By EMILY GLAZER
Procter & Gamble Co. is betting consumers are ready to pay a higher price to do their laundry…if the chore is made easier.
This week, the consumer-products giant is rolling out Tide Pods—small, dissolvable packets of detergent that will be the company’s highest-price laundry detergent, costing about 25% more per load than liquid. The move comes after P&G worked during the years after the recession to shore up the lower end of its detergent lines to defend its market share, as budget-conscious consumers switched to cheaper rivals.
P&G’s competitors are making the same bet with similar products, including Arm & Hammer Power Pak from Church & Dwight Co. and Purex UltraPacks from Dial Corp. The aim is to move consumers up to a higher-value product in the same way the companies got U.S. consumers to switch from laundry powder to liquid detergent in the 1980s. Even in tough times, convenience can be a huge selling point: Witness the popularity of single-serve coffee pods, for which the coffee is considerably more expensive, even before factoring in the cost of buying a brewing machine.
That said, fetching higher prices for something as basic as laundry soap could be a hard sell, especially with gasoline prices rising. Last year, P&G tried to raise prices for its Cascade dishwasher detergents—including the tablet form—but was forced to retreat when some rivals like Reckitt Benckiser Group PLC didn’t follow along.
The trick will be selling the benefits of Tide Pods.
“Instead of measuring out the cup, filling the cup in there, you just toss it in,” says Kris Burdis, grocery business manager for United Supermarkets. The regional chain, in Lubbock, Texas, is rearranging its aisles this week to make room for the new pods category.
“I believe our guests will respond to this, but a lot of it will be up to the manufacturers on how well they advertise and communicate the benefits.”
The suggested retail price for 35 Tide Pods is $9.99. P&G’s data show the new product will cost consumers anywhere from 25-32 cents per load, up from about 22 cents per load for Tide Original Liquid. Many consumers pour more than the recommended amount of liquid detergent when doing their laundry, manufacturers and analysts say, so they are actually paying more than per-load figures suggest.
Procter & Gamble’s Tide products on display
The average American household washes nearly 400 loads of laundry per year, the U.S. Environmental Protection Agency says, creating a $7.2 billion market last year, according to Sanford C. Bernstein’s analysis of Euromonitor data.
Sun Products Corp., maker of All laundry detergent, is rolling out a similar product—All Mighty Pacs—and also charging a premium. Michael Lyons, senior brand manager for All, says the company’s target consumer is a mom with children under the age of 12, whose life is getting increasingly complicated by her children’s activities. Based on Sun Products’ research, these moms view laundry as a chore and would rather spend more time with their families instead of doing things like measuring out detergent.
“Consumers’ lives are getting a little more busy,” Mr. Lyons says. “They’re really focusing on spending time with their families, and there’s a value equation.”
For buyers of All laundry detergent at Wal-Mart, a suggested price of $4.97 garners 40 loads of powder detergent, 32 loads of liquid detergent and just 24 loads of Mighty Pacs. A Wal-Mart spokeswoman said its pricing can change at any time and varies by location.
Alex Keith, P&G’s vice president of its North American fabric care business, says the company expects to sell $300 million of Tide Pods in the first year and expects pods as a category to account for about 30% of the laundry-detergent market in the next 10 years.
The company has accelerated its role on both ends of the consumer spectrum since Chief Executive Robert McDonald took over in August 2009. To show the company continues to aim at the high end of the market, Mr. McDonald pointed to launches of Crest 3-D Whitestrips, Downy Unstopables in-wash scent boosters and Gillette Fusion ProGlide styler razors, during an event last week in Cincinnati.
The importance of Tide for P&G is hard to overstate. “The soap sector was called the ‘Marine Corps’ of the company,” says Bill Schultz, an assistant brand manager when liquid Tide was launched in 1984 and now president and chief executive of Coca-Cola Bottlers Philippines Inc. “Almost all the top people spent their time in soap: It was the biggest, most competitive, toughest category.”
In the second quarter, fabric and home-care accounted for $6.6 billion out of P&G’s overall $22.1 billion in sales.
Mr. McDonald, himself a Tide brand manager from 1984 to 1986, calls Tide Pods the first evolution in laundry detergent in the last three decades since Tide liquid was rolled out.
Tide tried to roll out “Tide Tabs”—a single-dose, powder tablet—about a decade ago and failed because consumers claimed it didn’t dissolve well and they wanted to have control over their dose, says a former P&G employee who worked on Tide at the time. “It wasn’t even close to hitting the goals,” he says.
Tide spent eight years developing the new Tide Pods and tested them with more than 6,000 consumers.
“I think consumers are willing to pay,” Mr. McDonald says.