Steven Perdoch Matthew Dymit Carrie Loera Dan McGowan Elana Muradova Strategic Management, Spring 2012
History Founded in 1837 William Procter and James Gamble Incorporated in Ohio on May 5, 1905
In the beginning… Proctor and Gamble came to be by manufacturing soap and candles. After the invention of the electric light bulb, the demand for candles fell significantly, thus causing the newly formed P&G to cease their production. During the Civil War, the government began to order mass quantities of soap from P&G for the Soldiers’ use —this significantly led to P&G’s return to the market and their second chance at rising in the business world.
Acquisition Summary Between 1905 (Incorporated) – 2010, P&G invested in 34 acquisitions Periods of frequent acquisitions occur in the 1930’s, 50’s, 80’s and 90’s. Some of the larger acquisitions include: – Charmin, Clorox, Crush, Revlon, and Gil ette
P&G Today Products sold in > 180 Countries On the ground operations in 80 countries Organized into 2 Global Business Units (GBU’s) Health Care Fab F r ab ic and an d Hom o e Care & Beauty & Household Groom o i m ng n Baby ab y and an d Grooming Care Fam F ily y Care Beaut eau y Sn S acks a and an d Pet P Care
Health Care Segment includes products in oral care, feminine care, respiratory, toothpaste, OTC drugs and other personal care categories
Health Care - Overview 14% of Net Sales in 2011 Products sold in drug stores supermarkets, and mass merchandisers Mature market Name Brand & Private Label competitors
Health Care – Core Competencies Strong, Dependable, High Quality Products – Strict internal standards and guidelines to comply with FDA – Most recent recal was early 2010 - Vicks – Vicks 4-Hour Nasal Spray (wrong expiration date) Health Care Research Center – Promote innovation and bring new products to the market quicker
Threats Intense competition – Private labels are much cheaper
Baby Care and Family Care • Segment includes diapers, baby wipes, paper towels, and toilet paper
Baby Care & Family Care Key Info. • 19 % Of Net Sales • Products sold in supermarkets, convenience stores, hotels,motels,and other industries • Baby Care and Family Care competitors
Beauty Segment This segment includes cosmetics, fragrances, hair care, and skin care products
Beauty Segment Beauty accounts for approximately 34% of P&G’s product portfolio. 24% of Net Sales & Net Earnings – Head & Shoulders, Olay, and Pantene are some of the biggest brands within this segment.
P&G Beauty in The Marketplace P&G’s beauty products are highly recognizable; brand differentiation is a strength. Product availably is great; products are sold at practically all domestic retailer chain and drug stores. Proctor & Gamble is associated with tried and true, trusted products.
Beauty Segment Competition and Growth Competitors – Unilever – L’Oreal – Private Labels 3% Net sales growth from 2010 – 24% of P&G’s Net Sales are from the Beauty segment
Threats to Beauty Segment Greatest threat to P&G’s Beauty Segment is the Threat of Rivalry – Unilever, L’Oreal, Private Labels Mature Market Threat of Buyers and/or Suppliers? – Relatively low, due to the working relationship between both categories and the trust created in order to maximize that relationship. Suppliers are even involved in P&G’s creative process in developing new products.
Fabric and Homecare Segment contains products including laundry cleaning products and fabric conditioners; home care products, including dishwashing liquids and detergents, surface cleaners and air fresheners; and batteries Fabric care dominates the market with over 30% of the global market share Global home care market share is over 15% across the categories in which we compete
Fabric and Homecare (Cont.) Proctor and Gambles largest, and most profitable division - 30% of net sales Has been increasing steadily - 6% in 2011 Mature Market Market made up of Brand name and Generic brands
Snack and Pet Care This segment includes food products and pet food products Smallest segment
Snack and Pet Care Overview Least profitable P&G business segment 4% of P&G’s net sales in 2011 Pringles was the only existing snack brand* Pringles owned 3% of US Snack Food Production Industy’s market share Utilizes Eukanoba and Iams to appeal to all types of pet owners
Threats Lack of presence in the industries Mature market Fierce competition Extension would require major investment into creating new products and brands Competition has more industry-focused product lines
Disinvest/Sell off Snack & Pet Care Business Segment Least profitable business segment (4% net sales ’11) Pringles sold for $2.7 Bil ion Iams and Eukanoba (value?) Increased focus on profitable business segments Increased opportunity to innovate in successful segments
Growth in Developing Markets Company-wide initiative: Acquire 1 bil ion additional consumers by 2014/2015 P&G Sales Growth: 2000 to 2012 90% 80% 80% 77% Developed % of Total Company Sales 70% Developing 63% 60% 50% 40% 37% 30% 23% 20% 20% 10% 0% FY '00 FY '05 FY '12
Demographic/Socioeconomic Trends Population is forecasted to grow 700 mil ion people by 2020 (Think of all those diapers?) 95% of this growth wil come from developing markets Wealth and Per Capita income increasing Plan of attack? – Expand geographical y and fil in the “White Space”
Improve Productivity in All Areas Cost of Goods – Reduce RM costs Long-term contracts Increase # of Suppliers? – Reduce excess inventory – Develop partnerships (PGT Healthcare) Research & Development ~ $2 bil ion annually – Continuous improvement – Product Innovation
Open Innovate Connect + Develop Continue to nurture the Open Innovate: Connect + Develop method of research and development. What is OIC+D?
Connect + Develop “Today, open innovation at P&G works both ways — inbound and outbound — and encompasses everything from trademarks to packaging, marketing models to engineering, and business services to design. It's so much more than technology.” -Bruce Brown, CTO
Why is OIC+D Important? $2 Billion Brand Collaboration $2 Billion Brand Ultra-fast Joint Venture from Competitor product-to-market delivery
Marketing Opportunities Proctor and Gamble wants to cut $10 Bil ion in expenses In 2010 P&G spent $2.2 mil ion on Television advertising While many of its advertising campaigns boost sales is it too much? Focus on digital marketing & social media and spend more efficiently http://www.youtube.com/watch?v=PvYP_d2S1Pg