More evidence is emerging of the major changes taking place in Western retailing as we transition to the New Normal. Last week, my fellow blogger Doris de Guzman reported from the World Detergents conference that:
• P&G’s CEO Robert McDonald noted that in “the last 18 months, 60% of all new laundry and detergent products came from lower-tier segments”.
• Henkels’s SVP Thomas Muller-Kirschbaum, emphasised “there is current hyper-competition when it comes to product pricing“.
This trend was also evident when the blog returned recently to the IMD business school in Switzerland for an alumni event. One featured case study on ‘marketing in the new normal’ came from Peter Yorke, P&G’s global marketing director for Pampers, the leading diaper brand.
Yorke explained that P&G had traditionally resisted competing in the lower price, own-label market, for fear of cannibalising its sales in the upper and mid-tier. But the advent of the Crisis had caused this philosophy to be revisited, and the new lower-cost brand was now making an major difference to the bottom line.
“Most importantly”, he said, it has created a belief that “P&G could win” against the own-labels. This, of course, is why P&G, like other major consumer products companies, is now focusing on the area as a source of growth for the future.
This new focus on the value sector has important implications for all the chemical companies who supply raw materials into the consumer products market. Lower price, rather than technical innovation, is increasingly going to be the key to success.