Fekkai Goes Mass As P&G Meets Consumers "Where They Shop"

Procter & Gamble's decision to take its Frederic Fekkai salon hair-care brand into the mass market exemplifies its approach to meeting consumers where they shop, says CEO Bob McDonald.

During a Jan. 28 call with analysts, the company announced that it is launching the Fekkai Classic line to the mass market, positioned as a "super-premium" offering in that channel.

The rollout follows on the heels of a push to "significantly" improve and expand the brand's salon offerings with the introduction of Fekkai Advanced, a range of products exclusively for high-end salons and department stores worldwide.

"Our principle as a company is to have our products for sale wherever the consumer wants to shop, whether that's online, whether that's in the specialty store or whether that's in a professional salon," McDonald said.

Asked whether the entry of the brand into mass could eat away at sales of products sold in salons and department stores, McDonald noted that the formulas for each collection are "different," enough that they should not compete.

"We have a responsibility to work with retailers and consumers to differentiate those offerings based upon the consumers who shop in those specific channels," McDonald said. P&G purchased Fekkai in 2008 (¹ 'The Rose Sheet' April 7, 2008).

The strategy to diversify brand offerings is in line with the company's goal of making 2010 a year of innovation in which it will expand its product portfolio vertically, horizontally and into geographic white spaces (² (Also see "P&G's "Year Of Innovation" Opens With Glimmer Of Recovery" - HBW Insight, 2 Nov, 2009.)).

P&G is one of a number of companies in recent years that have moved traditionally salon-only brands into the mass market. Alberto-Culver, which acquired the Nexxus salon brand in 2005, subsequently introduced the range to mass doors, though it maintained its same salon formulas and price points (³ (Also see "Nexxus Mass Market Launch Will Be Backed With $30 Mil. In Ad Spend" - HBW Insight, 31 Oct, 2005.)).

Another example of P&G's diversification push is the expansion of the Oral-B toothpaste brand in Brazil. The brand already captured a 20 percent market share in pharmacies since its recent introduction in the channel; now the company is building upon that success with the "second wave" of expansion into new channels, though it declined to identify which ones.

P&G also is introducing its Pro-Health formula (under Crest in the U.S.) into other regions under different brand names. For example, in Germany it was recently introduced under the blend-a-med Pro-Expert brand.

Mid-single-digit volume growth for the firm's oral-care business contributed to an overall 5 percent increase in health-care sales during the second quarter to $3.1 billion. Net earnings grew 8 percent to $534 million.

In beauty, net sales grew 7 percent to $5.2 billion, with organic sales advancing 4 percent, the company reported. Net earnings for the unit were up 7 percent to $876 million.

"Price increases, primarily in developing regions to offset currency impacts, and favorable foreign exchange added two percent and three percent, respectively," the company said.

Looking at volume growth of individual categories, hair care increased mid-single digits due mainly to strong growth in Asia, while the salon professional sector was down double digits due to the exit of non-strategic businesses. Continued contraction of the fragrance market led to a low-single digit decline in prestige volume sales.

P&G's net sales in the quarter were $21 billion, representing an increase of 6 percent; organic sales grew 5 percent.

Net income for the period declined 7 percent to $4.66 billion. For the full fiscal year 2010, the firm expects growth of 3 to 6 percent, P&G reported.

- Eileen Francis