The old neighborhood laundry play has changed. Not in terms of where you decide to feed machines whole rolls of quarters. But in how much detergent, as measured in the neighborhood of what you think you need, you end up throwing down the drain. That’s ostensibly been the reason for the introduction of detergent pods, those compact plastic sacks that contain pre-measured amounts of soap for a satisfactory result. Waste not, want not, right?
Unless you’re one of the makers of the pods, the sales of which have resulted in an actual decrease in dollars flowing to corporate coffers. According to the Wall Street Journal, detergent sales are down more than 5% when compared to the pre-pod days of three years ago. That, along with consumers developing a budding crush on pods, prompted the CEO of Church & Dwight Co., which makes Arm & Hammer detergent products, to declare, “Pod is killing the laundry detergent category.”
Of course, James Craigie’s comment also might have something to do with the fact that rival Procter & Gamble claims up to 75% market share of the pod space. Which has P&G’s CEO, Robert McDonald, taking a slightly different viewpoint.
We are laser focused on making sure consumers get the right dose, and that may have consequences for our competitors.Robert McDonald, CEO, Procter & Gamble
To pod or not to pod
While P&G seems to be doing well with pod sales, the shift in detergent usage and buying habits has had broader implications for the industry as a whole. And even though P&G’s CEO seems fully supportive of the pod movement, going that route could wind up being more costly in the long run:
- The Journal cites numbers from Deutsche Bank Markets Research as indicating that consumers pony up about 25 cents per Tide pod, judging by Walmart’s prices, as opposed to just 20 cents per load for liquid or powdered Tide
- Competitors’ cut-rate detergents can be had for as little as 7 cents per load
- While some stores are selling more of the pod type of detergent, the margins on those sales are actually about 5% lower than those for liquid and powdered detergents, which are reportedly down by 15% at one Texas supermarket chain. A spokesperson says that, with wholesale prices already high for the pods, retailers are hesitant to mark them up even higher. “We don’t lose on them, but we don’t make much of a profit,” she told the Journal
- The convenience of pods has some consumers using them in select situations, such as for a vacation where packing space is limited, while also using liquid/powdered varieties at home. As is usually the case, people seem willing to pay more for the sake of convenience
- In order to save on production, packaging and shipping costs, detergent makers have long been offering more concentrated versions of their products – a trend that has some consumers over-pouring and over-using. While exact-dosage pods would seem to alleviate that problem, they actually might be causing it: Consumers reach for the concentrated products because they look like a better value, only to over-pour that value right down the drain
- Arm & Hammer is looking to offer more concentrated versions of its detergents, even as its CEO rails against the pod options that make those concentrated soaps look attractive. There might also be something to the fact that, with lower-priced detergents like those from A&H, consumers worry less about over-using…something that can’t be lost on the company’s CEO as he faces down P&G’s 75% pod market share
- Craigie went on to note that new products should expand the revenue pie for manufacturers and retailers, not shrink it, saying, “[w]hat kind of a new product is good when it’s hurting the total category?”
“New and improved” — for you…or for me?
Beyond the numbers, then, the switch to pods poses a bigger question: Should innovation be all about the bottom line – no matter how popular the new and improved product might be with customers?
One writer has gone so far as to suggest that the whining he’s picking up from A&H’s CEO is along the lines of some of the noise made by record companies when digital music formats became popular around the turn of this century. Rather than embrace those changes and meet consumer demand for them, some record companies, writes Tyler Wells Lynch, “…targeted the consumers, fined them, penalized them, and preempted a host of new-market opportunities that iTunes, Pandora, and Spotify would later scoop up.”
Are detergent makers in for the same sorts of changes? So long as the pods continue to prove attractive and convenient for customers, and so long as respectable margins can be maintained by retailers, it’s hard to see how even the grumpiest of CEOs can wash those pods out of his corporate shorts.
As is almost always the case, the sooner detergent companies climb on the consumer-led bandwagon, the better bottom lines will likely start to improve. With consumers paying more for a product they love. And with companies coming up with ways to make that demand profitable.
It may take a while. Chances are, it’ll all come out in the wash.