P&G expects to hold the line on price hikes

This looks likely to be one of a long series of posts on the Great CPG Price War of 2009. First there was this, in which I speculated that perhaps the price hikes are a hedge against uncertain economic conditions (following the model of the '70s). Then we discussed the Delhaize-Unilever spat.

Now we have P&G's CEO A.G. Laffey saying that the price increases his company put through last year will stick.

"Our products don't deliver value [just] because the prices on the shelves are lower," A.G. Lafley, chief executive of Procter & Gamble Co., told analysts and investors at a conference here.

Like several other industry executives who spoke at the event, Mr. Lafley said his company doesn't plan to roll back the significant price increases it has made over the past several months.

There also is a report in the article that Safeway suspended shipments from P&G in late December, but that appears to have been an inventory decision, rather than part of the pricing fight.

Executives from Clorox, Nestle, and Kimberley-Clark are also quoted as saying they will hold on to their price hikes.

P&G no longer tagging displays for Walmart

I'm not sure what to make of this item:

The Procter & Gamble Co. (P&G), a pioneer in the use of Electronic Product Code (EPC) technologies in the supply chain, has ceased placing EPC tags on promotional displays bound for Wal-Mart's RFID-enabled stores.

Although I haven't followed the subject closely, from the early days of RFID I have thought that its most significant application, from a trade promo standpoint, was in tracking displays for purposes of compliance monitoring. The article seems to support this view, quoting a P&G exec: "... the work we conducted with Wal-Mart has shown that this use of the EPC can deliver improved promotional effectiveness, better sales and, most importantly, higher shopper satisfaction."

So why stop doing it? It appears that Walmart was was not cooperating with the project. The article cites a P&G supplier as saying that "the company is frustrated that Wal-Mart's sales associates have not acted on the data in order to improve compliance with promotional programs."

P&G's managers, the contract manufacturer explains, "were asked to put the tag on and absorb the cost of that, and I think they felt Wal-Mart should be doing more to live up to their end of the bargain. Why put the tag on if Wal-Mart's not going to act on the data?"

P&G of course is not going to say anything like that. But they seem to hint at it:

"We've been working on these applications for close to 10 years. We have learned that to secure sustainable benefits, the use of EPC requires deep levels of collaboration between the manufacturer and the retailer, and a commitment to use the actionable visibility provided by the EPC to change business processes. "

Hmmm ... Walmart not collaborative?

P&G expanding car washes

Procter & Gamble has bought an Atlanta car wash chain and will use it as a foundation for expansion of their Mr. Clean experiment.

The move follows an August announcement by P&G that it was seeking franchisees to expand the car wash centers throughout Ohio and Kentucky, including with locations in the Dayton area. At the time it operated two local operations – in Deerfield Township and Evendale – and offered services at Fountain Square garage in downtown Cincinnati.

Now, Mr. Clean Car Wash operates 16 locations, including the two corporate-owned sites. Three other franchised locations are in the works.

On the one hand, using the Mr. Clean name on car washes certainly sounds like a natural brand extension. On the other, going into the car wash business seems rather distant from P&G's core competencies. On the third hand, who am I to question P&G?

P&G wants retailers to earn their money

Procter & Gamble is borrowing a page from Gillette’s playbook – requiring that retailers actually execute a promotion in order to be paid for it.

According to Advertising Age, P&G will tie promotional payments to store performance:

Both P&G and Gillette traditionally dubbed their trade-marketing programs "pay for performance," but Gillette's appears to more closely tie retail payouts to specific in-store execution. Currently, retailers accrue funds from P&G based on the number of cases they buy. But while the funds are earmarked for specific promotion programs, retailers don't need to prove they executed the programs to collect.

"What we're talking about is ... being a little more specific with how we spend that money, how we evaluate the payout for it," said Chris Petersen, VP-investor relations for P&G …

It isn’t clear how P&G will monitor compliance, particularly since the article also notes that they are cutting back on full-time retail merchandising staff.

Since anything P&G does generally ripples through the CPG world, however, this move could have serious effects. When coupled with recent talk we are hearting about CPG manufacturers having a renewed interest in basing more allowances on accruals rather than on discretionary funding, it appears we may be seeing a trend toward bringing the Wild West days of trade promotion to a close, and restoring some long-overdue control.

An amusing sidelight: The AdAge article says that “Household and personal-care marketers typically spend nearly as much on trade promotion as advertising …” Right. Nearly as much. Try several times as much. Later, it estimates that P&G ($70 billion in sales) spends about $2 billion in trade promo. Only off by $10 billion or so.

Wednesday quick notes

Wal-Mart and Tesco are both considering buying Carrefour's South Korean operation. "Analysts believe that the French group is committed to selling its 31 stores in South Korea because of their relative underperformance against domestic rivals and after its withdrawal from Japan last year."

P&G has filed another suit against private-label copycats -- their third in the past several months. "P&G claimed First Quality ... was manufacturing and distributing products that copied Tampax Pearl packaging..." A previous post on this subject is here.

CVS announced that a couple top execs, treasurer and controller, had resigned and that the SEC is investigating the company over a 2000 inventory transaction. "An internal review launched in December found that various aspects of the company's accounting for the transaction were incorrect, CVS said, though no adjustments to its financial statements are needed."

Pfizer sues P&G

Pfizer is suing Procter & Gamble, alleging that P&G is making false claims for its Crest Pro Health mouthwash, causing harm to Pfizer's Listerine.

Pfizer said in the lawsuit that P&G falsely claims that four out of five dentists recommend Crest Pro Health for reasons related to the product's efficacy, superiority or other characteristics. Yet, it added, P&G ''has no substantiation for either claim and neither statement is true.''

Quck notes

A few items we've come across today:

• Procter & Gamble says they are planning on more lawsuits against private-label imitators. We reported on this previously in this post.
• Metro, the German supermarket giant, is planning to enter the Pakistani market, with stores in Islamabad/Rawalpindi, Lahore and Karachi.
• Walmex, Wal-Mart's Mexican division, announced that it will open 120 new stores in 2006.