Battle of the Batteries

Aug. 15, 2000 -- The battery market may be getting a jolt this year, as the top two players push new products in hopes of gaining an edge in the increasingly competitive $2.6 billion battery business.

No. 2 player Energizer, for instance, last month launched a new premium-priced, longer-lasting battery called e² that could give market leader Duracell a run for its money. Energizer says the new product will last 40 percent longer and cost around 30 percent more on average than regular Energizer batteries.

Duracell, the pioneer in the premium battery segment, is also stepping up its efforts to lure the growing number of people fond of using battery-eating products such as digital cameras. The company will begin shipping the latest incarnation of the company’s successful long-lasting Duracell Ultra battery in September — the Duracell Ultra with M3 technology.

Duracell says the upgraded brand will last 180 minutes longer than a regular alkaline battery in a high-drain toy and give 150 more pictures in a flash camera. The product will also sell for about a 20 to 25 percent premium to regular Duracell batteries.

Duracell Maintains Lead

While the industry is seeing more promotional activity, smaller, value-priced producers like Rayovac are gaining market share.

“Duracell is the leading battery brand, and when you’re that big, you get shot at from a number of locations,” says Rick Anderson, vice president of existing products for Duracell’s global business management group.

And Duracell’s results of late have reflected competitors’ sniping. The unit of Gillette saw its sales fall 3 percent and its profits decline 19 percent in the most recent quarter, reflecting aggressive competitive activity, softness in the European battery market and sharply higher marketing expenses in North America.

Anderson says some of Duracell’s competitors have stepped up their promotional activity of late, offering deep discounts and free products to induce purchases.

Despite those pressures, Duracell has managed to stay on top, ringing in $1.15 billion in sales for the 52-week period ending June 18, according to Information Resources, Inc. Duracell Ultra also posted an impressive 126 percent growth during the same period with sales of $208 million.

Anderson vowed that the company would maintain its No. 1 position with some aggressive promotions in the second half of this year, which will include promotional tie-ins with the VH1 music channel. Anderson would not say how much the company plans to spend on promoting the new Ultra.

Will e² Equal Sales?Meanwhile, Energizer plans to put $100 million in marketing spending behind the e² brand, which is the biggest new product launch in the company’s history. The new brand could also give Energizer a much-needed boost to sales.

Even though Energizer only started shipping e² in mid-June, the company said the brand accounted for most of its nine percent sales increase in North America for the quarter ended June 30, 2000.

Apart from e², high inventory left over from the Y2K buildup tempered Energizer’s North American sales, while worldwide sales in the quarter rose only one percent to $402.8 million, partially due to weak foreign currencies.

Energizer’s executive vice president of worldwide sales and marketing, Randy Rose, says he’s optimistic about e²’s sales prospects, especially given the increasing usage of high-drain devices. “e² is something we think has a tremendous development curve,” says Rose. “As you look at the total category, about 18 percent of purposes are high-rate high-drain categories.”

Rayovac Gains ShareBut many market watchers wonder if consumers will pay up for longer-life batteries. Known for its value-priced offerings and commercials starring Michael Jordan, Rayovac’s steady growth highlights many consumers’ focus on value for money. The company posted a 26 percent increase in worldwide sales last quarter, while its share of the U.S. market rose 24 percent to$337 million for the 52 weeks ended June 18, according to IRI.

Consumer Reports’ latest battery review in December 1999 showed that Duracell’s Ultra outlasted other alkaline batteries by a wide margin in such high-drainage devices as digital and automated flash cameras.

But, the consumer magazine said using lesser brands would be more cost effective, even though consumers would have to change batteries more often. “You can buy from two to five garden-variety alkaline cells for the cost of just one Ultra AA,” reads the magazine’s review.

Some Wall Street analysts agree. “Although Ultra share gains are encouraging, we have still not seen evidence that Ultra technology advances are being translated into any sort of cost or efficiency advantage,” writes Catherine Lewis, consumer products analyst at Morgan Stanley Dean Witter.

Duracell’s Anderson is unfazed by criticism of the premium strategy, adding that there will always be customers who buy according to price — and those that will pay more for performance. “In many ways, we welcome Energizer’s entry into the premium segment because it does validate what we’ve thought for the last 18 months — that consumers love this,” says Anderson.