RETAILERS ROOTING OUT COUNTERFEIT SHAMPOO

CINCINNATI -- Supermarket chains have taken swift action to remove from their shelves any counterfeit bottles of Procter & Gamble's top-selling dandruff shampoo, Head & Shoulders.The process of weeding out the counterfeit bottles began about two weeks ago, when retailers in all three trade classes were notified by P&G that there was a serious problem with bogus products. Neither the exact source of

CINCINNATI -- Supermarket chains have taken swift action to remove from their shelves any counterfeit bottles of Procter & Gamble's top-selling dandruff shampoo, Head & Shoulders.

The process of weeding out the counterfeit bottles began about two weeks ago, when retailers in all three trade classes were notified by P&G that there was a serious problem with bogus products. Neither the exact source of the products nor how long they have been in circulation, or in what quantities, has been determined by P&G. The counterfeit products were discovered by P&G account executives when they were on store calls and noticed products that appeared suspect because they were not in the shape of P&G's newly redesigned rectangular Head & Shoulders bottle, shipped earlier this year. One company executive, who asked to remain anonymous, confirmed that counterfeit bottles were found at specific supermarket accounts. However, he declined to name the accounts.

"Albertson's has been keenly aware of the situation," said Mike Read, director of public relations and government affairs for the 725-store Boise, Idaho, chain. "We were notified by P&G in early August. We immediately issued a bulletin and a call to all of our stores in order to comply with the notice."

Read said that all Head & Shoulders products were pulled from the shelves and returned to an Albertson's distribution center, where they were examined by P&G.

"I am not certain whether we had any of the possibly contaminated products on our shelves, nor did we try to make a determination

at store level," he said. "When we get such a notice from a manufacturer alerting us that there may be a problem, we treat the matter seriously."

According to P&G, the sole test to distinguish the real from the imitation Head & Shoulders is the triangular-shaped recycling symbol stamped into the bottom of the bottle, which is the plastic resin identification code. Otherwise, the bottles are nearly identical. The counterfeit products even carry the words "Made in the U.S.A. by Procter & Gamble" on the back label.

In February 1995, P&G reconfigured its traditional long-necked, rounded bottle and began shipping Head & Shoulders in the redesigned rectangular squeeze bottle. "Ninety-nine percent of what's now on the shelves should be the new bottles," said Deborah White, spokeswoman for P&G's hair care division.

It appears that the imitation of the original bottle came into the market at about the same time that the new bottle was being shipped out to retailers.

In an official press release, P&G Chairman and Chief Executive Officer John E. Pepper said: "People trust our brands, and we're not going to let anyone violate that trust. We will continue to protect our consumers and our brands from infringement of any type, including counterfeiting."

Besides warning its retail customers, P&G ran half-page ads Aug. 16 in 26 major metropolitan newspapers and USA Today to notify consumers and retailers of the recall and displayed a toll-free information number, (800) 699-9435. All bogus products will be replaced free of charge.

In the ads, the company also warns consumers that the counterfeit shampoo may be infected with a bacteria that could possibly cause infection in people who have impaired immune systems. The risk is low, the company admits, but the products should be avoided by anyone undergoing radiation or chemotherapy treatment, or anyone taking immunosuppressant drugs.

"As soon as we hear about something like this," said John Raley, health and beauty care buyer at Raley's, West Sacramento, Calif., "we notify all our stores immediately. Just in case they somehow picked up any of the counterfeit product they can take it off their shelves right away. And we notify our suppliers to check their product to make sure that no bogus products made their way to the supplier."

In addition, P&G informed the U.S. Food and Drug Administration and is working closely with the agency to investigate the matter.

The P&G executive explained: "This is a drug and so this is an FDA issue. The retailer that has this product on the shelf is the one that would be viewed as culpable as far as the FDA is concerned, and not Procter and Gamble." Although P&G has not tracked down the manufacturing source of the counterfeit products, the company said it believes they have been shipped out by several distributors. So far only one distributor, Quality King Distributors, Ronkonkoma, N.Y., has been named in a lawsuit filed by P&G in the U.S. District Court on Long Island as selling counterfeit goods as well as trademark and package design infringement.

Michael Katz, senior vice president of Quality King, takes strong issue with P&G's charge. "Our company [a leading distributor of health and beauty care] was victimized along with other distributors. We unknowingly received a shipment of the product which may have been counterfeit.

"Our first concern is with the consumer," said Katz. "When we were informed of a possible problem [by P&G], we acted swiftly and responsibly to inform all retailers who may have purchased that product from us."

Quality King records show that it shipped the products May 2, according to Katz.

"The supplier is the key," said Raley. "We use a major supplier to ensure that our product lines are genuine, because they can't have their reputations called into question either. But gray market and black market products do seep into the system sometimes.

"I think that integrity becomes a problem when you go to nonconventional sourcing such as diverters," he said. "This is a particularly sensitive problem in health and beauty care, because HBC products are so personal."

Quality King is conducting its own independent investigation in an effort to identify the origin of the products.

Not all supermarkets had been apprised of the problem by Aug. 16, however.

"So far, I haven't heard a thing about this," said Dan Dailey, HBC buyer at Carr Gottstein Foods, Anchorage, Alaska, "but I doubt we have a problem because we only buy directly from P&G."

It was not known how damaging the incident might be to Head & Shoulders sales. It is the category leader in dandruff shampoos at food stores.

Towne-Oller & Associates, New York, reports that for the year ending July 31, 1995 at food stores , Head & Shoulders dollar sales were $67.6 million, with a 50.1% share of the market, in a total dollar value market of $134.8 million in sales.

P&G has filed more than dozen lawsuits in the past two years against companies that they allege are infringing on trademarks, package designs and copyrights. Many of these have been private label issues. Three such cases are currently pending. Others have been settled in P&G's favor.