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Procter & Gamble Hoping Tide Will Turn

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Is altering the famous detergent good for business or a losing gimmick?

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Procter & Gamble (PG) has been stung by consumers turning to low-cost brands. In response, P&G Plots Course to Turn Lackluster Tide:

"Procter & Gamble Co.'s chief executive on Thursday laid out measures to address lackluster profits and sagging market share, including price cuts, overseas expansion and plans to reposition the Cheer brand as a low-price detergent.

"Robert McDonald, who assumed the post of CEO in July, offered his most detailed plan yet on how to reignite flagging sales as cash-strapped shoppers forgo the company's premium products for less-expensive options. Speaking at a conference, he assured investors that P&G was 'in touch with reality,' and had 'a sense of urgency.'

"P&G has resisted cutting prices because of factors such as high commodity costs and a fear of hurting its brands' image of superiority. But throughout the recession, less-expensive versions of household staples have dented the dominant market share that P&G's products have long held. To narrow the price differences with competitors, the company said it would reduce prices or increase promotional spending on about 10% of its business.

"Tide and Cheer laundry detergents are among the brands targeted for reductions. Tide, which can cost more than twice as much as private-label detergents, will have 'targeted interventions' on its larger sizes, the company said.

"P&G also is testing Tide Basic, a version that costs about 20% less than regular Tide. Meanwhile, P&G plans to reposition Cheer as a value brand, cutting its price by about 13%.

"Some analysts remain skeptical of P&G's plans. 'The company is broadly losing share across its portfolio in the core U.S. market, and emerging-market sales have lagged peers,' Goldman Sachs analyst Andrew Sawyer wrote in a research note. 'Although the company is clearly devoting more resources to brand support, many of its key competitors are doing the same on a proportionate basis.'"


Tide Basic?

Will Tide Basic be any different that regular Tide? Assuming the answer is yes, then it will be missing a brightener or something else that consumers will quickly figure out. Customers may then think of it as inferior yet not want to pay more for the high-power stuff.

Tinkering with successful formulas sounds suspiciously like the disaster that quickly forced Coca-Cola (KO) back to Coke Classic.

Here's the deal: Customers want cheaper prices not gimmicks. Tide Basic sounds like a gimmick that will have many wondering what's wrong with it. Yet if there are no differences, why buy it? The confusion alone will cost sales.

Turning to shampoo, here's a study on Butylparaben.

For those concerned about costs and/or animal rights, you can get White Rain for perhaps one-sixteenth of the cost and the manufacturer claims it and its other products aren't tested on animals, nor are animal products used in its goods.

What are you getting for expensive brands? One word: advertising. The problem facing P&G is cost-conscious consumers are now interested in value, not clever ads.

By the way, I'm not going to get involved in a debate on moral issues regarding shampoo in an economic forum. I'm simply pointing out what I discovered while researching Tide as I believe some may be interested in such information.

No positions in stocks mentioned.
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