The Wall Street Journal reports that P&G is considering a less expensive version of its Tide laundry detergent again. The company has witnessed "value" brands taking share from the premium branded products in the detergent aisle. Several years ago, P&G tried to cope with that threat by offering Tide Basic, but it abandoned that effort as a result of consumer confusion and fears about cannibalization. Here's an excerpt from the WSJ article:
A decision to offer a lower-priced version of the premium brand carries the risk that buyers of regular Tide could trade down and stay there. Indeed, three years ago P&G scrapped a lower-priced powdered detergent called Tide Basic, which was tested for about a year. P&G said consumers were having a hard time distinguishing between the bargain version and the regular priced variety. The company's concern was that regular Tide users would trade down to Tide Basic, for instance, but be unhappy that it didn't clean as well as regular Tide.
As clearly indicated from the excerpt above, P&G faces some significant risks with a decision to offer a lower-priced version of Tide. The decision also brings other challenges though. At the end of the article, we see a quote from a rival company's CEO. Church & Dwight Chief Executive Jim Craigie states, "It'd be a terrible mistake, I think, if they pulled the price lever on some of their businesses. Nobody wins a price war game." This quote points out that P&G, as the category leader, has the ability to influence industry structure. Launching a low-end version of Tide could trigger a price war, and thereby diminish the overall attractiveness/profitability of this category. P&G may improve market share, but at the expense of profits for themselves and the industry as a whole.
The Church & Dwight CEO recognizes that you can influence the competition through signals and statements. It appears that he's trying to signal to P&G that the introduction of a low-end Tide product would trigger an aggressive response by his firm. In so doing, he may be trying to deter entry into the lower-priced segment which his firm has excelled in over the past few years. One wonders if his firm (and others) are trying to send other signals to deter a Tide entry into the value segment.