, analysts speculated that the brand is the bulk of the company's fabric and home care profits.

        Those totaled $437 million for the quarter ending Dec. 31, the highest of any of P&G's global business units.

        “At the end of the day, you make a disproportionate amount of money from your leading brands,” said Jim Gingrich, who studies P&G for the Wall Street investment house Sanford C. Bernstein. “When you've got a brand that's as big as Tide, that's a huge piece of the share price.”

        Tide's profits make it important to Mr. Lafley. But he also keeps daily watch on sales growth, hoping it soon will meet his long-term goal of 4 percent to 6 percent annually.

        With Tide, that kind of growth is elusive simply because the brand is so big and so dominant, said Ann Gillin, analyst at Lehman Bros.

        “The increments you gain here are sort of "new and improved' business,” she said.

        Unlike some of P&G's higher-growth businesses, most prominently health care and beauty care products, laundry care usually grows only at the rate of population growth or overall economic growth, she said.

Loads of detergent

        Tide's numbers are overwhelming. The brand posted a market share of 35.7 percent for liquid and 45.3 percent for powder for the year ending Jan. 27, according to market watcher Information Resources Inc. in Chicago.

        While those numbers do not include some big customers, such as Wal-Mart, they show a slow but steady increase in market share in the last four years.

        Brian McNamara, Tide's brand manager at P&G's downtown Cincinnati headquarters, said the company's emphasis on Tide — and all its big brands — is apparent.

        “If I need help, it's there,” he said. “It's kind of like, "Brian, what do you need to grow this business?'”

        To accomplish that, Mr. McNamara has introduced the new scents and a faster-dissolving powder detergent due on store shelves in early summer.

        A year ago, the company rolled out Tide Kick, designed to make the liquid detergent easier to pour and allow consumers to apply it directly to stains.

        P&G distributes Tide samples through partnerships with most washing-machine makers. And its Internet site,, has signed up more than 2.5 million consumers for a monthly newsletter.

        Tide is not all of P&G's laundry care business. The company also makes and sells detergents Ariel — sold overseas — as well as Cheer, Dreft and Gain.

        It also makes Downy fabric softener, which often is paired with Tide in promotions and advertising because they share the premium customer base, Mr. McNamara said.

        Combined, all of P&G's detergents dominate the market, with market shares well above 50 percent and more than triple their closest competitors.

        Because of Tide's prominence, P&G hasn't licensed out the name for use on other products. With Pampers diapers, for example, P&G has licensed that name on items such as baby clothes and household cleaners.

        “If I were to put the Tide name on anything, it would have to meet a pretty strong standard,” Mr. McNamara said.

Key to P&G expansion

        Tide has a storied history within P&G. First sold in 1946, it followed Dreft as P&G's first synthetic detergent. P&G's archivist, Ed Rider, said researchers working on early Tide were told to abandon the project.

        “The company didn't realize how successful it would be,” he said.

        The original Tide plant was in P&G's Ivorydale complex. It closed in 1998.

        The technology behind Tide became the driver of P&G's expansion into countries such as Mexico and Venezuela and then into Europe, Mr. Rider said.

        In the 1960s, P&G started selling Ariel overseas, restricting Tide to North America.

        Mr. McNamara said the brand's storied past only helps shape its future.

        “This is the No. 1 brand in the hearts and minds of consumers, and we want to keep it there,” he said.

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