Procter& Gamble is one of the most successful consumer goods companies in theworld.
(p. 240) The company markets its brands in more than 140 countries and hadnet earnings of $1.6 billion in 1990, and was recognized as a leader in the Canadianpackaged-goods industry.
Between 1987and 1990, worldwide sales of P&G had increased by $8 billion and netearnings by $1.3 billion. The P&G executives attributed the company’ssuccess to their ability to develop superior products to meet consumer’s needs.(p. 240) P&Gintroduced Scope into the mouthwash market in 1967, in which is became themarket leader in Canada. It is positioned as a mouthwash that effectivelyprevents bad breath while having a good taste. In 1990, Scope had retained itsposition as market leader with 32.
2% market share. Between 1986 to 1990, theCanadian mouthwash market increased in dollar sales and unit sales. Until 1987,on a unit basis the mouthwash market had grown an average of 3% per year forthe previous 12 years. In 1987, the market grew 26% due to the introduction ofnew flavors.
Since 1987, the market growth has declined to an average of 5% by1990. During the 1980’s, the market consisted of six leading brands: Scope,Listerine, Listermint, Colgate Oral Rise, Cepacol, and Plax. Plax had the mostgrowth in market share in 1988 to 1990. In 1990, 75% of Canadian householdsused a mouthwash and 65% of users purchased the product in drugstores, while35% of users purchased the product at a food store. Scope was mostly purchasedin food stores at a rate of 42%, and at drugstores at a rate of 27%. A surveyconducted in the case shows most people use mouthwash as “part of basic oralhygiene” and to “get rid of bad breath.
” Aftertwo years of being in the market, by 1990, Plax held a 10% market share. Plaxwas launched in Canada in 1988 with a unique positioning strategy as a “plaquefighting pre-brush rinse” with product benefits not breath focused, but claimedthat rinsing with Plax before brushing removes up to three times more plaquethan brushing alone. Plax is priced significantly higher than Scope and otherleading brands. Plax now stands as a threat to Scope and Scope must decide whatactions to take. PROBLEM:Bykeeping P’s goals of maintain and maximizing market share, volume, andprofitability, Gwen Hearst must decide whether to respond to the threat of Plaxby either launching a line extension, modify the current product, or maintainstatus quo.