A

Project Study Report

on
“A study on Green Practices in Proctor & Gamble”

Submitted in Partial Fulfillment for the Degree of

Bachelor of Business Administration

S.S. JAIN SUBODH P.G. COLLEGE JAIPUR

(2016-17)

SUBMITTED BY SUBMITTED To

Vineet Gangwal Ms. Shravasti Jain

B.B.A. IV Sem. Lecturer

1641172

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 TO WHOM SO EVER IT MAY CONCERN

This is to certify that Vineet Gangwal student of BBA II from S.S.Jain Subodh
P.G. College; Jaipur has successfully completed the Project.

His research is very beneficial for the company. His work was excellent. We wish
all success for his future Endeavour’s.

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 CERTIFICATE

Certified that this project report entitled A study on Green

accounting in Proctor & Gamble is a record of project work done
independently by Ms. Shravasti Jain Under my guidance and
supervision and that it has not previously formed the basis for the award
of any degree, fellowship or associate ship to her.

MS. Shravasti Jain

S.S.Jain Subodh P.G.College

Jaipur

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 DECLARATION

I hereby declare that this project report entitled is A study on Green

accounting in Proctor & Gamble a bonafide record of work done by me
and that it has not previously formed the basis for the award to me for
any degree/diploma, associate ship, fellowship or other similar title of
any other institute/society.

Vineet Gangwal

S.S.Jain Subodh P.G.College

Jaipur

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 ACKNOWLEDGEMENT

It is not often in life that you get a chance of appreciating and expressing your
feelings in black and white to thank the people who have been a crucial part of
your successes, your accomplishments, and your being what you are today. I take
this opportunity to first of all thank the Faculty at S.S. Jain Subodh P.G.College,
especially Dr. K.B.Sharma, Principal, and Dr. Rita Jain for inculcating and
instilling in me the knowledge, learning, will-power, values and the
competitiveness and professionalism required by me as a management student.

I would like to give special thanks to Ms. Shravasti Jain for educating me silver
lining in every dark cloud. Her enduring efforts, guidance, patience and enthusiasm
have given a sense of direction and purposefulness to this project and ultimately
made it a success.

Foremost with great respect and esteem, I wish to forward my deep sense of gratitude to
Ms. Shravasti Jain for providing me the opportunity.

Last but not the least; I would like to thank my family: my parents, for supporting
me spiritually throughout my life.

The errors and inconsistencies remain my own.

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CONTENT
Chapter: 1 – Introduction 07-13
 Introduction of Green Practices
 Introduction of the company
 Role of the environment professional

Chapter: 2 – Company Profile 14-18

 Green Practices in P&G
Chapter: 3 – Research & Methodology 19- 21
 Define Research & Methodology
 Objective of the Study
 Methodology
 Limitations of the study

Chapter: 4-Analysis and Interpretation 22-34

 Swot Analysis
 Financial Analysis
 Market Analysis
 Technical Analysis

Chapter: 5- Summary of Findings 35-40

 Result of the Study
 Conclusion & Recommendations
 Scope of further Study
 Suggestions
 Reference

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 Chapter-1
Introduction
 Introduction of Green Practices

Green Practices-A business functioning in a capacity where no negative impact is made

on the local or global environment, the community, or the economy. A green business will
also engage in forward-thinking policies for environmental concerns and policies affecting
human rights.

The aforementioned “genetic” link

of the green business ideology with
that of sustainable development
explains why it is often perceived –
explicitly or implicitly – as being
synonymous with the notion of
“sustainable business”. For
instance, Brown and Ratledge adopt
quite a narrow definition of green
business as “an establishment that
produces green output” (Brown, Ratledge, 2011). Meanwhile, Makower and Pyke, in a
broadbrush way, state that “a green Business requires a balanced commitment to profitability,
sustainability and humanity” (Makower, Pyke, 2009). The Business Dictionary indicates that
green business is “a business functioning in a capacity where no negative impact is made on the
local or global environment, the community, or the economy”, and further adds that “green
business will also engage in forward-thinking policies for environmental concerns and policies
affecting human rights” (Business Dictionary, n.d.). Similarly, G. Croston states that “Green
Businesses have more sustainable business practices than competitors, benefiting natural systems
and helping people live well today and tomorrow while making money and contributing to the
economy”. K. Slovik proposes an amalgamation of environmental sustainability demand with
that of social responsibility: “A “green business” can be defined as an organization that uses
renewable resources (environmentally sustainable) and holds itself accountable for the human
resource aspect of their activities (socially responsible)”
 Introduction of the Company

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P rocter & Gamble Co., also known as P&G, is an American consumer
goods corporation headquartered in downtown Cincinnati, Ohio, United States of America,
founded in 1837 by William
Procter and James Gamble . It primarily
specializes in a wide range of cleaning
agents, personal care and hygienic products.
Before the sale of Pringles to the Kellogg
Company, its product portfolio also included
foods, snacks and beverages.
In 2014, P&G recorded $83.1 billion in sales.
On August 1, 2014, P&G announced it was
streamlining the company, dropping and
selling off around 100 brands from its
product portfolio in order to focus on the remaining 65 brands, which produced the bulk, i.e.
95%, of the company's profits. A.G. Lafley, the company's chairman, president, and CEO until
October 31, 2015, said the future P&G would be "a much simpler, much less complex company
of leading brands that's easier to manage and operate".
David Taylor is the current president and CEO of Procter & Gamble.

Green Practices

 As the biggest food and consumer goods company in the world, P&G (formerly Procter
& Gamble) have gargantuan environmental footprints.
 But the sheer size of this company also means that if they really carry through
their sustainability visions, they have the power to bring about significant changes – from
their own supply chain to consumer behavior.
 P&G have upped the ante on their sustainability ambitions in the past few months, seeing
it as a central issue in growth plans. P&G – whose brands include Ariel, Gillette and
Pringles – in September 2010.
 The company pledged to use only renewable or recycled materials in products and
packaging, and stop all manufacturing and consumer waste going to landfill.

Two views of sustainability

Peter White, P&G’s director for global sustainability, explains that the company has had a
sustainability strategy since 1999, but this was boosted in 2007 when it added a specific principle
incorporating sustainability into its products, packaging and operations to its mission statement.
“Up until then it had always been the concept of doing the right thing, but in 2007 we used the
‘s’ word and put it specifically into the purpose, value and principles of the company,” he says.

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  P&G sees sustainability in terms of business opportunity, not just responsibility to the
environment. Sustainability can protect the business and save money, but can also help
build the business through new products that save consumers money too, such as
concentrated washing liquid, he explains.
 With the global population expected to grow to nine billion by 2050 and the
corresponding rise in resource demand, the company needs to look for a new way to
respond, she explains. “We’ve set ourselves a vision to decouple business growth from
our environmental impact and really use sustainability as a key driver for our business
growth.”
 Hamilton believes that Unilever’s plan is different to those of other corporations as it
does not distinguish between various parts of the business or geographical locations, but
covers all 400 of its brands in the 170 countries where it operates.

On target
P&G have already made significant progress on previous targets. P&G said in 2007 that it
would reduce energy, waste and CO2 by 20% by 2012. So far, White reports that energy and
CO2 are down 14% and 11% respectively, while waste has been slashed by 50% and water
reduced by 16%.
Although the 20% target refers to each unit of production, rather than “absolute” or overall
figures, P&G’s sustainability report reveals that it has achieved an absolute cut in all these areas.

 “P&G’s biggest energy footprint over the life cycle of a product is heating water to wash
clothes. It’s very clear that the energy use in P&G plants is very small compared to that
used in people’s homes.”
 In an effort to reduce their own environmental footprints, company are therefore
targeting one of the most tricky issues of all – that of consumer behavior. P&G has
developed Ariel Cool-Clean,

Making progress
Of course, the difficulty with targeting consumer behavior change is how to measure progress.
Government bodies and NGOs have also had campaigns to wash at lower temperatures, so it will
be hard for P&G to claim that their product or campaign has had a significant effect.
White admits that this is tricky, but that there are ways of sampling consumer behavior. “This is
an area we can influence, but it’s also where we need to work with other partners in industry and
stakeholders such as NGOs and government agencies.”

 P&G’s own data show that, in 2002, only 2% of the UK population were washing at
30°C or less, but by 2007, it was up to 27%. White is adamant that P&G can decouple
growth from environmental impact despite the reliance of this particular ambition on
changing consumer behavior.

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  It has plans to run plants on renewable energy, ensuring the water that leaves its plants is
as clean, if not cleaner, than that entering them and wants to see zero manufacturing
waste going to landfill.
 P&G has more than 140 manufacturing plants globally so it will take some time to see
these standards at all of them, but it has made a start. Last year it built its Milenio facility
in Mexico, with more than one million square feet of manufacturing space.
 The water from this plant is 100% recycled, with wastewater and rooftop rainwater
collected and treated by an on-site water-treatment plant. It is building 19 new plants over
the next four years, all of which will use a 77-point tool that assesses sitting, transport,
water and energy sources.
 Renewable-energy technology has been installed at several plants, including solar panels
on a plant in Oxnard, California and a wind turbine at Coervorden in the Netherlands.
 P&G has also come up with ways of reusing waste substances produced in the
manufacturing of its products. This has enabled it to achieve a 50% reduction in solid
waste from manufacturing, against a target set in 2007 to reduce it by 20% by 2020.
 White says that P&G has achieved this through a very systematic approach. It has
identified all waste material from each plant and worked out ways to use it. For example,
the waste oil that comes from cooking Pringles is now sold to make biodiesel. Sludge and
fibers left over from making paper are sold to a local construction company that makes
low-cost roofing tiles.
 This makes business sense too, as previously the company had to pay for these waste
products to be taken away. “This is industrial ecology essentially, you’re taking the
negative away and providing a second value,” White says.

 Role of the environment professional

A huge part of making a company sustainable is making sure all employees understand the aims
of the strategy and work the principles into their job.

P&G has environment professionals employed mainly in two areas of its business. A team of
more than 700 employees works to ensure that products are safe for human beings and the
environment, while site environment leaders head up sustainability programmers at its
manufacturing sites. A global sustainability department leads overall development of its strategy.

P&G also aims to spread the word throughout the company so that those employees whose job is
not specifically related to the environment are on board. It publishes articles about sustainability
on its intranet and has a sustainable ambassadors’ network.

All employees who either work in sustainability, or have an interest in it, can link together
virtually to share best practice and ideas of what solutions can be applied at site or project levels.
There are around 500 ambassadors globally, White reports.

The company marks annual Earth Day by asking all employees to make a personal pledge on
how they are going to incorporate sustainability into their work, and has volunteer events where
employees can get involved in local environmental projects.P&G also has a three-year

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partnership with WWF to increase awareness and training on sustainability. Some employees,
such as plant managers, have sustainability goals integrated into their incentive programme.

“I think this is quite radical actually because we’re asking for an analysis on a quantitative level
which gives us a view on whether people are moving innovations in the right direction,”
Hamilton says.

Outside those main teams of environment professionals, it has focused on the employees it
considers most important in furthering the company’s sustainability vision. These are the
scientists involved in research and development, the marketing team and the procurement
managers who buy the raw materials.

Company’s 10 product categories have a sustainability champion and it has a specialist team of
agronomists who assist the procurement team. Environment professionals will be central to the
companies’ focus on sustainability in years to come.

With global population soaring, most companies’ business plans are aiming to expand to meet
increased demand , P&G are no exception, despite warm words and ambitious targets.

Doing business

 While White acknowledges that the anticipation of more environmental regulation in the
future is a driver for P&G’s sustainability plans, he stresses that regulation merely sets
the minimum acceptable standard. There are huge opportunities in going beyond the
minimum, he believes.
 “By 2050 there will be nine billion people on the planet and we want to reach all of
them,” White says. “We can only do that if we take a sustainable approach.”

International expansion
The company moved into other countries, both in terms of manufacturing and product sales,
becoming an international corporation with its 1930 acquisition of the Thomas Hedley Co.,
based in Newcastle upon Tyne, England. After this acquisition, Procter & Gamble had their UK
Headquarters at 'Hedley House' in Newcastle upon Tyne, until quite recently. Numerous new
products and brand names were introduced over time, and Procter & Gamble began branching
out into new areas. The company introduced Tide laundry detergent in 1946 and Prell shampoo
in 1947. In 1955, Procter & Gamble began selling the first toothpaste to contain fluoride, known
as Crest. Branching out once again in 1957, the company purchased Charmin paper mills and
began manufacturing toilet paper and other tissue paper products. Once again focusing on
laundry, Procter & Gamble began making Downy fabric softener in 1960 and Bounce fabric
softener sheets in 1972.
One of the most revolutionary products to come out on the market was the company's
disposable Pampers diaper, first test-marketed in 1961, the same year Procter & Gamble came
out with Head & Shoulders. Prior to this point, disposable diapers were not popular,
although Johnson & Johnson had developed a product called Chux. Babies always wore cloth

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diapers, which were leaky and labor-intensive to wash. Pampers provided a convenient
alternative, albeit at the environmental cost of more waste requiring landfilling
Operations
As of July 1, 2016, the company structure has been categorized into ten categories and six selling
and market organizations.

 Categories
 Baby Care
 Fabric Care
 Family Care
 Feminine Care
 Grooming
 Hair Care
 Home Care
 Oral Care
 Personal Health Care
 Skin & Personal Care
 Selling & Market Organizations
 Asia Pacific
 Europe
 Greater China
 India, the Middle East, and Africa (IMEA)
 South America
 North America

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 Chapter-2
Profile of the Company
Neither William Procter nor James Gamble ever intended to settle in Cincinnati. Although the city
was a busy center of commerce and industry in the early nineteenth century, William, emigrating
from England, and James, arriving from Ireland, were headed farther west. Despite their intentions,
however, both men ended their travels when they arrived at the Queen City of the West – William,
to care for his ailing wife Martha, who soon died, and James, to seek medical attention for himself.

William Procter quickly established himself as a candle maker. James Gamble apprenticed
himself to a soap maker. The two might never have met had they not married sisters, Olivia and
Elizabeth Norris, whose father convinced his new sons-in-law to become business partners. In
1837, as a result of Alexander Norris’ suggestion, a bold new enterprise was born: Procter &
Gamble.

 Green Practices in P&G

2016  P&G introduces Tide pure clean™—the first bio-based detergent (65% bio-based)
with the cleaning power of Tide.
 With the help of our more than 150 partners, P&G delivered P&G's Children's
Safe Drinking Water Program's 10 billionth liter of clean drinking water through
our Children's Safe Drinking Water Program.
 P&G achieves its energy goal four years ahead of schedule.

2015  P&G introduces Tide pure clean™—the first bio-based detergent (65% bio-based)
with the cleaning power of Tide.
 With the help of our more than 150 partners, P&G delivered P&G's Children's
Safe Drinking Water Program's 10 billionth liter of clean drinking water through
our Children's Safe Drinking Water Program.
 P&G achieves its energy goal four years ahead of schedule.

2014  P&G introduces Tide pure clean™—the first bio-based detergent (65% bio-based)
with the cleaning power of Tide.
 With the help of our more than 150 partners, P&G delivered P&G's Children's

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 Safe Drinking Water Program's 10 billionth liter of clean drinking water through
our Children's Safe Drinking Water Program.
 P&G achieves its energy goal four years ahead of schedule.

2013  The P&G Children’s Safe Drinking Water Program was recognized by the U.S.
Department of Commerce as a winner of a U.S. Patent and Trademark Office
Patents for Humanity program award.
 The Company announced during Earth Week, that 45 P&G sites around the world
had achieved zero-manufacturing-waste-to-landfill status.
 Our Gillette Venus packaging was redesigned for Venus & Olay to be recyclable
and is manufactured using 26% less plastic.
2012  P&G became a founding member of the Plant PET Technology Collaborative to
accelerate use of plant-based PET materials.
2011  P&G became a founding member of the Plant PET Technology Collaborative to
accelerate use of plant-based PET materials.
2010  P&G implemented Supplier Environmental Sustainability Scorecard to reduce
environmental footprint across the supply chain.
2009  New commitment made to provide a total of 4 billion litters of safe drinking water
in order to help prevent 160 million days of diarrheal illness and save 20,000
lives.
 Won Presidential Green Chemistry Award for Sefose molecule.
 P&G named to Global 100 Most Sustainable Corporations in the World.

2008  EPA awarded P&G’s Cincinnati corporate headquarters with the Energy Star
Certification.
 P&G received the European Business Award honouring commitment to corporate
sustainability.
2007  P&G awarded the Ron Brown Award for Corporate Leadership.
 P&G recognized by EPA for Children’s Safe Drinking Water Program.
 New commitment made to provide 40 million maternal and neonatal tetanus
vaccines to UNICEF. COMPLETED

2006  New commitment made at Clinton Global Initiative to reach one million children

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 in school programs and provide 135 million litters of safe drinking water over
three years. COMPLETED
 P&G was National Inventor of the Year for the design and development of
purification sachets.
2005  Downy Single Rinse introduced, offering water savings in critical regions.
 P&G awarded Stockholm Industry Water Prize for providing safe drinking water.
2004  Downy Single Rinse introduced, offering water savings in critical regions.
 P&G awarded Stockholm Industry Water Prize for providing safe drinking water.
2003
 Downy Single Rinse introduced, offering water savings in critical regions.
 P&G awarded Stockholm Industry Water Prize for providing safe drinking water.
2001  FTSE4Good launched; P&G listed every year since inception.

2000  P&G ranked as a Sector Leader in Dow.

1999  P&G formed a corporate sustainability department and was one of the first
companies to publish an annual sustainability report.
1997  Developed the Geo-referenced Regional Exposure Assessment tool for European
rivers.
 P&G developed Japan’s first environmental exposure model for consumer
products.
1995  P&G pioneered use of Life Cycle Assessment to design Municipal Solid Waste
Management.
1993  The first P&G Annual Global Environmental Report was produced.
1992  Received the United Nations World Environment Centre Gold Medal.
 P&G moved to elemental chlorine-free pulp for all of the Company’s paper
products.
1990  P&G articulated its Company-wide environmental quality policy.
1989  P&G committed $20 million to assist the development of U.S. compost
infrastructure.
1987  P&G environmental stream facility began operation.
1983  P&G environmental stream facility began operation.
1981  P&G co-founded the Society of Environmental Toxicology and Chemistry.

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1977  P&G Environmental safety organization formed in Brussels.
1973  Publication of the “Sturm Test,” the forerunner of the Ready Biodegradability
Test.

1971  The P&G Corporate Environmental Safety Department was formed.

 P&G Safety and Regulatory was established as a separate entity from product
development.

1970  P&G implemented its first manufacturing plant environmental audit.

1969  Instream biological monitoring program began.

1965  P&G published its 10th environmental safety paper to support new
biodegradability test methods.

1964  Switch to biodegradable anionic surfactant LAS began.

 The P&G Environmental Water Quality Laboratory was established.

1956  The first environmental safety publication was created at P&G measuring
surfactants in rivers.
1952  The first environmental safety publication was created at P&G measuring
surfactants in rivers.

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 Chapter-3
Research & Methodology

Research can be defined as “an activity that involves finding out, in a more or less
systematic way, things you did not know”

“Methodology is the philosophical framework within which the research is

conducted or the foundation upon which the research is based”

 Objective of the study

The objectives of this research are to

 Study the green practices of P&G

 To study and evaluate the green practices of P&G

 To Study the factors which influence the effectiveness of green practices in the
company?

 To know the acceptance of the green practices by employees of the company.

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  Methodology

Methodology is the systematic, theoretical analysis of the methods applied to a field of

study. It comprises the theoretical analysis of the body of methods and principles
associated with a branch of knowledge. The process used to collect information and data
for the purpose of making business decisions. The methodology may include publication
research, interviews, surveys and other research techniques, and could include both
present and historical information.

 RESERCH DESIGN -The research design is exploratory and discursive in nature.

 Source –The source that have been used to analyses and fulfill the objectives are
completely secondary based. The data sources studies include magazines, books and
manuals, reports, journals, research papers, etc.

 Limitations of the study

 The survey is subjected to the bias and prejudices

of the respondents; hence 100% accuracy can’t be assured.

 The researcher was carried out in a short span of time, where in the researcher
could not widen the study.

 The study could not be generalized due to the fact that researcher adapted personal
interview method.

 The source use are secondary so it subject to change and need more analyses

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 Chapter-4
Analysis and Interpretation

ANALYSIS OF P&G ON VARIOUS HEADS

 SWOT ANALYSIS  MARKET ANALYSIS

 FINANCIAL ANALYSIS  TECHNICAL ANALYSIS

 SWOT ANALYSIS

“SWOT is an acronym for the internal Strengths and Weaknesses of a firm and the
environmental Opportunities and Threats facing that firm. SWOT analysis is a widely
used technique through which managers create a quick overview of a company’s strategic
situation. The technique is based on the assumption that an effective strategy derives
from a sound “fit” between a firm’s internal resources (strengths and weaknesses) and its
external situation (opportunities and threats). A good fit maximizes a firm’s strengths and
opportunities and minimizes its weaknesses and threats. Accurately applied, this simple
assumption has powerful implications for the design of a successful strategy.”

Procter & Gamble

P&G is the world's largest consumer goods company that markets more than 300 brands
in over180 countries. The company is engaged in producing beauty, health, fabric, home, baby,
family and personal care products. The company's product portfolio also includes pet health
products and snacks. The company's leading market position along with its strong brand
portfolio provides it with a significant competitive advantage. However, slowdown in global

23
economic condition is making it increasingly difficult for branded product manufacturers like
P&G to maintain their sales volume and revenue growth.

Strengths

 The large scale, on which the P & G operates, is one of its strengths. It is a global leader
for different product categories like fabric, home, baby, beauty, health and personal care
in many countries. Its three hundred products are sold in over one hundred and eighty
countries.
 The strong branding of P & G makes it one of the most successful brands in the world.
 The company has a vast experience in oral and personal hygiene products as they are
working since...
 Also, it has an extensive experience in marketing in different market segments and is one
of the best marketers in the world.
 P & G is tightly integrated with some of the largest retailers in United States of America
as well as world around. and around the world Distribution channels all over the world
 Gross profit margin of the company is 15 times the industry average
 P & G is known for its diverse brand portfolio. The company is able to customize its
global products and brands according to the local preferences.
 P & G invests greatly in its research and development to. About $2 billion are invested
every year by P & G for improving and introducing new products. The end-consumer
understanding of P & G and its large database of consumers make its research and
development strong.

Weaknesses

 Many of the top brands of P & G are losing their market share rapidly. In online media
leadership and presence P & G is lagging behind.
 The beauty and health products by P & G are mostly for women.
 P & G does not make and offer any private label products for the retail customers and is,
missing an opportunity.
 The large scale operation of the company makes the culture heavy and processes slow.
This also leads to quality control problems.
 P & G does not divest its weak or poor brands.
 The major customers of P & G are located at some of the places and it concentrates
heavily as them.

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  When P & G acquired Clairol business in year 2001, it was unable to grow this business.
The Clairol Herbal Essence brand failed to enter new markets as the market had access to
better and innovative products. This shows weakness of P & G in the beauty care
division.

Opportunities
 An opportunity for P & G is health and beauty products for men. With the acquisition of
Gillette, the company now has several growth opportunities in this market segment.
 P & G has doubled its Environmental Goals for the year 2012 and thus, promises more
value for the environment concerned customers today.
 Using the online social networks and internet marketing techniques is also an opportunity
for P & G.
 Divest brands that are not in accordance or do not meet P & G's long-term goals.
 Company is constantly trying to pursue growth overseas.

Threats
 There is a cut throat competition in the fast moving consumer's goods markets today.
Companies like Kimberly Clark, Unilever, Johnsons & Johnsons and Colgate-Palmolive
etc pose a serious threat to its market share in different countries.
 The competitors are making their product portfolios diverse day b day and using
different marketing and promotional strategies to increase their market share.
 In the market many substitutes are available for P & G products at cheaper prices.
 The private label growth is also a serious threat to the P & G's market share.
 Due to recession, the consumer spending has decreased globally. Also, the prices for
raw materials are increasing so cost to the company is increasing.

 FINANCIAL ANALYSIS

STRATEGY
They are focused on strategies that the right for the long- term health of the Company and
will deliver total shareholder return in the top one-third of their peer group.

The Company’s long-term financial targets are:

 Grow organic sales 1% to 2% faster than market growth in the categories and geographies in
which they compete,
 Deliver earnings per share (EPS) growth of high single digits to low double digits, and
 Generate free cash flow productivity of 90% or greater.

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 In order to achieve these targets, they are prioritizing the strategies and resources that will make
P&G more focused and fit to win over the near- and long-terms.

Improving productivity and creating a cost savings culture

They have taken significant steps to accelerate cost savings and create a more cost
focused culture within the Company, including a five-year, $10 billion cost savings initiative,
which was announced in February 2012. The cost savings program is based on:
 The reduction of approximately 5,700 non-manufacturing overhead positions by the end of fiscal
year 2013.
 Approximately $1.2 billion in annual cost of goods savings across raw materials, manufacturing
and transportation and warehousing expenses.
 Generating efficiencies to enable us to grow marketing costs at a slightly slower rate than sales
growth while still increasing consumer reach and effectiveness, saving approximately $1 billion
over the five year period

Procter and Gamble: Still a Champion Blue-Chip

Procter and Gamble (NYSE: PG) is a worldwide consumer products company, and one of
the largest companies in the world. The company has grown its dividend for well over 50 years,
and has a market cap of almost $190 billion.

-Seven Year Revenue Growth Rate: 5.7%

-Seven Year EPS Growth Rate: 4.7%
-Seven Year Dividend Growth Rate: 11%
-Current Dividend Yield: 3.28%
-Balance Sheet Strength: Strong, but with Goodwill

The returns have been positive since, PG dividend stock report from 2011 when called
the stock fairly valued and a “hold”, but the company seems to have a diminished moat and
lackluster growth prospects. Over the long-run, earnings will begin inching up and the rate of
return will be positive, but they don’t view the current valuation as appropriate for the stock
performance with a margin of safety. They would desire a 10% pullback or more to invest.

OVERVIEW
Founded in 1837, Procter and Gamble (symbol: PG) is now one of the largest companies
in the world. They sell their products in over 180 countries and currently have a market
capitalization of over $180 billion. The company is known as one of the most solid blue
chip dividend stocks with the history of more than five decades of consecutive annual dividend
growth and large product diversification.

The company operates in numerous segments, as outlined below:

Beauty
With brands like Head and Shoulders, Pantene, and Olay, Procter and Gamble brings in
24% of its sales and 22% of its earnings from its beauty segment.

Grooming

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 Another 10% of sales and 16% of earnings come from the grooming segment, which
includes brands like Braun, Fusion, and Gillette.

Health Care
Procter and Gamble offers a number of feminine care, oral care, and symptom-care
products, including Oral-B, Vicks, and Always. The company generates 15% of sales and 17%
of earnings from this segment.
Fabric/Home Care
The company has a variety of brands like Duracell batteries, Tide detergent, and Febreeze
air care, from which it generates 32% of revenue and 26% of earnings.

Baby/Family Care
Through brands like Bounty, Charmin, and Pampers, Procter and Gamble generates 19%
of sales and 19% of earnings from baby and family care products.
In terms of geographic exposure, 39% of sales come from North America, 19% come
from Western Europe, 18% come from Asia, 14% come from Africa, the Middle East, and
Central/Eastern Europe, and 10% come from Latin America.

Ratios
Price to Earnings: 22
Price to Free Cash Flow: 22
Price to Book: 3
Return on Equity: 17%

REVENUE CHART

Sales grew at an annualized rate of 5.7% over this period, but over a more recent period,
sales growth has been flat. The company has restated numbers which are not shown here, and
those points to mild growth. In some ways, the chart is not quite as bad as it looks, because the
company was actively divesting brands over this period, including selling the large Folgers
coffee brand to Smackers, rather than focusing on growth. Still, investors are broadly and
correctly unimpressed by Procter and Gamble’s performance over this period.

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 Earnings and Dividends

In terms of earnings per share, the company grew at an annualized rate of 4.7%.
However, earnings have declined over the later period as part of the cost-cutting. The company
has stated that it targets high single digit EPS growth. When combined with a dividend yield of
over 3%, that would mean long-term low double-digit returns. As far as the dividend is
concerned, it currently yields 3.28% with a payout ratio of under 60%. The dividend has grown
by a rate of 11% annually, and the most recent increase was 7%.

BALANCE SHEET
Total debt/equity for the company is under 50%, and the debt/income ratio is under 3 xs.
However, over 80% of the existing shareholder equity consists of goodwill. Much of PG’s
growth was due to acquisitions.
The interest coverage ratio is very solid, at over 17. Taking everything into account,
Procter and Gamble has a rather strong balance sheet, with manageable debt levels, a high
interest coverage ratio, and good investment grades. The only real downside to the balance sheet
is the large quantity of goodwill, but overall, it’s in good shape.

INVESTMENT THESIS
Procter and Gamble is the largest company in the world at what it does, and has 25
billion-dollar brands. The company’s goals, as stated in their most recent annual report, were for
an organic sales growth rate of 1-2% above global market growth rates, earnings growth in the
high single digits or low double digits, and for free cash flow to be 90% of earnings.
The company has pursued a global growth strategy, and has achieved 23% compound
annual sales growth in Brazil, 25% compound annual sales growth in Russia, 27% compound
annual sales growth in India, and 17% compound annual sales growth in China, over the last 10-
year period.
For example, if a company can achieve 2% annual volume growth and 3% pricing growth
on that volume (basically in line with a standard inflation rate), then the revenue growth is
around 5%. If a company then buys back 3% of its market cap in stock buybacks each year and
net profit margins remain static, then EPS growth is in the ballpark of 8%. Add a 3% dividend
yield, and P&G got a good investment on your hands.

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 But if margins deteriorate, or volume growth halts, then the picture can change. In
addition, if the valuation of the stock is too high, it drives down the dividend yield and reduces
the number of shares that the company can repurchase, which in turn reduces the EPS growth
rate. That’s something that not everyone realizes: that for a company that does buybacks, a high
stock valuation results in a measurable reduction in EPS growth compared to if the stock
valuation were low. Slow and profitable growth works great when the valuation is low enough to
provide double-digit returns.
For Procter and Gamble, they announced earlier in 2012 a plan to save $10 billion in
operations by the end of 2016. Specifically, they call for $6 billion in savings on cost of goods
(which comes out to around $1.2 billion per year), $3 billion in savings on overhead (reducing
the number of employees, at about $600 million per year), and then $1 billion in savings from
marketing, or around $200 million per year.
To do this and keep the top line intact means that these savings can go towards dividends,
buybacks, or strengthening the balance sheet.

RISKS
Procter and Gamble faces commodity cost risk and global currency risk. More
specifically, they operate in a highly competitive industry, and if consumers are looking to
reduce spending, they can switch and have switched to private label products. Plus, other
branded companies with overlapping products, like Colgate, can fight for market share.
If the company doesn’t make good use of its advertising, maintain pricing power, and continue to
grow global volume, then their earnings growth rate won’t match their target rate of high single
digits or better per year.

 MARKET ANALYSIS

Porter five forces competitive analysis for P&G

Threat of New Entrants

 P&G possess a significant amount of market share around the world.

 To compete P&G, A competitor must have a large sum of capital for heavy marketing
and R&D.

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  Firms That Specialize in nice market could possibly become a threat to P&G
corresponding business segment.

Power of Buyers:
 P&G is heavily dependent on wall mart and its affiliates for generating a major part of its
revenue.
 High dependence upon Wal-Mart could reduce the bargaining power of P&G.

Power of Suppliers
 Supplier of P&G need key customer for profitable revenue generation and will have little
bargaining power.
 Rising interest rate and declining availability of credit ultimately should not affect
P&G’s relationship with its suppliers.

Threat of Substitutes

 There are substantial no of substitutes for all of P&G’s product offerings, creating an
intense competitive environment.
 In order to differentiate itself P&G must continue to provide new and innovative
products to the customer.

Intensity of Rivalry
 P&G has several strong competitors in different markets like AMWAY corporation,
Colgate-Palmolive Company, Johnson & Johnson, Revlon, HUL among big and medium
size competitors.
 Switching cost in this industry is quite low.

Main competitors:
 HUL
 KIMBERLY CLARK LIVER PVT. LTD.
 JOHNSON AND JOHNSON

COMPETITORS ON THE BASIS OF PRODUCT

PRODUCT NAME COMPETITORS NAME

Vicks Amirtanjan Bam, Zandu Bam, Cold Snap,

Pharma’o cold

Pantene Sunsilk, Clinic Plus

Ariel Surf Excel, Rin

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 Whisper Kotex, Stayfree

Pamper Huggies, Snuggy Baby Diapers

STRENGTH IN STRUCTURE

Global Business Units (GBUs) Focus on consumers, brands and competitors in India. They are
responsible for the innovation profitability from their businesses.

Market Development Organizations (MDOs) are charged with knowing consumers and
retailers in each market.
Global Business Services (GBS) utilizes P&G talent and expert partners to provide best-in-
class business support services at the lowest costs.
Lean Corporate Functions ensure ongoing functional innovation and capability improvement.

Business level
 Efforts to build competitive advantage
 Collaborative partnership and strategic alliance
 Distribution channel

Functional level strategy

 Human Resources Strategy
 R&D Technology Strategy
 Marketing and Sales Strategy

Value Chain Analysis

Analysis of Primary activity

P&G developed extensile economies from its scale of operations in
finance, logistics, marketing, Research, new product development, technology
innovation and other function.

Inbound and Outbound Logistics

P&G’s goal has been to create adaptive, reactive supply networks that
will link together sales and supply processes, inside and outside the organization,
to improve product availability.

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Operations
P&G organized into 3 business units

 Beauty
 Health and well-being
 Household care

The operation group consists of market development organization and global

business services

Sales and Marketing

 The company markets more than 300 brands over 180 countries
 23 of these brands are categorized by P&G as billion dollar brands.
 Majority of sales now coming from promotional events, pull systems of
efficient distributors of consumer and industrial product.

Services

 P&G emphasis on its principal business call of providing its customers with
right products at right place all the time.

Analysis and Support Activity

Firm Infrastructure:

 Integrity
 Passion for Winning
 Leadership
 Trust
 Ownership

Product R&D

P&G has strong commitment to find the best researchers, and retain them with
cultural design to reward success, stimulate learning, challenges compliancy and nurture
innovation.

Human resources Strategy

 Hire the best
 Challenges of P&G people from day1

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  Business and functional leaders activity recruiters, Teach and Coach
 Plan careers
 Never Stop Learning

Top 10 Developing Markets:

Maintaining the strong growth momentum they have established in developing markets is
critical to delivering their near- and long-term growth objectives. They are focusing resources
first on the markets that offer the greatest growth opportunity. They will assess the potential for
further portfolio expansions beyond the top 10 developing markets based on the top- and bottom-
line growth progress of the core business.

 TECHNICAL ANALYSIS

Innovation Wins Decades Innovation is the driving force behind their strategy, as it
always has been at P&G. Their experience has proven that price promotion may win a
quarter here and there, but innovation wins decades. There are many examples to prove
this. Take their Laundry business in the U.K., for instance. In the late 1970s, there were
competing hard just to defend and maintain our 35% market share leadership position.

They stepped up their innovation efforts. In the three decades since, they have
introduced a series of game-changing innovations such as Daz automatic detergent,
concentrated liquid detergent, and most recently, Liquitabs. They now enjoy around a
50% share. P&G seen the same dynamic in Oral Care. In the 1990s, P&G lost their
historical lead versus their top competitor because they simply out-innovated us. They
stepped up their innovation game once again and delivered a string of product
breakthroughs including Crest White strips, Crest Pro-Health, and Crest 3D White.
P&G’s leadership of the U.S. Dentifrice category, which is now enabling us to expand
these innovative products around the world.

The investment continues to pay off. P&G currently have the strongest innovation
and global expansion program in P&G history. They are globalizing products such as
Gillette Fusion ProGlide, Crest 3D White, Laundry additives, and the Pampers thinness
and absorbency upgrade. P&G also expanding successful marketing innovation such as
the SHIKSHA education program in India, in which P&G contributes a brick to
build a school for each pack of product purchased, or the Pampers “One Pack Equals
One Vaccine” campaign with its focus on eradicating maternal and neonatal tetanus.

The Old Spice “Smell like a Man, Man” campaign generated consumer excitement
and demand that catapulted the brand to market leadership. P&G’s global sponsorship of
the Olympic Games provides an outstanding platform for integrated, multi-branded
commercial innovation.

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 Today, an Innovation Council made up of three members from P&G and three
members from Accenture meets regularly to understand the business needs and explore
how new virtual reality technologies can help. Both Accenture and P&G harvest and
share innovative ideas from within the team and across their respective organizations.
P&G ultimately governs the program, and projects are prioritized on the technology
readiness and business impact.
Core Strengths
P&G focuses on five core strengths required to win in the consumer products industry. They are
designed to lead in each of these areas.

Consumer Understanding
No company in the world has invested more in market research than P&G. They interact
with more than five million consumers each year in nearly 100 countries. They conduct over
15,000 research studies every year, and invest more than $350 million annually in consumer
understanding. The insights they gain help us identify opportunities for innovation and better
serve and communicate with our consumers.

Innovation
P&G is widely recognized as the industry’s global innovation leader. Nearly all organic
sales growth over the past decade has come from new brands or improved products. They
collaborate with a global network of research partners, and more than half of all product
innovation coming from P&G today includes at least one major component from an external
partner. Their contributions have consistently helped us earn honors from the Symphony IRI
New Product Pacesetters Report—the annual list of the biggest innovations in our industry.
Over the past 16 years, P&G has had 132 products on the top 25 Pacesetters list—more
than our six largest competitors combined. P&G earned 5th place among Fortune’s 2011 list of
the World’s Most Admired Companies. And as of April 2011, P&G has won 22 “Product of the
Year” recognitions, as voted on by consumers in the US, UK, France, Holland, Italy, Spain, and
South Africa

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35
 Chapter-5
Summary of Findings
 Result of the Study

Quality, safety and the environment

Our goal is to provide products and services that make a positive impact on our consumers. As a
result, we strive to improve the environmental quality of our products, packaging and operations
worldwide.

To carry out our Environmental Quality Policy, we pledge to:

 Ensure our products, packaging and operations are safe for our employees, consumers and
the environment.
 Reduce or prevent the environmental impact of our products and packaging through their
design, manufacture, distribution, use and disposal. We're passionate about innovative,
practical solutions to environmental issues related to our business. We support the
preservation of resources and actively encourage reuse, recycling and composting. We also
partner and offer assistance to others who may contribute to progress in achieving
environmental goals.
 Meet or exceed the requirements of all environmental laws and regulations. We use
environmentally sound practices, even in the absence of governmental standards. We also
cooperate with governments in analyzing environmental issues and developing cost-
effective, scientifically based solutions and standards.
 Continually assess our environmental technology and programs, and monitor progress
toward environmental goals. We develop and use state-of-the-art science and product life-
cycle tests to assess environmental quality.
 Provide our consumers, customers, employees, communities, public interest groups and
others with relevant and appropriate factual information about the environmental quality of
P&G products, packaging and operations.
 Ensure every employee understands and is responsible for incorporating environmental
quality considerations in their daily business activities. We encourage, recognize and
reward individual and team leadership efforts to improve environmental quality—in and
outside of work.
 Keep operating policies, programs and resources in place to implement our Environmental
Quality Policy.

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  Conclusion & Recommendations

The case highlights P&G's dedication and constant devotion to cling to the idea of sustainable
development to ensure that the resources of the planet is not only enjoyed by us- the current
generation, but the same can be equally shared with the coming generation as well. P&G has
received external recognition for its approach to sustainable development. For the second year
running P&G holds first place within the Dow Jones Sustainability Index ‘non durable household
products’ group and reports its work annually under the Global Reporting Initiative (GRI)
guidelines.
This case study illustrates how P&G has innovated to develop a range of products and services
that are helping to provide a better quality of life for everyone, as well as business opportunities
for itself. It demonstrates that it is perfectly possible for companies that take environmental
protection, social responsibility and economic development seriously not only to survive, but to
flourish. Hence if P&G can take initiative to serve the world population, anyone can do achieve
the true meaning of Sustainable Development.

 As it was mentioned in the case that P&G is contributing towards sustainable

development in terms of economic development, better quality of life and improving
standard of living. But most of the people are not aware of the fact that what efforts the
company is making to improve globally sound.

 Now, in order making people aware P&G should go for communicating to the world
through marketing channels like advertisements, bill boards, newspaper and word of
mouth.

 P&G must focus on building more research and development centers across various cities
in order to ensure better quality of life for everyone so that sustainable development can
be achieved.

 Using less energy, water, and materials when we make our products and requiring fewer
resources when they are used in the home.

 Increasing the use of sustainably sourced, renewable materials and renewable energy in
P&G’s products and operations.

 Identifying ways to eliminate waste at the end of life, so that all manufacturing and
consumer waste has value through recycling, reuse, or conversion to energy.

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  Scope of further Study

We are working toward our long-term vision of:

 Powering all our plants with 100% renewable energy

 Using 100% renewable or recycled materials for all products and packaging

 Having zero consumer and manufacturing waste go to landfills

 Designing products that delight consumers while maximizing the conservation of

resources

We have established specific goals to demonstrate we are making progress against our long-term
vision. The table below updates progress against our goals.

Climate

 Reduce energy use at P&G facilities by 20% per unit of production by 2020. ACHIEVED

 Reduce absolute greenhouse gas emissions by 2020 by 30%.

 Ensure 70% of all washing machine loads are low energy cycles.

 Reduce truck transportation kilometers by 20% per unit of production. ACHIEVED

 Double use of recycled resin in plastic packaging.

 Ensure plants are powered by 30% renewable energy.

 Create technologies by 2020 to substitute top petroleum-derived raw materials with

renewable materials, as cost and scale permit.

 Ensure traceability of palm oil and palm kernel oil to our supplier mills by December 31,
2015, and to plantations by 2020 to ensure zero deforestation in our palm oil supply
chain, with a commitment to working with small farmers.

Waste

 Have 100% of the virgin wood fiber used in our tissue/towel and absorbent hygiene
products be third-party certified by 2015. ACHIEVED

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  Have 100% of our paper packaging contain either recycled or third-party-certified virgin
content by 2020.

 Reduce packaging by 20% per consumer use.

 Conduct pilot studies in both the developed and developing world to understand how to
eliminate land filled /dumped solid waste.

 Zero Manufacturing Waste to Landfill.

 Ensure 90% of product packaging is either recyclable or programs are in place to create
the ability to recycle it.

Water

 Provide 15 billion liters of clean drinking water by 2020.

 Reduce water use in manufacturing facilities by 20% per unit of production. ACHIEVED

 Provide 1 billion people access to water-efficient products.

 Suggestions

 As it was mentioned in the case that P&G is contributing towards sustainable

development in terms of economic development, better quality of life and improving
standard of living. But most of the people are not aware of the fact that what efforts the
company is making to improve globally sound.

 Now, in order making people aware P&G should go for communicating to the world
through marketing channels like advertisements, bill boards, newspaper and word of
mouth.

 P&G must focus on building more research and development centers across various cities
in order to ensure better quality of life for everyone so that sustainable development can
be achieved.

 Using less energy, water, and materials when we make our products and requiring fewer
resources when they are used in the home.

 Increasing the use of sustainably sourced, renewable materials and renewable energy in
P&G’s products and operations.

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  Identifying ways to eliminate waste at the end of life, so that all manufacturing and
consumer waste has value through recycling, reuse, or conversion to energy.

 References

WWW.PG.COM
WWW.WIKIPEDIA.COM
WWW.FMCG.COM
WWW.PG.COM/EN_IN/

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