We all use AA and AAA batteries, even today. But have you noticed a shift in demand over the years?
I've noticed an increasing number of devices using lithium-ion, but I haven't noticed and our forecast doesn't show a major shift in demand away from round cell batteries. On one hand you have two streams going parallel; there are more and more devices, and the good news is there's not only more devices using lithium-ion but also more devices using round cell batteries. Of course, with a leaky bucket, of some of the devices using round cell batteries moving to lithium-ion. As long as there's more replenishing devices using round cell batteries, the way I predict the market is 100 plus or minus two.
Why did Duracell never release a disposable lithium AA battery, like Energizer Advanced?
We have AA Lithium batteries and we're even selling them in Europe and Latin America, however we don't believe that the lithium round cell battery provides the consumer with the type of value that they need. There are two very simple reasons for that: one, it's a very expensive technology that has a very specific benefit of rapid energy burst that comes to life in a snap-and-shoot camera. However, as you may have noticed, the number of snap-and-shoot cameras using these disposable round cell batteries are disappearing very rapidly. So in a way, in the device where the lithium round cell battery really provides any consumer advantage, that market is shrinking very rapidly, while investing into a major infrastructure to produce round cell lithium-ion battery is a very costly affair.
Considering that the lithium-ion battery would typically cost up two to three, up to four times more than an alkaline, it's very difficult to justify that it's a very good value proposition, and that's probably one of the reasons why that segment is pretty flat to declining 2 percent of the market. I think there are many more areas that have high potential to delight the consumer and to make a difference in the marketplace than focusing, for us at least, a lot of research and development in disposable lithium batteries.
Are your rechargeable products gaining popularity? What percent of the business do rechargeable batteries represent?
The rechargeable batteries, I think, will have a huge advantage in toys. When you have children, you see how often you drain the battery, and I personally use rechargeable batteries in some of my boys' toys. Like the trains, when my seven year old goes on and on and on and I'm out of rechargeable batteries, I actually, during one day can use at least two or three sets of alkaline batteries. So there is a big advantage for some very-high-usage toys. It also is, however, a hassle and a habit change. That's why that market is still relatively underdeveloped. It's slightly more developed in Western Europe, where you have up to 15 to 20 percent of the market in rechargeable batteries, while I think in the U.S. we're below 10 percent or something like that.
As more devices move to proprietary and even non-removable batteries, how will Duracell remain relevant in the market?
In a way, the smartphone delivers more than what you'll ever be able to use, because you'll be limited by the battery.
We as a Duracell company, and as part of Procter & Gamble, we will always strive to remain relevant with changing consumer habits. For Procter & Gamble this is nothing new. The habits of washing detergents, diapering and even cosmetics and shampoos have always evolved, but this is our job to stay one step ahead and in this sense we are great believers in staying with the core where we have the right to continue winning, which is, as I mentioned to you, the alkaline battery market that, for the foreseeable future, is going to be a big and viable, and even in many areas, growing market.
Now, talking about the U.S. and Western Europe, with virtually every other region, especially in the developing world, the alkaline battery market is growing very rapidly, because there you have a dynamic where converting the market from the old fashioned low-performing zinc batteries that have maybe one-tenth of the power of alkaline, and people are moving to the more performing alkaline batteries. That's why the number-one priority is that we are the leading battery company and we believe that we have a right to win with the disposable alkaline batteries. However, with the changing consumer habits, we see a very big trend in smartphone usage, because the smartphone is not anymore a phone -- actually the smartphone should not even be called the smartphone, it should be called a universal personal device, because only three percent of the time, people are using a smartphone for talking. Ninety percent of the time they are using it for surfing, texting, Googling, listening to music, watching films, reading your [Engadget] articles and downloading their boarding passes, etc... this is a trend that is going to continue.
When I talk about smartphones and smart devices, I would probably put them together with the pads, the tablets. I see them more and more as an extension of the same type of segment between smartphone, and then over time, as you rightly point out, there is going to be even some hybrids between phone, tablet, different sizes and so on. So that segment is going to be growing, and being very important and true to our heritage of trying to resolve conflicts, there is today a huge conflict that you and I and every consumer faces: the desire to use the smartphone and the ways to use the smartphone exceed greatly the capability of the smartphone being charged throughout the day. So in a way, the smartphone delivers more than what you'll ever be able to use, because you'll be limited by the battery. This is a wonderful dilemma to have and this is a wonderful challenge to have and is a typical challenge that Procter & Gamble and Duracell are eager to resolve.Can you tell us what motivated the joint-venture with Powermat?
So going back to Duracell and Procter & Gamble, when we often do something, we call it the landscape assessment for the future, and every business, every company is doing that: looking at where the business is today and where it's going in the future. In this landscape assessment, we clearly see, as I mentioned, the area of smart charging, wireless charging, on-the-go charging is going to be an important area linked to the increasing smartphone and smart device usage. As a matter of fact, we have spent many years -- it's nothing new -- in looking at how we can work to improve the lives of people.
Every company faces a very simple crossroads, sooner or later. Are we going to do this alone or are we going to look for partnerships with people that we believe have something, whether it's a technology, a process or a way of thinking, that we believe will be better off than trying to do it ourselves. At Procter & Gamble, we do have a very strong culture of working more and more in partnerships, technology partnerships and outsourcing some areas -- we call it Connect and Develop, and it is in this vein of thinking that I, actually very early zoomed in on the company I felt had the best understanding, and the best product range in wireless inductive charging, and this happened to be Powermat. This led us to talking to each other and that led to a marriage that led to the Duracell Powermat JV.What will we see for inductive charging three, five, even ten years out?
I am hesitant to label a technology because Duracell Powermat is not about a technology, it's about delivering a delightful experience to the consumer, meaning staying charged versus a situation where you always fear that you'll be out of power, or that you'll not be able to go through the day. As I said about the evolution of what we're delivering, we're going to be very open to the technology that is going to deliver the most delightful experience, so whether this is inductive charging, conductive or loosely coupled, this is not important. We are not a technology company per se on this one -- we are about delivering a consumer benefit, better than anybody else, and the technology, we'll always be able to either develop it ourselves, license it if we need or work with someone else to get it as long as we are always providing the best wireless charging.
To your question, regarding how we label technology, the best analogy I can think of is when Henry Ford developed the car and there were no petrol stations. Today we have all these beautiful cars called the smartphones or the smart devices, but the only petrol station you have is at home or at work where you have a socket and the occasional socket that you find somewhere in the city and that's not very handy. I do believe that there's going to be, in the future, the need for the charging station built up. This is one of the things that we are working with, you may be aware of the partnership that we have with Madison Square Garden, where Madison Square Garden, this iconic venue, is going to equip its building with Duracell Powermat enabled charging mats built into the tables, bars etc... So in a way, Madison Square Garden will become the first charging station for smartphones in New York.
In five to ten years from now, when you walk into somewhere to have a sandwich or somewhere to have a coffee or a movie theater or an airport, you'll be able to find this charging station service...
I believe that, in five to ten years from now, when you walk into somewhere to have a sandwich or somewhere to have a coffee or a movie theater or an airport, you'll be able to find this charging station service -- that's my vision. You'll be out of the need to worry about your phone lasting throughout the day. I also believe that, in five to ten years from now, having this service of power and staying charged will become as natural as being able to hook onto a wireless network. Do you remember the days when you only had the cable at home at best and at work, and you had some very specific areas or venues where you could get wireless reception? Today you get wireless for free virtually everywhere, and today, that, I believe, is going to be equally relevant for the consumers. Especially for New Yorkers, because at least when you live in a city or use your car a lot, you can always claim that you can put your phone in your car and charge it, but New Yorkers that are always on they go, you don't use cars, you have very busy days, the day never stops before ten or eleven -- well, good luck with your battery unless you find the right charging stations! Are you in talks with any manufacturers to standardize battery types in devices like cellphones and digital cameras?
We are not, today, in talks to do this, but it is a wonderful question. It actually is so relevant because, when I asked, as I've mentioned that I'm not an expert on batteries, but I am an expert on consumers based on my 26 to 27 years of work with Procter & Gamble. When I said 'Hey guys, the consumer needs a better battery in their phones and smartphones.' Nobody told me 'Oh, it's impossible.' The first answer was not that it's impossible but 'Well, it's so complicated and so unpredictable.' I said 'What do you mean, complicated and unpredictable?' Well, the answer was 'Everyday, there are new smartphones and every single phone comes with different dimensions, different cavities and different requirements, so we can't proactively develop a solution, we almost reactively look at what the manufacturers come up with and that means that by the time we have then developed a solution for one manufacturer, that phone is already obsolete and they come up with something new.'
The Verizons in this world, the AT&Ts of this world, they would love to have people that have longer lasting batteries so that they can use up the capabilities of their phones and obviously make more revenue.
So we don't today have a system where we can take all our best scientists, all our best technologies, develop a superior lithium-ion battery and then go out in the market, because there will be no buyers. No manufacturer today has a standardized battery -- it takes us time to develop the right technology, to put in all the intelligence, all the juice, all the capabilities in that battery, but we're never given that time. That's why there's a disconnect between the way the market operates today and our capabilities to develop a superior product that's going to be a superb win for the consumers and for the manufacturers and for all the providers. The Verizons in this world, the AT&Ts of this world, they would love to have people that have longer lasting batteries so that they can use up the capabilities of their phones and obviously make more revenue. What is the motivation for a manufacturer to adopt such a product?
I strongly believe that if we were able to have battery manufacturers and device manufacturers developing a set of standard requirements, proactively, in terms of lithium-ion battery size and connectors, that will give the industry more time to work on the actual performance and added value of the battery. Remember also, that, for every lithium-ion battery that we have to develop, we then need to do testing, safety testing, etc., before it is ready. If we have a much more standard approach the way round cell batteries are (AA, AAA, C, D), then we eliminate a whole part of the process related to safety standards, qualification for special cavity, etc., so we take all that development work away and can really focus our energy on adding more intelligence to the battery. Intelligence can be in the areas of making it wirelessly connectible, it can be in the areas of lasting longer or even being capable of more rapid charging. There are many ways that we can add intelligence to a battery that would delight the consumer and the end-user much more than what is happening today if we were able to simplify the work and eliminate some of the uncertainties when it comes to size, specs, etc. What would the advantage be for consumers?
The advantage for the consumer is, I would say, two fold. One, they'll be able to get better performing batteries versus today. The second advantage is that they'll be able to leverage an aftermarket of batteries -- they'll be able to go to a Best Buy, to a Walmart, to a Target and actually buy an extra battery for their phone, because there will be maybe six or seven, if we look at the analogy of AA, AAA, there will be six to ten, call it, maximum battery types serving 150 types of phones and smartphones. And therefore, there will be also a viable aftermarket and also for the customer, for the trade, they'll be able to actually list those SKUs where today, they can't list 150 different batteries. So there would be many advantages. Also, I think that over time, this is also going to lead to a cheaper device, because when you are able to standardize, we'll be able to get some economies of scale and hopefully that's going to get into the hands of the consumer, to be able to buy and get the better battery at a lower cost. Will there be any changes to the standard AA and AAA products in the near future, or will alkaline batteries remain mostly unchanged?
Our ambition is to continuously improve the performance of our products, and we're looking at many ways of how we can improve the performance and the quality of our batteries. I believe that there are many viable ways and we have an innovation pipeline that obviously is very difficult for me to speak about now, that is going to delight the consumer also on the basis of alkaline batteries, because contrary to popular belief, there are very significant differences in the alkaline batteries -- how they are manufactured, what they deliver, the safety standards, etc. -- so there is room for us to innovate in this space and we are about innovation.We've established that there will be a need for disposable batteries around the world for some time to come. Are there any plans to expand recycling programs, or to launch a major initiative on that front?
We are, today, in the process of developing a voluntary recycling system for disposable batteries.
Absolutely. In my role as president for Duracell, I am actively engaged with industry leaders of the battery manufacturers and we are, today, in the process of developing a voluntary recycling system for disposable batteries. We even have an agreement that is a project we all want to do and we're in the process of actually defining the parameters of how this is going to be done in the future. I believe strongly in that, and I'm a very strong proponent for doing everything we can to be responsible, and do everything we can to make sure our planet is as green as possible. We need to look at ways that are actually environmentally positive, because what some people forget is that sometimes a program, whether that's battery recycling or other things, considering all the transportation, fuel and all the activities around that, can actually create a more negative impact that the actual product if it's not recycled. We're very much driven by having a positive environmental impact with every activity, but there is today a very strong commitment, I can say, from the battery industry that this is something that we are going to do -- a voluntary recycling program. Is there a timeline in place?
We have a timeline that is going to obviously be a rolling-thunder timeline, where it's very difficult to establish a program overnight in such a large geography as the United States, but we are looking at starting in some areas already in 12 months. Can you provide some specifics of how that is going to be implemented?
Obviously, this is really part of what is very important for us to come up with, because, the most important thing is that we're not about green washing. I believe that we need to come up with a system that will actually stimulate scalable recycling. That's why we need to come up with execution that will be user-friendly and easy enough for the consumers to do. I don't have the exact details yet, because this is a work in progress. That's why the timeline, we have an ambition to have it going already in 12 months, but it is all going to depend on the two criteria: one is that it needs to be environmentally positive, and two, it needs to be easy and intuitive enough for the consumer and our customer partners that it's going to be used. What other technologies are you currently exploring?
We are today closely following device trends, consumer habits trends and we are always going to go back to what we really can do best. The Duracell company was born because it was solving a trend and meeting a trend: the heydays of the Walkmans and the Discmans. Predicting the device trends, predicting the market development, this is what we're going to do, so obviously an area related to personal power, to having access to power in a device, in a toy, in a game, every area and how this area develops is an area for us, Duracell, Procter & Gamble, to play and this is where we'll be looking at different technologies to deliver on those needs. What do you see for the future of the battery industry in general?
The battery industry, in my mind, will continue to be an extremely important industry for the consumer. Today in an American household you have 39 to 40 devices on average, using a battery. It is cradle to grave, from the baby monitor to the hearing aid, and it is from the poorest consumer that has a flashlight when the lights are off or the grid doesn't work, to the most rich and device-rich consumer who has maybe up to 70 to 80 battery devices. So the battery industry is playing an incredible role in the life of every consumer and that's why I think that this is an industry that is extremely relevant and important with obviously a bright future if we're able to continue delivering on the requirements and the changing consumer needs. And last by not least... where's Duracell's answer to the Energizer Bunny?
Outside of the U.S., in virtually every other market, you have the Duracell Bunny.
The Energizer Bunny is a wonderful iconic device, and outside of the U.S., in virtually every other market, you have the Duracell Bunny, and I'm not sure you're aware of that. I have my office full of bunnies, that are all Duracell Bunnies, but the point is that Duracell invented the Bunny. We were also advertising with the Bunny in North America first. At one point in time, the leadership of the Duracell company in North America decided that they needed a new campaign. Somebody said, 'We're not selling Bunnies, we're selling batteries,' and we moved to a different campaign. The way the trademark law works is when you've not been using a character or some element in your advertising for a few years, it becomes free, and that is when our competitors started using the bunny. That's how it became the Energizer Bunny.
If you, today, travel to Paris and you turn on the TV, you will see a Duracell Bunny. If you travel to Moscow and turn on the TV you'll see a Duracell Bunny, and so on. So this is how it actually happened, but we are extremely happy with our brand and our equity in the U.S. The campaign we have in the U.S. that is building around the idea of 'trusted everywhere' -- that highlights the benefit of our superior technology and the role that we play in peoples lives, has served us very well, and we have very strong equities behind Duracell also in North America.
Is there anything else that you'd like to share?
I believe that the only way we'll be able to get to a world where we have a more standardized lithium-ion smartphone or phone battery is if we can find a way to get device manufacturers and battery manufacturers together and stop seeing the battery and cavity size as some type of competitive advantage the way people were seeing the cables, and now everybody has moved to micro-USB. Today, wrongly, device manufacturers believe that, well, they'll do their own little battery, they'll have a special cavity and it'll give them some type of advantage. I do not see what advantage it gives them, I don't see any value in that.
Maybe there was an advantage four years ago, when, still, there was some kind of a competition between who has the slimmest phone, etc., but as we are moving more and more towards some level of a similar look, because ultimately if you want to have a tactile screen and all these apps, [looking at his phone] this is probably the minimum size that you have to go for, so I believe that somehow, four or five years ago, there was more justification for a device manufacturer to look at the size and the cavity and the battery as an afterthought. Once you design the optimal phone, the most attractive phone, okay, here's the space left for the battery. Today, I think that the benefits of having a better battery will largely offset keeping your cards close to your chest and not revealing the size of the battery that you're going to need. That's why I think that the time is ripe to get into some level of standardization on the lithium-ion batteries.