One of the world’s leading fmcg companies has accused retailers of devaluing major branded product launches by subjecting them to savage price promotions as soon as they hit shelves.
Irwin Lee, UK boss of Procter & Gamble, said years of research that went into innovative new products faced being damaged by short-sighted policies.
A case in point, said Lee, was P&G’s Oral-B Pro Expert toothpaste, which was launched in the summer after more than 15 years in development and 70 scientific studies, only to find itself heavily price-promoted by leading supermarkets.
P&G described the product as “the biggest breakthrough in oral care technology since fluoride”, yet it was put on sale by Tesco at half price immediately, with other retailers following suit.
“We are keen to invest in new products but we want to get something in return,” Lee told The Grocer. “We want more multi-faceted engagement from retailers. It’s a sign of desperation and the short-termism of the trading culture.”
Lee said the company had told supermarkets of its plans to give away 20 million tubes of the toothpaste to support its launch push because it was confident customers would come back for the product and be prepared to pay full price.
“In the case of Oral-B it’s a bit frustrating,” said Lee. “We were very transparent that we were going to give away 20 million samples because we were so confident that customers would like the product.
“We expressed our misgivings but we can’t dictate it and we certainly do not fund it.”P&G also threw a huge marketing investment at the launch of Oral-B Pro Expert toothpaste. The entire Oral-B toothpaste range has seen sales rise to £9.5m in the year to 2 October. This is dwarfed by market leader Colgate’s toothpaste range at £171m, but P&G insisted it believed the NPD was breathing new life into the market.
The launch was also a high-profile example of the company’s cross-market expansion plans - one of its key global objectives.A senior executive at another major global supplier sympathised with P&G’s case. “Our biggest challenge in the context of the economic environment is the increasing level of promotions and competition between retailers, who all of course want to keep them close to their chest,” he said.
Colin Harper, head of insight at the Institute of Promotional Marketing, said: “This is huge problem for the industry. The toolkit that retailers use for promotions is being restricted only to price. We’ve got to start selling products at full price.”
Ian Fermor, business director of effectiveness at Ebiquity, added: “The level of promotional activity in the UK is driven by the white hot competitive dynamic. We also know that much of this activity is profit-destroying at a category level. We hope the current squeeze on retailer top-line growth will result in some level of constraint from retailers.”