Will a German laundry import give Walmart leverage with P&G?

Discussion
Jul 13, 2015

Backed by TV commercials, Walmart has brought Persil, one of Europe’s most popular premium laundry brands, to the U.S. as an exclusive.

Walmart has said it is introducing the line, from Germany’s Henkel Corporation, to deliver more options to consumers. But a Wall Street Journal article asserts Walmart is looking to gain some leverage against P&G, which accounts for 60 percent of all sales in the U.S. laundry detergent market and 85 percent of the category’s profits.

Laundry is a key store traffic driver and P&G’s Tide is ubiquitous at not only at Walmart’s direct competitors but drug stores, dollar stores, Staples, Home Depot and elsewhere. With its recent re-commitment to being the "low-price leader", Walmart is looking for better pricing and promotions to stand out in the category and earn a fatter margin in laundry.

But P&G’s dominant position has allowed the company to be largely immune to negotiating tactics. Last year, P&G raised prices on some Tide varieties by reducing the amount of detergent and number of loads per container. Persil, launched in March, sits alongside Tide on Walmart’s shelves and is similarly priced.

"If Persil sales do well, Walmart can shift the balance of power," Susan Lee, a former P&G employee and now a consultant at Simon-Kucher & Partners, told the Journal.

[Image: Persil ProClean]

While largely unknown to Americans, Henkel, which competes with P&G’s Ariel brand overseas and distributes Purex detergent in the U.S., has already released three television commercials to support Persil. The lighthearted commercials feature "Mr. Professional," a tuxedo-wearing cleaning expert with a "no-nonsense, down-to-business, and intent on one thing — getting out stains." So far, he’s saved a dress shirt from a wine spill at a yacht party and a dress from a chocolate smear at a girl’s birthday party.

The launch received some good press in June when Persil took over the top spot in Consumer Reports’ laundry detergent ratings from Tide based largely on tests on red wine, chocolate and grass stains.

Does it make sense that Walmart brought in Persil for leverage in its negotiations with P&G? Do you see Persil connecting with U.S. consumers and becoming a true competitor to Tide?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"It makes sense that Walmart brought in Persil for leverage, however, what has become of Walmart’s "Made in the USA" stance? I think Tide will keep its leadership role here, especially if Persil is only carried in Walmart. Tide is available everywhere and it has deep roots in the U.S. Persil will be gone in six months!"
"Walmart is always looking for ways to squeeze money from manufacturers. When a manufacturer is less susceptible to its tactics, Walmart pushes its private label goods or boosts a competitor."
"Make sense from which perspective? On paper, from Walmart’s perspective, the move MIGHT make SOME sense. From the customers’ perspective the move is silly."

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11 Comments on "Will a German laundry import give Walmart leverage with P&G?"


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Frank Riso
Guest
6 years 10 months ago

It makes sense that Walmart brought in Persil for leverage, however, what has become of Walmart’s “Made in the USA” stance? I think Tide will keep its leadership role here, especially if Persil is only carried in Walmart. Tide is available everywhere and it has deep roots in the U.S. Persil will be gone in six months!

Max Goldberg
Guest
6 years 10 months ago

Walmart is always looking for ways to squeeze money from manufacturers. When a manufacturer is less susceptible to its tactics, Walmart pushes its private label goods or boosts a competitor. Henkel has pockets that are deep enough to launch an ad campaign designed to introduce Persil to Americans. If consumers start buying Persil, it could give Walmart the leverage it wants with P&G.

Ryan Mathews
Guest
6 years 10 months ago

Make sense from which perspective?

On paper, from Walmart’s perspective, the move MIGHT make SOME sense.

From the customers’ perspective the move is silly. Walmart’s U.S. customers want cheap Tide — not a (shudder) European Tide substitute they’ve never heard of.

I’m sure Henkel is happy to gain such a large U.S. customer, particularly one that could bolster its trade relationships in Europe.

Look, Persil is a fine brand and Henkel is a great company, so presumably Persil could compete in America — provided of course Henkel is willing to run at a loss for a decade or so. But the issue here isn’t whether Persil can become a global brand, it’s whether or not this is a good move on Walmart’s part to counter P&G.

And the answer to that question, I’m afraid, is no.

Steve Montgomery
Guest
6 years 10 months ago

Can Walmart leverage Persil against P&G? The answer is yes, but only if Persil gains a reasonable share of the market. Despite its dethroning a Tide product as Consumer Reports’ top-rated detergent Persil the exclusive deal with Walmart limits it brand recognition with American consumers. Without that it will be hard for Walmart to leverage Persil against P&G.

Dr. Stephen Needel
Guest
6 years 10 months ago

Persil has to establish itself first before it can provide Walmart with leverage. That’s going to take some time and in a crowded market with Walmart’s one year exclusive, not likely to be effective for negotiating against P&G.

Gordon Arnold
Guest
6 years 10 months ago

International commerce and trade will call for vendor diversity and trade law compliance. Owning interest in a country’s manufacturing, distribution and real estate makes for easier and better trade relations. Walmart is keeping an eye on the ball here, as in the one world market of today. Anything else is just more for the pot.

Kai Clarke
Guest
6 years 10 months ago

This is just a push by Walmart, but not truly a serious threat to Tide. It is one way to manage pricing better, but there are many other competitors to Tide already in the aisle. Persil also has to compete with them as well….

Craig Sundstrom
Guest
6 years 10 months ago

I’m a little more curious about Henkel’s motives. I believe Persil—pronounced “perzil” in its home market, “purse-el” in the UK, and now, yet a third way here—is seen as a somewhat upscale brand, or perhaps as simply the market leader. Do they realize association with Walmart is likely to cause just the opposite perception here?

Gajendra Ratnavel
Guest
6 years 10 months ago

Supplying weapons to the underdog? Has worked before for many, so why not? It’s not like P&G is going to threaten Walmart, they are both on unshakable ground. Leverage is a great idea and it seems P&G is at a disadvantage in this case.

Brent Buttolph
Guest
Brent Buttolph
6 years 10 months ago

Whether or not the intent was primarily to “leverage” P&G or not, there is an even stronger case to be made here that this was a smart move by WMT—”exclusive.”

If this is a sign that Walmart is considering a move beyond relying on everyday low prices and moving beyond ubiquitous products that every grocer, drug store and even pure-play online purveyors can sell, they may be onto something here.

The challenge of course will be building brand awareness, which will be a very steep climb against P&G in this space. Three TV commercials are not even scratching the surface and in order to be successful, both Persil and WMT will need to invest heavily…not necessarily in mass media, but getting started with targeted messaging and promotions to consumers with an affinity to the category would be wise.

Interesting enough, the other major brand often outranking Tide with Consumer Reports in this category is also an “exclusive”—Costco’s Kirkland brand.

Brian Hart
Guest
Brian Hart
6 years 10 months ago
Yes, it makes sense for Walmart to carry Persil. Why not? Henkel is an $18 billion consumer products company that already sells $3.2 billion in the US (Henkel bought Dial in 2004). Persil is already a $1 billion brand globally. Studies show that Persil cleans clothes well … at least just as good, as Tide … but cheaper! What a win for Walmart to negotiate an exclusive! Isn’t it always a retailer’s best interest to carry products that deliver value? I loved Sam’s Club’s one time moto “We are your Buyer’s Agent.” Walmart’s decision also comes down to what’s best for the category … and for Walmart’s frugal customers. Usually there is some SKUs that could be cut … size and other attribute duplication … how many fragrance options does the category need? With the exception of Costco’s Kirkland Signature brand, private label continues to have only a tiny market share. I have worked in PL leadership for a top US grocer and my suppliers would brag when the were “just one formulation” behind Tide.… Read more »
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Braintrust
"It makes sense that Walmart brought in Persil for leverage, however, what has become of Walmart’s "Made in the USA" stance? I think Tide will keep its leadership role here, especially if Persil is only carried in Walmart. Tide is available everywhere and it has deep roots in the U.S. Persil will be gone in six months!"
"Walmart is always looking for ways to squeeze money from manufacturers. When a manufacturer is less susceptible to its tactics, Walmart pushes its private label goods or boosts a competitor."
"Make sense from which perspective? On paper, from Walmart’s perspective, the move MIGHT make SOME sense. From the customers’ perspective the move is silly."

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