After a string of acquisitions, including hair colour icon Clairol in 2001 and German hair care giant Wella in 2003, Procter & Gamble is to add yet another portfolio of brands to its expanding business. This time the focus is on laundry detergents, taken from US rival Colgate-Palmolive in a number of Western European countries.
The acquired detergent brand portfolio, with combined retail sales of over US$100 million (€107million) includes Axion and Gama in France, Dinamo in Italy, Ajax in Sweden and Dynamo in Denmark.
Accounting for over a third of the laundry detergent market in Western Europe, Procter & Gamble is the undisputed leader in the region. The newly acquired brands are set to increase its regional share by approximately two percentage points to nearly 36% in value, with gains being even more prominent at national level.
Higher margin business focus for Colgate
Colgate’s disposal of its heavy-duty detergents business in Western Europe has been subject to much industry speculation. On the whole, net sales of the company’s household care division have experienced a gradual decline of around 11% in the last five years. The decline has revealed a weaker focus on this segment in preference to more dynamic activities in the hygiene and personal care sectors, particularly oral care in Western Europe.
As a result, while its oral hygiene sales increased by almost 8 percentage points in Western Europe in 2002, its laundry detergents dropped in value by a further point over the previous year. Colgate’s strategy of sidelining its detergents business became most apparent following the disposal of the Viva brand in Mexico, which was handed over to its global competitor Henkel in 2001.
Mixed fortunes for Procter & Gamble’s laundry detergents
At the same time, Procter & Gamble’s laundry business has experienced instability across a number of international markets in the last two years. Downward price pressures from retailers, coupled with a weaker economy have led to moderate growth in its domestic US market. Increased price sensitivity among consumers made sales of its premium laundry detergent brand Tide stagnate in 2002. Although this was partly mitigated by a stronger performance of two profitable US brands – Gain and Bounce- the company’s regional position remained relatively static.
Meanwhile, the company’s presence in Africa and the Middle East has been severely hit by anti-American boycott campaigns, which peaked during the first half of 2002. As a result, its share of the laundry care sector in the region dropped by a massive five percentage points last year.
In Western Europe, Procter & Gamble has recently extended its four core brands – Ariel, Bold, Daz and Fairy, into a multitude of innovative detergent formats and formulations. The increased popularity of the colour and non-bio variants of laundry tablets, for instance, underpinned Ariel’s dominant share of laundry care in Western Europe in 2002.
The revolutionary launch of Ariel Liqui-Tabs in 2001 made shortly before Unilever’s introduction of Persil capsules, reinforced Procter & Gamble’s intentions to keep a competitive edge over its rivals in Europe. However, despite maintaining leadership in Western Europe, Ariel’s regional performance has been dampened by an overall decline in sales of powder detergents and increased competition from rivaling brand Persil.
Acquisition adds to local strength
The acquisition of Colgate’s detergent brands, which have strong credentials in their national markets, will no doubt strengthen Procter & Gamble’s respective shares. The most significant impact will be in France, the second largest laundry detergent market in Western Europe after the UK. Falling closely behind Henkel and market leader Unilever, Procter & Gamble currently takes third position in the country. The acquisition of Axion and Gama will expand the company’s share by almost six percentage points,making it the largest player in the €1.4 billion laundry detergents market in France.
The acquisition of the Dinamo brand in Italy, the fourth largest laundry detergents market in Europe, will strengthen P&G’s leading position by approximately 1.3 percentage points, warding off intensifying competition from rival Henkel and Reckitt Benckiser brands.
With the takeover of Sweden’s Ajax laundry detergent and Denmark’s Dynamo brand, P&G will mark its expansion in the Scandinavian region, the traditional bastion of its rival Unilever. In Sweden, the company’s share of laundry detergents will go up by 6% to reach over 23% against Unilever’s dominant 33% share of the market. While in Denmark, the integration of Dynamo will increase P&G’s share of laundry detergents up to 18%, a close match to its nearest competitor Sara Lee.
Following a disappointing performance in fiscal 2001, Procter & Gamble’s sales and profits bounced back in 2002. Backed by the company’s sound financial footing, as reported in their 2003 July-September quarter earnings, the acquisition of Colgate’s laundry detergent business is a clear signal to the industry that the company is firmly back on track.