After introducing premium diapers to the Chinese market, P&G has launched another high-end product. Recently, P&G's oral care brand Oral-B announced its strong entry into the Chinese market with a professional gum care toothpaste set priced at 159 yuan, a product with almost no competitors in China and completely shedding the affordable brand image of P&G's Crest. Beijing Business Today reporters found that consumers have low acceptance of the high price, but P&G itself is confident. Industry insiders believe this product can lay the foundation for P&G's complete monopoly in the ultra-high-end market, and P&G will also attempt to regain the initiative in the Chinese market through its high-end strategy.

Toothpaste priced at 159 yuan

"We are trapped in the middle of the market. Consumers are increasingly high-end, which means we are moving down." This was P&G Chairman and CEO A.G. Lafley's remark in a media interview last year. To rectify this strategic misstep, after launching high-priced diapers in China, P&G has extended its premium push to the toothpaste sector. A P&G spokesperson told Beijing Business Today that Oral-B's new home-use dual-tube toothpaste set for cleaning and gum care is mainly targeted at China's high-end consumers and urban elite. In terms of product lines, Oral-B is best known in China for its electric toothbrushes, ranging from entry-level 399 yuan to high-end 3D Bluetooth smart models at 1899 yuan, fully meeting consumer needs.

Some consumers told Beijing Business Today that compared to P&G's old brand Crest, Oral-B's new toothpaste separates cleaning and care, and this dual-tube model feels novel. However, the vast majority of consumers said the 159 yuan price is somewhat too high and not easy to accept.

For P&G, broadening its high-end product line is one of the key strategies after "slimming down." This is especially true for the toothpaste market, where P&G previously had fewer products. Currently, P&G has two oral care brands under its umbrella: Crest and Oral-B, both classified under P&G's "Health" category. Although Crest has consistently held one of the top three positions in China's toothpaste market, according to data from Euromonitor, Crest's market share in China has declined from 20.8% to 19.7%. As the blue ocean of mid-to-low-end products gradually turns red, Oral-B has become P&G's weapon to expand into the mid-to-high-end segment.

Compared to Crest, which covers multiple product lines including toothpaste, toothbrushes, mouthwash, and whitening strips, Oral-B mainly produces toothpaste and electric toothbrushes. However, the price difference between the two brands' toothpaste products is stark. Crest's official website shows retail prices for 25 toothpaste products ranging from 7.9 to 35.9 yuan. Meanwhile, P&G's Tmall flagship store shows Oral-B toothpaste retailing between 30 and 79.5 yuan, with the new 159 yuan product set to hit a new high. This price is also higher than other high-end toothpastes on the market, such as Liangmianzhen's traditional Chinese medicine pain-relief toothpaste launched last year at 59.9 yuan per tube, and Pien Tze Huang's Yahuoqing toothpaste launched in 2011 at a maximum price of 52 yuan per tube.

Constraints of high prices

Public information shows that Oral-B, a high-end oral care brand, was one of the many well-known brands acquired by P&G after its acquisition of Gillette in 2005. It is also one of the few oral care brands retained among P&G's 65 core brands after the major brand "slimming" in 2015.

Industry insiders believe that P&G's move into high-end toothpaste through the Oral-B platform is directly related to the increasingly high-end consumer market. According to AC Nielsen surveys, in the highly competitive toothpaste market, high-end and ultra-high-end new products are increasing (high-end products are those priced 120-140 yuan above the category average, while ultra-high-end products exceed 140 yuan). Together, they account for 20% of the overall market sales, with annual sales growth exceeding 40%. This indicates that the trend toward high-end products in China's oral care market is becoming more pronounced.

However, Beijing Business Today reporters found that in the market, few brands can directly compete with Oral-B's 159 yuan new product. For example, at Watsons, a 100g tube of Sensodyne Professional Repair toothpaste retails at 45 yuan; a 100g tube of NANO-UP Nano Pearl White toothpaste is 40 yuan; a 120g tube of Yunnan Baiyao toothpaste is 26.9 yuan; and high-end products from Colgate and Crest are also priced around 30 yuan. In contrast, Oral-B's new high-end product at 159 yuan contains a total net weight of 176g for two tubes.

Industry insiders further stated that Oral-B's high-priced, niche toothpaste can lay the foundation for P&G to completely monopolize the ultra-high-end toothpaste market. At the same time, through this "toothpaste strategy," P&G's shift from affordable to high-end is evident. However, whether the 159 yuan toothpaste can gain market acceptance is key to the success of this high-end strategy. Beijing Business Today reporters saw on Tmall Supermarket that the Oral-B cleaning and gum care home dual-tube toothpaste set, priced at 159 yuan, currently has zero monthly sales and zero reviews; the set with an electric toothbrush has monthly sales of 15; and the set with mouthwash has monthly sales of only 10.

When asked whether the high price would hinder sales, an Oral-B spokesperson told Beijing Business Today that the new cleaning and gum care home dual-tube toothpaste set is mainly targeted at China's high-end consumers and urban elite. A P&G spokesperson also stated that in terms of marketing, the high-end Oral-B toothpaste will not follow the large-scale advertising campaigns of previous P&G product launches, but will instead select online channels and premium retail channels, such as Watsons and Walmart's high-end supermarket channels.

P&G's high-end transformation

Zhao Xianghui, an observer in the daily chemical industry, further told Beijing Business Today that even though high-end products face issues of narrow consumer groups and difficulty in increasing sales, the high-end strategy is a must for P&G. P&G is also changing its past approach of "casting a wide net" and laying out product lines across all areas, instead beginning to make targeted product arrangements. Zhao also believes that P&G is gradually shedding its past affordable, approachable image and upgrading its strategy by relying on high-end products.

Since entering the Chinese market in 1988, P&G has been busy capturing market share, focusing on the mass market. Constrained by the rapid entry of domestic and foreign daily chemical companies into low-end products, P&G had to lower its profile to cater to and compete for the mid-to-low-end consumer market. After more than 20 years of effort, P&G completed its occupation of the low-profit, high-volume market. However, in this process, P&G gradually lost the mid-to-high-end market. Over the past year, P&G has been simplifying the company by "abandoning" products to accelerate sales growth. After selling, discontinuing, or eliminating about 100 underperforming brands in August 2014, in December 2015, P&G streamlined one-sixth of its Olay products that did not align with the anti-aging positioning or had poor sales.

In the industry's view, high-end brands are like the tip of the pyramid and also the most profitable part. But P&G currently has a significant gap in this area. Therefore, quickly reshaping a high-end brand to compete with the tip brands after streamlining its product lines is P&G's top priority. P&G has clearly recognized this. In 2015, P&G successively launched high-end products including Pampers premium diapers, Ariel laundry detergent pods, and Whisper Future·Extreme Care sanitary pads, all reflecting its strategic transformation.

Industry insiders believe that for P&G, although Crest's overall market share is higher than that of Yunnan Baiyao toothpaste, which is positioned in the mid-to-high-end, Crest has been suppressed by Yunnan Baiyao in some regional markets. Whether from its own development strategy or market competition strategy, P&G needs a high-end oral care brand to enter the Chinese market to enhance its competitiveness. As the global leader in electric toothbrushes and also holding a leading position in the toothbrush market with annual sales of 4.5 billion yuan, Oral-B has inherent brand advantages to bolster its toothpaste business, which is also advantageous for P&G. "Overall, after 'slimming down,' P&G no longer expects to occupy all categories of the daily chemical market, but rather attempts to gain leadership in core markets through precision marketing. However, due to intense competition in all categories of the daily chemical market, P&G needs time to win, and it also needs absolutely innovative and differentiated products."

Source: Beijing Business Today

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