Lowering the Suds

Few British battles have been waged more noisily than the fight for the nation's soap and detergent market. Warring over the $192 million-a-year business, Lever Brothers & Associates Ltd. and Procter & Gamble Ltd. have been spending some $45 million annually wooing housewives with everything from giveaway glassware and plastic daffodils to door-to-door sales calls by costumed "Fairy Snowmen." Now, under government pressure, the war--and the suds-makers--are taking on a new pitch.

Deescalation. Arguing that all the high-volume advertising and promotion is not only unnecessary but also adds about 25% to the retail price of the products, Britain's regulatory Board of Trade has ordered the two companies to de-escalate. Specifically, the companies were forced to agree to cut out promotion gimmickry and slash prices by 20% on one brand in each of the three major sectors of the suds market: white and blue detergent powders and soap powders. The companies can still market their other brands as they see fit, but the board figures that the new two-year experiment will, by reducing their sales revenue, result in less advertising--and lower prices--all around.

As the subsidiaries of U.S. and Anglo-Dutch parents, which grapple with each other in markets all over the globe, P. & G. and Lever naturally did not give in easily. The pressure to de-escalate began last August, when a Monopolies Commission study found that, though neither P. & G.'s 46% share of the market nor Lever's 44% constituted a monopoly, the expense of their competitive practices was "against the public interest." The commission recommended that they cut their promotion budgets by 40%, pass a 20% price reduction on to the consumer. The Board of Trade, taking a righteous stance as the consumer's champion, promised to see the recommendations through.

Understandably, many British businessmen were outraged at the bureaucratic attack on the modern selling practices that have made P. & G. and Lever two of Britain's most profitable companies. Compared with the 11% the average manufacturer earns on his invested capital, Lever earns 16% and P. & G. earns 37%. "High-pressure marketing," said London's Observer, "is the lubricant to economic growth."

The Board of Trade, in eight months of bitter negotiations, was not impressed by the companies' argument that massive promotion was necessary for high-volume sales, which, in turn, permit low-cost mass production and spending for research. The board's president, Douglas Jay, threatened mandatory across-the-board price reductions. Lord Cole, Chairman of Lever's parent, Unilever, vowed to fight against that possibility "by all legal means."

Extra Value. When the compromise agreement finally came, the companies lost no time getting their low-priced, low-promotion suds to the market. P. & G. slapped "Extra Value" labels on its Tide detergent, and Oxydol soap powder dutifully cut its prices by 20%. Lever followed with its Square Deal Surf, also selling for 20% less than the old stuff. Early reports had British housewives snapping up the cut-price products by the armload.

This file is automatically generated by a robot program, so reader's discretion is required.