CINCINNATI — There's a method to Procter & Gamble's Pac Man-like march to gobble up market share: attacking the competition from all angles.
That winning formula was the message presented to Wall Street analysts during P&G's investors' conference at the company headquarters here last week.
During the company's three-hour presentation, P&G chairman, president and chief executive officer, A.G. Lafley, declared, "Procter & Gamble is a stronger and more attractive company today, and we are getting stronger."
P&G's core strength, industry watchers assert, is the company's compulsion to know consumers' habits, particularly while at home.
To that end, the company invests more than $200 million each year in understanding the customer, said Lafley, and has replaced a "behind the mirror" approach with immersion tactics and proprietary tools. In Lafley's view, "Living with the consumer leads to richer ideas."
Such techniques are what led P&G to reformulate Rejoice, a value-priced shampoo sold in China. Thanks to P&G's closeness to the customer, the company removed the conditioning agents in the shampoo to increase the cleansing power for Chinese women who can only afford to wash their hair once a week, said Susan Arnold, vice chair, P&G Beauty and Health.
Arnold also told analysts that proprietary tools help P&G make improvements in packaging, which in turn can lift sales. By repackaging Herbal Essences in curved packaging in which conditioners and shampoos fit together, P&G boosted the brand's conditioner sales volume by 10 percent. "The design encourages consumers to buy both [products]," said Arnold. She added that the curved, brightly colored bottles also "create a visual dance on the shelf." The packaging concept was born out of P&G's design think tank called Clay Street, which is charged with balancing form with creativity.
In addition to design, P&G is continually scouting out new technology beyond the confines of its research and development labs. The company estimates that there are two million scientists and engineers not working with competitors, whom P&G can tap for innovative technology. To find such partners, P&G broadcasts its desire to link arms with entrepreneurs through Web-based initiatives, said Gil Cloyd, P&G's chief technology officer. Last year, 40 percent of products launched by P&G featured third-party technology.To support its teeming brand portfolio, the consumer products behemoth wields an annual advertising budget of $8 billion a year. In addition to bulking up its marketing might, Lafley said P&G's scale allows the company to spend more than its competitors on R&D and marketing and to earn a better return on that investment.
In addition to integrating new brands from Gillette, P&G is also bent on polishing the image of existing brands. Lafley noted that Olay was a "middle-of-the-pack" skin care brand five years ago. Olay's subbrands Regenerist and Definity have since catapulted its standing in the mass market to a premiere offering. Lafley said, "Olay is proof positive that you can move a brand's equity in just several years."
Lafley asserted that the company is well positioned to outperform the industry.
With Gillette nearly 100 percent absorbed, P&G forecasted a long-term sales growth target of 5 to 7 percent through 2010 for the overall company.
For the second quarter, P&G expects sales growth of 5 to 8 percent and growth of organic sales, or those excluding mergers and the impact of foreign exchange, of 4 to 7 percent.
Lafley told analysts that since 2001, P&G has doubled sales in developing markets and pushed further in higher-margin businesses, including beauty. "We are disproportionately focused on high-growth and margin businesses," Lafley told analysts.
Following the conference, Morgan Stanley & Co. analyst William Pecoriello wrote in a research note that P&G's portfolio shift toward emerging markets and heath and beauty has put the company in position to sustain 6 percent sales growth, the high end of its target. Health and beauty now accounts for 48 percent of sales, up from 29 percent five years ago, and emerging markets account for 26 percent of total corporate sales, up from 20 percent in 2001.
P&G completed its acquisition of Gillette 15 months ago and expects to have completed systems and operations integration for 95 percent of sales in January. The merger is on track to deliver $750 million in savings during the next fiscal year.
P&G is already co-promoting Gillette with other brands in its portfolio. For instance, in Latin America, it leveraged its Always brand of feminine care to drive the trial of Gillette's women's razors, said Clayt Daley, P&G's chief financial officer. Gillette has a robust product pipeline, which in 2007 will crank out Gillette Fusion Power Phantom and Venus Breeze, a two-in-one scented razor designed to compete with Schick Intuition. Venus is currently a $500 million business, said Chip Bergh, P&G's president of global grooming. Since its launch in January 2006, P&G has sold 12 million Fusion razors.Lafley said that P&G currently has three billion customers worldwide and plans to add one billion more by 2010, mostly by extending its reach in developing markets.
As for how he will keep P&G in the winner's circle, Lafley answered by defining leadership as "the ability to continually transform an organization to win."
Alberta Ferretti's "Rainbow Week" sweaters are back. The designer closed her #MFW show with a few day-of-the-week sweaters, which first debuted on the catwalk last January as part of the pre-fall 2017 collection. #wwdfashion (📷: @delphineachard)