The discount retailer is going up against industry giant Procter & Gamble, one of its key suppliers, with its Sam's American Choice detergent.
Wal-Mart Stores Inc. is about to put the detergent business in a spin.
The giant retailer is introducing a private-label laundry soap called Sam's American Choice. The detergent began hitting Wal-Mart's shelves nationwide last week and should soon be in all 2,457 of its stores.
The new product is likely to challenge Tide, a hugely important product from Procter & Gamble Co., one of Wal-Mart's most important suppliers. People don't wash their clothes more often or buy extra detergent just because they see a new brand at the store, so Wal-Mart will have to take sales from somewhere. The new Wal-Mart detergent is packaged in boxes and jugs whose background color is close to Tide's, but it is priced about 25 percent to 30 percent lower.
Stores sell more laundry soap than any other non-food consumer product. Currently, Tide is the market leader in detergents, with 38.6 percent of the U.S. market, according to P&G. P&G calls Tide one of its top brands, and some analysts say it is the biggest P&G brand of all.
"Wal-Mart's really going after the family jewels with P&G," said Burt Flickinger III, managing director of Reach Marketing in Westport, Conn.
What makes detergent especially attractive to the huge discount chain is that Americans will often make a special trip to the store to buy more soap. They spend about $4.5-billion on laundry soap annually and buy it about every two weeks.
Wal-Mart, with $137.6-billion in annual sales, accounts for about 20 percent of U.S. laundry detergent sales, analysts say.
"We saw a void in the marketplace for a product at that price point and quality level," Wal-Mart spokesman Mike Maher said.
Both companies insist Wal-Mart's move won't smudge its close relationship with Procter & Gamble. Wal-Mart founder Sam Walton and the consumer-products giant pioneered the concept of a retailer and manufacturer sharing inventory responsibilities and sales data years ago. P&G, based in Cincinnati, was among the first companies to open an office near Wal-Mart headquarters in Bentonville, Ark., just to serve the retailer.
"They're a good supplier of ours and we expect to continue growing fully with them," Maher said.
Wal-Mart's action "in no way strains our relationship," said Molly Humbert, a spokeswoman for Tide. "We'll continue to actively market our brands."
P&G, which invented laundry detergent and sells half of the laundry soap in the United States, has beaten out store brands from other retailers in the past. But Wal-Mart's sheer size could make its store brand a more formidable competitor.
Wal-Mart is offering only four varieties of its detergent line, including two sizes of powder and two of liquid, so the rollout isn't its largest private-label effort ever. It already sells private-label pet food, soda, cookies and some household cleaners, among other products.
Last October, Wal-Mart began selling its own detergent at its Sam's Club warehouse chain, but that wasn't considered a challenge to premium brands because shoppers at Sam's Clubs look primarily for a good price.
Unlike many products, laundry detergent doesn't yet have a truly global brand. P&G sells its products under different names in different countries, leaving room for Wal-Mart to create the first really global detergent.
"It's a test of who's the brand here," Wal-Mart or Crest and Tide, said Paul Kelly, a principal at Silvermine Consulting Group, Westport, Conn., which advises manufacturers selling to Wal-Mart and others.
Once Wal-Mart has laundry detergent, it could easily branch out to other household items, Kelly said. In another sign that the retailer is looking to feature more exclusive items, General Electric Co. recently agreed to sell a new line of small appliances, such as toasters and coffee makers, exclusively in Wal-Mart.
Still, private-label laundry detergent is ticklish. Currently, total private-label detergent accounts for just $117-million, or 2.6 percent of the U.S. market, according to Information Resources Inc.
"In sour cream, it's the same stuff whether it's private label or a branded good. With detergent or skin care, it's harder to say it's the same," said Heather Hay, an analyst with Merrill Lynch. She thinks Wal-Mart's detergent will be a "good niche product," but adds: "I don't necessarily think it will set the world on fire."
Huish Detergents Inc., a closely held manufacturer in Salt Lake City, is manufacturing the new detergent for Wal-Mart. The company is using four plants across the country to service Wal-Mart and is increasing its factory capacity for the retailer and other clients, said Dan Huish, president and chief executive.
He declined to give sales expectations for the Wal-Mart detergent, which was in development for about a year.
Huish also said he sees the detergent competing with the entire market. "I think it will affect everyone a little bit," he said.