By Elaine Wong

For economically pinched consumers, trading down to private label for stuff like cleaning solvents and tissues can seem like a no-brainer. You may feel like a cheapskate if you eschew Cheerios for the store brand, but Kleenex? Not so much.

That, of course, is a huge problem for Kimberly-Clark, the maker of Kleenex. As Hedy Lukas, K-C’s vp-of integrated marketing communications admits, “I won't pretend that private label isn't making inroads as consumers are looking to trade down.”

In an indication of the pressure K-C is under, the company is tinkering with what may be a last resort: Pricing. In an April conference call with analysts, CEO Tom Falk mused that, “If a $5 price point is what moves the volume more effectively with some account, [it's about] making sure you can get there with the right product.” That came after K-C's consumer tissue sales fell 8 percent in the first quarter.
Procter & Gamble has the same headache. The company, whose Pampers and Puffs products compete directly with K-C, recorded a 1 percent organic sales growth, far below its long-term goals of 4 to 6 percent. (For the next quarter, P&G now expects organic sales growth to fall between zero and 3 percent.) To cope with the recession, it's been increasing prices and cutting back on marketing spend.

P&G is also scrutinizing every dollar of that spend. The company cut its first quarter U.S. ad outlay by an estimated 20 percent, per Nielsen, but CEO A.G. Lafley said the company's strategy, in down times, will be to continue growing its “share of voice” by taking advantage of discounts in the media biz. 

Consumers are doing their own bargain hunting. Volume on Tide—P&G's largest North American brand—fell in the “high single digits” and value share in all retail outlets was down 3 points to 38 percent, as consumers flocked to cheaper competitors. Part of that presumably came from P&G's low-price detergent Gain, which grew 19.5 percent, in dollar share, per IRI data ending April 19. Still, Gain is nonetheless pricier than store brands, notably Walmart, whose Everyday Elegance competes with Gain and Tide. In response to private label,  P&G and others are trumpeting value messages, which promise more for the money. P&G’s dish care brand, Dawn, for instance, introduced a premium product, called Dawn Hand Renewal last fall that claims multiple cleaning benefits plus some moisterizing thrown in (what no tooth whitening as well?) P&G has taken the same approach for its Mr. Clean brand. A spot by Grey, New York, for instance, shows the popular cleaning brand doing the work of three generic cleaners combined.

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