RISING TIDE

Procter & Gamble has an incredibly simple business problem

Obsession
How We Buy
Obsession
How We Buy

Procter & Gamble announced Tuesday (July 28) it has a new CEO. It’s tapped 35-year veteran David Taylor to turn around the struggling maker of Tide detergent and Gillette razorblades.

As he takes over, here’s a tip: P&G may have pushed brand loyalty too far.

Shoppers are shelling out 60% more money for products from the maker of Tide detergent and Gillette razor blades, compared to the average price of competing brands, according to a UBS research note out this week.

P&G-price

When just looking at detergent, P&G’s prices are 140% higher than the average of its competitors. Per ounce, Tide is the most expensive liquid detergent available on supermarket shelves, according to data from Euromonitor.

The charts underscore a big challenge ahead for Taylor, who will take the reins of the $83 billion company from A.G. Lafley, who ran P&G from 2000 to 2009 and came out of retirement in 2013 to resurrect the flailing company.

While the company has a host of problems to deal with, lowering prices could provide a jumpstart.

The consumer goods conglomerate has long been able to command higher prices than its rivals because of the intense brand loyalty it built up over decades. Billions of dollars on advertising and the introduction of new products like Febreze helped it gain new generations of customers. But the focus on buying and building up premium brands didn’t jive with the thriftier mindset shoppers adopted—and stuck with—long after the 2008 recession.

Even as the economy rebounded in the US—P&G’s largest market—sales growth failed to pick up. The price gap between the company and its competitors are just “too high for today’s consumer,” UBS analyst Stephen Powers said in the note.

P&G spokesman Paul Fox told Quartz that comparing prices overlooks “consumer value,” the combination of performance and price.

“Throughout our history, we have created the most value by winning at the top–delivering the best product performance at a modest price premium. That does not mean we will not compete in the mid-tier but we only compete there when we can create a winning consumer value proposition versus competition,” he said.

Rather than just lower prices across the board, introducing new, lower-priced versions of well-known products could better cater to customers of all budgets, according to UBS’s Powers. P&G has already done this in certain categories, including diapers with its lower-priced Luv’s label and a simpler version of its Tide detergent (paywall).

The strategy could bode well as P&G sells off dozens of well-known but under performing brands like Duracell batteries in an effort to slim down, cut costs, and focus on its core brands. But it will be up to Taylor to meet shoppers where they are rather than expect a rising tide.

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