Defensive Strategy, Super Bowl

The Super Bowl Detergent Battle

3 Feb 2017  

On Sunday, the Patriots and Falcons will take to the field in Super Bowl LI. Each team will be looking to pick up yardage and put points on the board in hope of emerging the victor. It should be a terrific battle.

The football game isn’t the only competition we will see. This year’s Super Bowl is shaping up to be a battle of iconic brands. T Mobile will be fighting Sprint in the battle of wireless providers; Go Daddy, Squarespace and will all be struggling to get an edge in the web services category; and Lexus and Mercedes will have competing high-powered sports cars.

Perhaps the most intense battle will be between detergents. This is the one to watch.

The Players

The incumbent is Tide, P&G’s enormous and dominant brand. Tide dates back to 1946 and has about a 35% share in the U.S. detergents category. It is a premium brand and one of P&G’s crown jewels.

The challenger is Persil ProClean, a brand owned by German packaged goods giant Henkel. Persil is a huge global brand; it is sold in more than 60 different countries with a premium positioning. Henkel got a foothold in the U.S. market with its purchase of Dial Corporation in 2014. That gave Henkel the Purex brand, a discount player.

Henkel launched Persil in the United States in 2015. Its big break came when Walmart agreed to support the new brand. Tide had been the dominant detergent for decades, and any time there is only one strong player in a category, the retailer doesn’t have much leverage in negotiations concerning price and support. Walmart was clearly tired of dealing with Tide and wanted a competitor.

Last year, Henkel ran a fifteen second spot on the Super Bowl. The ad didn’t stand out. The Kellogg Super Bowl Advertising Review panel gave it a grade of D.

After last year’s weak showing, I anticipated that Henkel would soon abandon its quest to build Persil. Attacking a strong brand like Tide in a routine category is not an easy task. Henkel was losing a ton of money as it attempted to build trial and repeat on Persil.

I was wrong. This year, Persil is back on the Super Bowl. Henkel is continuing the fight.

P&G is no longer sitting back. Persil is clearly committed and hence a threat. As a result, Tide is also running an ad on the Super Bowl, so we have a remarkable battle taking shape—a clash of global packaged goods titans.

The Stakes

The stakes are high. In the United States, detergents are a $7 billion category. Henkel is apparently hoping to take 10% of this. This means P&G has a lot to lose. If detergents have a 40% gross margin (just a guess), then a proportionate loss would be about 3.5 share points on Tide, or $245 million in revenue and $98 million in profit. If you value that as a perpetuity—the correct approach, because once Persil is established in the category the brand will remain—then at a 10% discount rate, P&G has a $980 million problem.

So watch the fight.

Things to Watch

There are several things to consider on Sunday.

How long are the spots? Fifteen seconds? Thirty? Longer?

How will Persil try to differentiate? It needs to communicate something impactful.

How will Tide respond? It needs to remind Tide users why the brand is so special.

You can see Tide’s teaser spot here.

It’s a battle for the ages coming up on Sunday. And perhaps a good football game, too.

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