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Makers of Dawn dish soap, Heinz ketchup, Clorox boost defenses against store brand rivals

2022 05 03T165946Z 2 LYNXNPEI420PQ RTROPTP 4 CONSUMER COMPANIES INFLATION - Global Banking | Finance

By Jessica DiNapoli and Richa Naidu

NEW YORK/LONDON (Reuters) – The makers of brand-name products such as Tide detergent and Kraft Macaroni & Cheese are bolstering their defenses against store-brand rivals like Walmart Inc’s Great Value products as shoppers’ budgets start to show signs of strain due to persistent inflation.

Executives at Clorox Co said they have seen private-label rivals make “marginal improvement” in market share, in a Monday evening earnings call. The bleach maker’s CEO, Linda Rendle, said Clorox would increase promotions – now already higher than last year – if shoppers’ wallets show more signs of stress, a tactic for competing with cheaper store-brand products.

The roughly $361 billion U.S. packaged-food and household- products sector is on alert as shoppers start to buckle under multiple rounds of price hikes, with more in the pipeline. Retailers including Walmart are partners with brand-name product makers like Clorox and Kraft-Heinz Co as much as they are rivals selling less costly store-brand goods. A bottle of 64-load Tide “Free & Gentle” laundry detergent cost $12.97 on Walmart.com on April 25, while Walmart’s Great Value “Free & Clear” brand costs $8.67 for the same number of washes, for instance.

A survey from financial services firm Jefferies found that roughly 72% of 3,500 consumers are buying cheaper grocery and household items. Inflation “will ratchet private label growth,” said Jim Wisner, founder of marketing and research firm Wisner Marketing in Gurnee, Illinois. “It most definitely is a moment.”

Separately, Dawn dish soap maker Procter & Gamble Co is shifting its marketing to make more “overt” claims about the value in its costlier products, finance chief Andre Schulten said in a call with media in April, another strategy aimed at warding off popular private-label rivals.

P&G and some other companies such as Kimberly-Clark Corp that make brand-name pantry and household staples are easing in price hikes at a slower rate than store-brand competitors, according to Nielsen data analysed by Bernstein.

On a rolling average basis, in the 12 weeks ended March 26, price hikes on private-label household care goods such as laundry detergent outpaced the increases from big brands, compared with the same time period last year, according to a Reuters analysis of exclusive Nielsen figures. Average prices for store-brand household goods rose by 15% in the same period, while major brands climbed 11.7%.

U.S. private-label household goods and beverages lost market share during the pandemic because consumers had more money from stimulus checks and were spending less outside the home, Bernstein analysts wrote.

Executives at consumer companies are also expecting to start seeing a slowdown in demand.

To promote Cascade detergent, P&G is airing TV commercials about the efficiency of using a dishwasher for as few as eight dishes. The company has also added a new easy squeeze cap for Dawn dish soap that allows consumers to use “every last drop,” Schulten said in a call with analysts.

“You will see us go into those claims and make them more overt for the consumer,” Schulten said in the media call. An 18-ounce bottle of Dawn detergent in the new squeeze cap bottle costs $3.99 on Target.com, while a 28-ounce bottle of the big box retailer’s up & up brand dish soap sells for $2.39 online.

Consumer goods manufacturers focused on basics in the pandemic and are now launching new products to stand out against private-label items. Kraft-Heinz Co offers a new two-in-one sauce and chip dip. Clorox’s new disinfecting mist is off to a “strong start,” a spokeswoman said.

Reckitt Benckiser Group Plc finance chief Jeff Carr said the company was investing in its equipment to upgrade Finish Quantum dishwasher tablets, which is “very difficult for private label to copy and keep up with.”

(Reporting by Richa Naidu in London and Jessica DiNapoli in New York; Additional reporting by Danielle Kaye in New York; Editing by Matthew Lewis)

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