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Company History: The Procter & Gamble Company (P&G) is a giant in the area of consumer goods. The leading maker of household products in the United States, P&G has operations in nearly 80 countries around the world and markets its nearly 300 brands in more than 160 countries; more than half of the company's revenues are derived overseas. Among its products, which fall into the main categories of fabric care, home care, beauty care, baby care, family care, health care, snacks, and beverages, are 16 that generate more than $1 billion in annual revenues: Actonel (osteoporosis treatment); Always (feminine protection); Ariel, Downy, and Tide (laundry care); Bounty (paper towels); Charmin (bathroom tissue); Crest (toothpaste); Folgers (coffee); Head & Shoulders, Pantene, and Wella (hair care); Iams (pet food); Olay (skin care); Pampers (diapers); and Pringles (snacks). Committed to remaining the leader in its markets, P&G is one of the most aggressive marketers and is the largest advertiser in the world. Many innovations that are now common practices in corporate America--including extensive market research, the brand-management system, and employee profit-sharing programs--were first developed at Procter & Gamble. 1837 Launch: Maker of Candles and Soap In 1837 William Procter and James Gamble formed Procter & Gamble, a partnership in Cincinnati, Ohio, to manufacture and sell candles and soap. Both men had emigrated from the United Kingdom. William Procter had emigrated from England in 1832 after his woolens shop in London was destroyed by fire and burglary; Gamble came from Ireland as a boy in 1819 when famine struck his native land. Both men settled in Cincinnati, then nicknamed "Porkopolis" for its booming hog-butchering trade. The suggestion for the partnership apparently came from their mutual father-in-law, Alexander Norris, who pointed out that Gamble's trade, soap making, and Procter's trade, candle making, both required use of lye, which was made from animal fat and wood ashes. Procter & Gamble first operated out of a storeroom at Main and Sixth streets. Procter ran the store while Gamble ran the manufacturing operation, which at that time consisted of a wooden kettle with a cast-iron bottom set up behind the shop. Early each morning Gamble visited houses, hotels, and steamboats collecting ash and meat scraps, bartering soap cakes for the raw materials. Candles were Procter & Gamble's most important product at that time. Procter & Gamble was in competition with at least 14 other manufacturers in its early years, but the enterprising partners soon expanded their operations throughout neighboring Hamilton and Butler counties. Cincinnati's location on the Ohio River proved advantageous as the company began sending its goods downriver. In 1848 Cincinnati was also linked to the major cities of the East via rail, and Procter & Gamble grew. Around 1851, when P&G shipments were moving up and down the river and across the country by rail, the company's famous moon-and-stars symbol was created. Because many people were illiterate at this time, trademarks were used to distinguish one company's products from another's. Company lore asserts that the symbol was first drawn as a simple cross on boxes of Procter & Gamble's Star brand candles by dockhands so that they would be easily identifiable when they arrived at their destinations. Another shipper later replaced the cross with an encircled star, and eventually William Procter added the familiar 13 stars, representing the original 13 U.S. colonies, and the man in the moon. The moon-and-stars trademark became a symbol of quality to Procter & Gamble's base of loyal customers. In the days before advertising, trademarks were a product's principal means of identification, and in 1875 when a Chicago soap maker began using an almost-identical symbol, P&G sued and won. The emblem, which was registered with the U.S. Patent Office in 1882, changed slightly over the years until 1930, when Cincinnati sculptor Ernest Bruce Haswell developed its modern-day form. During the 1850s Procter & Gamble's business grew rapidly. In the early part of the decade the company moved its operations to a bigger factory. The new location gave the company better access to shipping routes and stockyards where hogs were slaughtered. In 1854 the company leased an office building in downtown Cincinnati. Procter managed sales and bookkeeping and Gamble continued to run the manufacturing. By the end of the decade, the company's annual sales were more than $1 million, and Procter & Gamble employed about 80 people. Prospering During the Civil War
Procter & Gamble prospered. Introducing Innovative Employee Benefits In 1885 the young Procter recommended that the workers be given Saturday afternoons off. two young cousins. as time wore on. Nevertheless. procuring a large supply at the bargain price of $1 a barrel. Advertising was risky at the time. P&G soon introduced another successful brand: Lenox soap. including a soap that was equal in quality to expensive castile soaps. including Procter & Gamble. but which could be produced less expensively. Behind P&G's labor policies was a founder's grandson. and the moon and stars became a familiar symbol with Union soldiers. the company sought to avert labor problems before they became significant. the yellow soap helped P&G reach sales of more than $3 million by 1889. Harley Procter. the first all-vegetable shortening. starting in the soap factory. Procter. and P&G's formula for White Soap changed permanently. When P&G's supply of rosin ran out toward the end of the war. William Procter's son. Although Procter & Gamble had foreseen the wartime scarcities." Although the office was at first perplexed. In 1878 Procter & Gamble's White Soap hit the market and catapulted P&G to the forefront of its industry. William Cooper Procter had joined the company in 1883 after his father. The slogan "99% pure" was a welcome dose of sobriety amidst the generally outlandish advertising claims of the day. The company supplied the Union Army with soap and candles. in 1882 the company approved an $11. Nevertheless. which experienced a number of strikes and demonstrations. Procter learned the business from the ground up. The most distinctive characteristic of the product." Procter devoted himself to the success of the new product and convinced the board of directors to advertise Ivory. The 1880s saw labor unrest at many American companies. Launching Ivory Soap in 1878 After the war Procter & Gamble expanded and updated its facilities." The success of Ivory and the ability of Procter & Gamble to spread its message further through the use of national advertising caused the company to grow rapidly in the 1880s. William Alexander Procter. In 1887 the company implemented a profit-sharing plan in order to intertwine the employees' interests with . to set up a laboratory at Ivorydale and improve the quality and consistency of Procter & Gamble's products. When wartime shortages forced competitors to cut production. With lard expensive and in short supply. Marketed as a heavier-duty product. developed the new soap's potential. had them analyzed and improved even before they went to market. was developed by chance. out of the ivory palaces whereby they have made thee glad. Gamble hired a chemist. In 1875 the company hired its first full-time chemist to work with James Gamble on new products. Harley James Morrison.000 annual advertising budget. Before long Procter & Gamble was receiving orders for "the floating soap. What lard and lard stearin was available was instead developed into a cooking compound. William Cooper Procter. Until 1863 lard stearin was used to produce the stearic acid for candle making. In 1860. requested that he return from the College of New Jersey (now Princeton University) just one month before graduation to help with the company's affairs. on the brink of the Civil War. In 1890 James N. In order to keep up full production the company had to find new ways of manufacturing. its stockpile of raw materials shrank. The same process was later adapted to create Crisco. A worker accidentally left a soap mixer on during his lunch break. James Norris Gamble and William Alexander Procter (sons of the founders). traveled to New Orleans to buy as much rosin as they could.Procter & Gamble's operations were heavily dependent upon rosin--derived from pine sap--which was supplied from the South. the confusion was soon cleared up. Harley Procter was inspired to rename the soap by Psalm 45: "all thy garments smell of myrrh. In 1886 P&G opened its new Ivorydale plant on the edge of Cincinnati to keep up with demand. the company experimented with silicate of soda as a substitute. and aloes. Procter believed that "advertising alone couldn't make a product successful--it was merely evidence of a manufacturer's faith in the merit of the article. committed to the excellence of the company's products. a new method was discovered to produce the stearic acid using tallow. most advertisements were placed by disreputable manufacturers. there were 14 strikes over the next two years. causing more air than usual to be mixed in. This practice was the origin of P&G's superior product development. soon renamed Ivory soap. and cassia. and the company's management agreed. Thereafter. which later became a key ingredient in modern soaps and detergents. In 1869 the transcontinental railroad linked the two coasts and opened still more markets to Procter & Gamble.
Postwar Growth Fueled by Tide After World War II the availability of raw materials and new consumer attitudes set the stage for unprecedented growth. which was introduced in 1902. William Cooper Procter was also active in the wartime fundraising effort. Drene. Further improvements in synthetics resulted in a host of new products years later. soon known as "soap operas. Procter & Gamble has been recognized as a leader in employee-benefit programs ever since. and was widely copied by other companies. In 1933 Procter & Gamble became a key sponsor of radio's daytime serials. kitchens and laundry rooms to assess the effectiveness of Procter & Gamble's products in practical use and to recommend improvements. but Procter & Gamble management had again foreseen the crisis and had stockpiled raw materials. Although the semiannual dividends were received enthusiastically by employees.those of the company. Procter & Gamble soon began experimenting with a hydrogenation process which combined liquid cottonseed oil with solid cottonseed oil. and Procter & Gamble was one of the largest manufacturers of that product. together with home automatic washing machines. Market research complemented Procter & Gamble's laboratories and home economics department in bringing new technology to market.W. synthetic soap products hit the market. Radio took Procter & Gamble's message into more homes than ever. followed by Port Ivory on Staten Island. The company was not ready for the consumer demand for heavy-duty detergent when it introduced the . The company's market research became more sophisticated when P&G chemist F." In effect. Backed by a strong advertising budget. After several years of research. During the 1920s the flurry of new products continued. Deupree became president of the company in 1930. that enthusiasm rarely found its way back into the workplace. but Procter & Gamble emerged virtually unscathed. followed by the first synthetic hair shampoo. That year P&G advertised on television for the first time. In 1933 Dreft. Debut of Brand Management in 1931 In 1931 Neil McElroy." In 1935 Procter & Gamble spent $2 million on national radio sponsorship. kept P&G at the forefront of the cleaning-products industry. and implemented an eight-hour workday in 1918. new soaps. Procter & Gamble patented the procedure. a former promotions manager who had spent time in England and had an up-close view of Procter & Gamble's rival Unilever. Crisco sales took off. revolutionized the way people washed their clothes. competing with the products of other firms as well as those of Procter & Gamble. Ivory Flakes came out in 1919. Brand management became a fixture at Procter & Gamble. After Blair returned.S. corporations as well as for individuals. In 1907 William Cooper Procter became president of the company after his father's death. including P&G White Naphtha. Soon after Richard R. In 1940 Procter & Gamble's packaging expertise was given military applications when the government asked the company to oversee the construction and operation of ordinance plants. and by 1937 the amount was $4. was introduced. Paul Smelser began a careful study of consumer behavior. which produced better results. Procter & Gamble's postwar miracle was Tide. Missouri. the first synthetic detergent for home use. Two years later the company implemented an employee stock-purchase program. Blair began a six-month tour of U. The Great Depression caused hardship for many U. each brand would operate as a separate business. suggested a system of "one man--one brand. In 1904 the company opened its second plant. Glycerin also became key to the war effort for its uses in explosives and medicine.5 million. in 1934. Chipso soap flakes for industrial laundry machines were introduced in 1921. In 1939 Procter & Gamble had 21 programs on the air and spent $9 million. The company introduced a revolutionary sickness-disability program for its workers in 1915. In 1926 Camay was introduced and three years later Oxydol joined the P&G line of cleaning products. The next year William Cooper Procter recommended tying the bonuses to employee performance. a synthetic detergent that. Meanwhile. The system would include a brand assistant who would execute the policies of the brand manager and would be primed for the top job. when Red Barber plugged Ivory soap during the first television broadcast of a major league baseball game.S. World War I brought shortages. By 1915 about 61 percent of the company's employees were participating. and in 1911 Crisco was introduced to the public. which in 1903 was tied to the profit-sharing plan. the economic-research department under D. in Kansas City. In 1890 The Procter & Gamble Company was incorporated. with William Alexander Procter as its first president. New York. Procter & Gamble Defense Corporation operated as a subsidiary and filled government contracts for 60-millimeter mortar shells.
Luvs. Despite its premium price. nudging past Colgate in 1962. In 1977. The company expanded its food business by entering the coffee market through the 1963 acquisition of the Folgers brand and by introducing the stackable Pringles potato chips. the Centers for Disease Control (CDC) published a report showing a statistical link between the use of Rely and a rare but often fatal disease known as toxic shock syndrome (TSS). within two years Tide. Morgens remained CEO until 1974. but disliked the 10 cents-per-Pamper price. and the product was on its way to becoming the country's number one toothpaste. Era in 1972. and a porous film that let moisture pass through into the absorbent layers. but kept it from coming back. Tide remained the number one laundry detergent into the 21st century. The idea for Pampers came from a Procter & Gamble researcher. Kentucky-based nut company W. Ariel (an overseas brand) in 1967. Procter & Gamble reduced the price to six cents and implemented a sales strategy emphasizing the product's price. a year later. In 1950 Cheer was introduced as bluing detergent. In 1974 Edward G. had climbed the corporate ladder from the advertising side. In 1980. and added a premium brand. In 1957 the Charmin Paper Company and the Clorox Chemical Company were also acquired. Young Foods. Researchers at the company and at Indiana University developed the toothpaste using stannous fluoride--a compound of fluorine and tin--which could substantially reduce cavities. including Bounce fabric softener for the dryer in 1972 and Sure antiperspirant and Coast soap in 1974. He was replaced by Howard Morgens who. outselling even the company's own Oxydol and Duz. taking a $75 million write-off on the product. like his predecessor. Procter & Gamble improved the technology over the years. Procter & Gamble's paper-products offensive culminated in the 1961 test marketing of Pampers disposable diapers. however. Procter & Gamble began acquiring smaller companies aggressively in the mid-1950s. Bold in 1965. Harness became chairman and CEO of Procter & Gamble and the company continued its strong growth. and Puffs tissues in 1960. along with other soap makers. left the company to serve as secretary of defense in President Dwight D. Vic Mills. After initial resistance. Procter & Gamble firmly established itself in the toiletries business with Crest toothpaste. and Solo in 1979. In a case that found its way to the Supreme Court. and acquired Nebraska Consolidated Mills Company. and over the years other laundry products were also marketed: Dash in 1954. and coffee acquisitions for ten years. who was inspired while changing an infant grandchild's diapers in 1956. who had become Procter & Gamble president in 1948. The product consisted of three parts: a leak-proof outer plastic shell. In September 1980 the company suspended further sales of Rely tampons. In 1955. Procter & Gamble was finally forced to divest Clorox in 1967. In 1957 Neil McElroy. Downy in 1960. In 1960 the American Dental Association endorsed Crest. Procter & Gamble introduced Rely tampons. Many familiar products were improved during the 1970s. In 1959 McElroy returned to Procter & Gamble as chairman and remained in that position until 1971. had to contend with charges from the Federal Trade Commission that both its Folgers and Clorox acquisitions violated antitrust statutes. and new ones were added as well. P&G. In 1955 it bought the Lexington. in 1968. Test market results showed that parents liked the diapers. drastically reduced the use of phosphates in its products.T. Eisenhower's cabinet. was the number one laundry detergent. after three years of test marketing. several absorbent layers.product in 1946. owner of the Duncan Hines product line. Procter & Gamble's Charmin brand of toilet paper was also made softer. . which were rapidly accepted in the market as a result of their "super-absorbent" qualities. Pamper's threelayer design was a phenomenal success. The 1950s were highly profitable for the company. after five years of research. The Folgers action was dismissed after Procter & Gamble agreed not to make any more grocery acquisitions for seven years. in 1976. Paper Products Push Included Pampers Morgens oversaw Procter & Gamble's full-scale entry into the paper-goods markets. A new process developed in the late 1950s for drying wood pulp led to the introduction of White Cloud toilet paper in 1958. a key group of ingredients in soap products. which were shipped in resealable cans. and within 20 years disposable diapers had gone from less than 1 percent to more than 75 percent of all diapers changed in the United States. however. when Morgens succeeded him. backed by a $21 million advertising budget. In the late 1960s public attention to water pollution focused on phosphates. Procter & Gamble.
He had been president since 1974. Procter & Gamble brands continued to compete against one another." Category managers became responsible for several brands. and Triton Bioscience and Cetus for a synthetic interferon. share. Analysts maintained that Procter & Gamble's corporate structure had failed to respond to important changes in consumer shopping patterns and that the company's standard practice of extensive market research slowed its reaction to the rapidly changing market. up from 14 percent in 1985. The company also entered the over-the-counter (OTC) drug market with the 1982 purchase of Norwich-Eaton Pharmaceuticals. and the company continued to use the trademark on corporate stationary and on its building. unable to squelch perennial rumors linking Procter & Gamble's famous moon-and-stars logo to Satanism.S. Private labels' market share of that segment grew 50 percent between 1982 and 1992. with over one-fourth of the market. Procter & Gamble experienced its first decline in earnings since 1953. P&G was able to capitalize on the resurgence of feminine napkins after the TSS scare.and beauty-care goods manufacturer. In 1987 the company restructured its brand-management system into a "matrix system. which had been built up earlier in the decade. making them sensitive to the profits of other Procter & Gamble products in their areas. UpJohn for its anti-baldness drug. Smale became CEO of Procter & Gamble. The company completed its biggest purchase in 1985. including Ben Hill Griffin citrus products. The mass-marketing practices that had served Procter & Gamble so well in the past lost their punch as broadcast television viewership fell from 92 percent to 67 percent in the mid-1980s. The company's Always brand pads quickly garnered market share. Noxell and Blendax Acquisitions in 1988 In September 1988 Procter & Gamble made its first move into the cosmetics business with the purchase of Noxell Corporation.3 billion stock swap. In 1985. P&G's brand equity was threatened by the weak economy and resultant consumer interest in value in the late 1980s and early 1990s. the company reluctantly removed the logo from product packages. . Procter & Gamble was no longer willing to settle just for market share. population grew both older and more health conscious. and bought the motion-sickness treatment Dramamine and the laxative Metamucil from G. By 1989 foreign markets accounted for nearly 40 percent of group sales. maker of Noxema products and Cover Girl cosmetics. entered a number of joint ventures in pharmaceuticals. maker of Vicks respiratory care products. Minoxidil. The restructuring also eliminated certain layers of management. Many large companies responded to the challenge of cable TV and increasingly market-specific media with appropriately targeted "micro-marketing" techniques. During fiscal 1985. makers of Pepto Bismol and Chloraseptic. This value orientation resulted in stronger performance by private labels. In the late 1980s Procter & Gamble diversified its advertising.5 percent. In 1988 the company acquired Blendax. A company spokesperson summed it up for Business Week: "before it had been share. Searle & Co. These purchases made Procter & Gamble a leader in over-thecounter drug sales.D. Naprosyn. in a $1.Ironically. Procter & Gamble also planned to further develop its international operations. Smale led the company further into the grocery business through a number of acquisitions. Computerized market research including point-of-sale scanning also provided the most up-to-date information on consumer buying trends. The logo began to reappear on some packages in the early 1990s. reducing its reliance on network television. Procter & Gamble's OTC drug group. for $1. The company became more aware of profitability than in the past. quickening the decision-making process. The Bain de Soleil sun care-product line was also purchased that year. Procter & Gamble teamed up with the Syntex Corporation to formulate an OTC version of its bestselling antiarthritic. To serve this market. but far less actively. especially in health and beauty aids. to 4. NyQuil cold remedies. with the acquisition of the Richardson-Vicks Company. We get the share and the profits will follow. Cooperative deals were also struck with the Dutch Gist-Brocades Company for its De-Nol ulcer medicine.2 billion. and Oil of Olay skin care products. and Procter & Gamble was forced to rethink its marketing strategy. In the late 1980s healthcare products were one of the fastest-growing markets as the U. Food and OTC Drug Acquisitions in the Early 1980s In 1981 John G." In the later 1980s. a European health. and by 1990 Always was the top sanitary napkin. share.
To combat the trend. the U. It also helped to increase Procter & Gamble's net earnings margin from 7.to Late 1990s Company sales surpassed the $30 billion mark in 1993. P&G inaugurated "Every Day Low Pricing" (EDLP) for 50 to 60 percent of its products.84 billion in cash to acquire Tambrands. The program involved severe cost-cutting. or 12 percent of P&G's total workforce. and added the prestige fragrance business of Giorgio Beverly Hills. Inc. No product containing olestra ever caught on in the market. The corporation also sold an Italian coffee business in 1992 to focus on a core of European brands. Cascade dish soap. In 1996 the company had set a goal of doubling sales from the $35 billion of 1996 to $70 billion by 2005. and improving overall profitability. the $2. The company sold its Duncan Hines baking mix line to Aurora Foods of Ohio for $445 million in 1998.15 billion by 1998. Asia. Jager was named president and chief operating officer.2 percent in 1998. The FDA go-ahead came after an eight-year investigation and included a stipulation that foods containing the substitute include a warning label about possible gastrointestinal side effects. Latin America. In the 1990s Procter & Gamble also hopped on the so-called "green" bandwagon of environmental marketing. it also divested holdings in some areas it had outgrown. the forestry business had become unprofitable and distracting by the 1990s. the company continued its brisk acquisitions pace. Some retailers objected to P&G's cut in promotional kickbacks to the point of actually dropping products. including the closure of 30 plants around the world and elimination of 13. Major Restructurings and Acquisitions in the Mid. the company held a "Dirtiest Kid in America" contest. In 1992 the corporation sold about one-half of its Cellulose & Specialties pulp business to Weyerhaeuser Co. In July 1997 Procter & Gamble spent about $1. but was compensated for with lower promotion deals for wholesalers. however. but would now organize around four regions--North America. and Oil of Olay. thereby solidifying its number one position worldwide in feminine products. branding. Procter & Gamble that year launched a major restructuring effort aimed at making the company's brand-name products more price-competitive with private label and generic brands. P&G soon began test-marketing Fat Free Pringles.4 billion program resulted in annual after-tax savings of more than $600 million. for $600 million. but others welcomed the value-conscious positioning. Pantene Pro-V was introduced in 1992 and quickly became the fastest growing shampoo in the world. While vertical integration had benefitted P&G's paper products in the past. The company had developed olestra after 25 years of research and at a cost of $250 million. and olestra was eventually considered one of the company's biggest product failures ever. and Latin American brands Lavan San household cleaner and Magia Blanca bleach. P&G hoped to introduce products with pan-European packaging. Culminated in 1997. and Jif peanut butter. That year also saw Procter & Gamble reenter the South African market following the lifting of U. P&G redirected the money it saved from trade promotions for direct marketing efforts that helped bring coupon and sample programs to targeted groups for brands with narrow customer bases such as Pampers. bringing products to market faster. Inc. sanctions. and the Tampax line of tampons.000 jobs.03 billion. While P&G expanded its presence in cosmetics and fragrances through the July 1991 acquisition of the worldwide Max Factor and Betrix lines from Revlon. P&G had divided its operations into United States and International. dubbed Organization 2005.3 percent in 1994 to 10. In July 1995 Artzt retired. The pricing strategy was good for consumers. Inc. for $1. only a 4 percent increase over the previous year--when 7 percent increases were needed each year.S. But sales stood at just $37. Meanwhile. in snacks and crackers. baby wipes brand Baby Fresh. Artzt and President John E. The company altered its geographic management structure the following year.S. Fat Free Ritz. and advertising to capture more of the region's well-established markets. including Pampers and Luvs diapers. and Europe/Middle East/Africa. a controversial fat substitute. Under the leadership of Chairman and CEO Edwin L. It reduced packaging by offering concentrated formulations of products in smaller packages and refill packs on 38 brands in 17 countries. A key element of this restructuring was a shift from an . Also in 1996 P&G received U. Pepper. Food & Drug Administration (FDA) approval to use olestra. In 1994 P&G entered the European tissue and towel market through the purchase of Vereinigte Papierwerke Schickedanz AG's European tissue unit. and other products made using olestra. In September 1998 P&G announced a new restructuring initiative. During the restructuring period. In 1996 Procter & Gamble purchased the Eagle Snacks brand line from Anheuser-Busch. and was replaced as chairman and CEO by Pepper. Clearasil. Durk I. In celebration of the 50th anniversary of Tide's introduction.S.
Taking over as president and CEO was A.9 billion. In June 1999 Jager extended the Organization 2005 restructuring to include several new initiatives. Also debuting in 1999 were Febreze. Extending its 1999 restructuring still further. Beauty Care. with annual global sales of approximately $800 million.24 billion. and Dryel. "This change will drive greater innovation and speed by centering strategy and profit responsibility globally on brands. In its biggest deal yet. Jager reportedly approached the Gillette Company. Pfizer Inc. and accelerate both revenue and profit growth. P&G announced in March 2001 that it would shed several thousand additional jobs over the following three years and double the amount of money it would spend to fix its operational problems. Fabric & Home Care. achieving $80 million in sales in 1998.000 jobs. P&G next acquired Recovery Engineering. P&G sold Clearasil. who had joined the company in June 1977 as a brand assistant for Joy and had most recently been in charge of the global beauty care unit. Lafley slowed down the rush to get products to market in order to make sure that they received the proper marketing support.22 billion in cash for the Iams Company.5 percent to $2. Warner-Lambert Company had agreed to a nearly $70 billion merger with American Home Products Corporation (AHP). According to a company press release announcing the new structure. having decided to try to build the Minute Maid brand on its own. P&G was able to achieve $1 billion in annual Actonel sales by fiscal 2004. But Jager was forced to abandon the white knight maneuver. But Coca-Cola pulled out of the deal just a few months later. when Jager would also assume that position.85 billion. Warner-Lambert attempted to fend off Pfizer. P&G . Jager resigned. In the meantime. In March 2001 Procter & Gamble reached an agreement with the Coca-Cola Company to create a $4 billion joint venture designed to join Coke's Minute Maid brand and distribution network with P&G's Pringles chips and Sunny Delight drink brands. when word leaked out to the press and the company's stock price plummeted. an electrostatic dusting mop that was part of a new category of household product: quick cleaning. Procter & Gamble laid out $2. By the end of fiscal 2003. The company said that by 2005 it would eliminate 15. for about $265 million. The Swiffer line went on to become one of P&G's fastest-growing brands of the early 2000s.48 billion. each of which brought in more than $1 billion in global revenues annually. 1999. Despite this setback. 1999. the company's fiscal 2001 results clearly showed the dismal state of affairs at that time: Sales fell nearly 2 percent to $39. get new products to the market faster. rather than on geographies. and record restructuring costs of $1. shutter about ten factories. bringing P&G into the picture in January 2000 to discuss a three-way deal involving AHP. Among other developments in 2000. Lafley. Late in the previous year. quickly stepped in with a hostile bid for Warner-Lambert that exceeded AHP's offer. Food & Beverage. after the company issued its third profit warning in a year. Based in Minneapolis. Health Care & Corporate New Ventures. a home dry-cleaning kit. In the meantime.600 jobs and incurred total before-tax charges of $4. Recovery produced the fast-growing PUR brand of water-filter products. which would have been a huge and risky move into the drug business. Procter & Gamble had cut about 21. a spray used to eliminate odors in fabrics. Around this same time. as it was announced at the same time that he would become president and CEO on January 1. about a takeover but was quickly rebuffed. Inc. P&G remained on the lookout for acquisitions and completed two significant ones in the latter months of 1999. In June 2000. Feminine Protection. with Pepper remaining chairman only until September 1. Early 2000s: Further Restructuring." Jager would be the person leading the reorganization.92 billion thanks to after-tax restructuring charges of $1. the Oil of Olay brand was renamed simply Olay in an effort to dispel the perception that the product was greasy. The aims were to increase innovation. Pepper returned to the company board as chairman. and Tissues & Towels. while at the same time focusing more of the company's resources on shoring up its big core brands--the top dozen or so products. Hair-Care Acquisitions Early in 2000 Procter & Gamble placed itself in the middle of a major takeover battle in the pharmaceutical industry. one of the leading makers of premium pet food in the United States. The company also received FDA approval for Actonel. Among new products introduced in 1999 was Swiffer.G. when the restructuring was declared to be complete. to Boots PLC for about $340 million.organization centered around the four geographic regions established in 1995 to one centered on seven global business units based on product lines: Baby Care. the acne-treatment brand. while net income plunged 17. a prescription treatment for osteoporosis. best known for its razors. At the same time. As part of an ongoing effort to focus on a smaller number of core brands. Aided by a marketing partnership with Aventis.
The deal. The deal provided P&G with an entrée into the salon market. (Netherlands). Giorgio Beverly Hills. and it also increased its dividend for the 48th straight year. Gore & Associates. propelling it past the $1 billion mark during fiscal 2002. These two new products helped increase global sales of the Crest brand by 50 percent.K. Noxell Corporation. baby. and global household care. such as beauty and hair care. In its best performance in nearly a decade. was valued at about $900 million.. Wella AG (Germany). Based in Germany.K. P&G consummated its largest acquisition yet. a private-equity firm in Boston. under a marketing and distribution agreement with AstraZeneca PLC. P&G-Clairol. Vick International Corporation. Procter & Gamble also bolstered its dental care line by acquiring the Glide brand of dental floss from W. and Lafley took on the additional post of chairman. Procter & Gamble Switzerland SARL. Wella was a leading maker of professional hair-care products with 2002 revenues of $3.. Procter & Gamble Inc. Baby. This further paring of the foods business left P&G with just two main food brands. . more profitable product areas. Limited (U. PUR Water Purification Products. Global Health.succeeded in paring back its ever more marginal food business by selling the Jif peanut butter and Crisco shortening brands to the J.L..27 billion. hitting $6.N. shifting its five previous units into three: global beauty care. Soon thereafter.). P&G built on these results with another blockbuster acquisition--once again the largest in company history. Procter & Gamble posted an 8 percent increase in net sales. and a 19 percent jump in net earnings. Procter & Gamble Limited (U. Inc. In July 2002 Pepper again retired. Procter & Gamble Italia. maker of a battery-powered toothbrush featuring spinning bristles that at $5 was much cheaper than existing electric toothbrushes. (U. Principal Competitors: Unilever. The Iams Company. Inc.V.. buying the Clairol hair-care business from Bristol-Myers Squibb Company for nearly $5 billion in cash. Also brought out in 2001 were Crest Whitestrips. John's SpinBrush. Yardley of London Ltd. In November 2001. Thomas Hedley & Co. to $5. Childs Associates LP. completed in May 2002. to $43.C.. and family care. Kimberly-Clark Corporation. surpassing the $50 billion mark for the first time.6 billion. Inc. Procter & Gamble India Holdings. meantime.K. In September 2003 the company acquired a controlling interest in Wella AG for $6. Olay Company.W. Inc. a tooth whitening product.. Results for the fiscal year ending in June 2003 provided strong evidence that Lafley had engineered a remarkable turnaround. Smucker Company. P&G began selling Prilosec OTC. The deal melded well with P&G's goal of securing faster-growing. an over-the-counter version of AstraZeneca's blockbuster heartburn medication. Global Household Care. Procter & Gamble Australia Proprietary Limited. Vidal Sassoon Co.48 billion. Inc.M. (Italy). global health. The Folger Coffee Company. Procter & Gamble France S. Johnson & Johnson. Inc.).). In September 2003. In April 2004 Procter & Gamble reached an agreement to sell its Sunny Delight and Punica drinks businesses to J.. Procter & Gamble Pharmaceuticals. Inc. and Family Care..p. Prilosec. Kraft Foods Inc.19 billion. where about half of Wella's sales were generated.A. the newly named Crest SpinBrush was successfully launched.. Sales for fiscal 2004 surged 19 percent. The newly invigorated company continued its streak of paying dividends without interruption since its 1890 incorporation. Procter & Gamble Nederland B. Also acquired in 2001 was Dr. Pringles and Folgers were placed within the latter unit. Net earnings jumped 25 percent. Tambrands Inc. The snacks and beverages unit accounted for only 7 percent of the company's total revenues in fiscal 2004.. Colgate-Palmolive Company. (Canada). Principal Subsidiaries: Cosmopolitan Cosmetics GmbH (Germany). S. Principal Operating Units: Global Beauty Care.. L'Oreal SA.38 billion. Max Factor & Co. At the beginning of fiscal 2005 P&G realigned its business units. Sara Lee Corporation. Pringles and Folgers.
Pampers).000 people. Earlier. In October 2005. India. Procter & Gamble China. strengthening its position in all categories of FMCG. the US-based fast moving consumer goods (FMCG) manufacturer . Charmin. P&G President and Chief Executive AG Lafley said investing in China made sense because demand for items such as Crest toothpaste and Tide detergent was rising faster in developing countries than in developed countries. P&G entered China in 1988. and this is a challenge because of the diversity and scale of the country. P&G acquired the US-based Gillette Company 5(Gillette). Former President. One out of five people in the world lives there. Having reached a saturation point in terms of revenue growth in developed economies. Metamucil). Over its history of more than 168 years. including China. This sharp step-up reflected the increased importance P&G attached to advertising its products in the fast growing Chinese economy." 1 . This sharp step-up reflected the increased importance P&G attached to advertising its products in the fast growing Chinese economy. Cover Girl).P&G's Success Story in China China is a focus market on two grounds: it is a developing market.global retailers. Scope. Analysts attribute P&G's success in China to its localization strategies. The company manufactured and marketed nearly 300 brands to consumers in over 160 countries across the globe. P&G brought variations in products such as toothpastes and cosmetics to suit the needs and preferences of Chinese consumers. Russia and Brazil. the company had 13 products that generated more than US$ 1 billion sales annually. and we have the kinds of products people use day in and day out. P&G had been the biggest bidder for advertisement space for 2005 as well. and it is big. paper goods (Bounty.affluent versus modest. Cascade. P&G had a high market share in several product categories: laundry and cleaning (Tide. in 2004. P&G began focusing aggressively on developing countries such as China.east versus west China and in the trade channels . as well as in geography . . The company customized product packaging. It employed about 102. Head & Shoulders. P&G President and Chief Executive AG Lafley said investing in China made sense because demand for items such as Crest toothpaste and Tide detergent was rising faster in developing countries than in developed countries. Procter & Gamble. in 1996 Introduction In November 2005. By 2003. modern Chinese retailers. However. food and beverages (Folgers. spending about 385 million yuan. Pringles. The diversity is in the consumers . Pantene.Procter & Gamble (P&G) outbid other major companies for prime-time advertising slots on the China Central Television3 (CCTV) investing 394 million yuan4 for 2006 advertisement space. P&G had established a strong presence in emerging economies such as China and Russia. "The potential is enormous for us in China. Whisper and Pringles were products that were same across the world. P&G acquired several companies. Olay. product formulas and advertising campaigns to cater to the Chinese market.John Pepper. President-Worldwide. beauty care (Pantene. Duncan Hines) and health care (Crest. traditional trade such as mom-and-pop groceries and kiosks. in 2004.Laurent Philippe. P&G had invested just 180 million yuan." 2 . Dawn). Our aspiration is market share leadership in all P&G core categories in China.
The Chinese FMCG market was expected to grow by 5-6% in 2006. there was no shampoo that could remove dandruff from the scalp. it could potentially damage the brand name and sales of the original brand.. By 1984."6 P&G's Entry Into China The Chinese government began to open local markets to foreign investment in the early 1980s. It was during this time that P&G began to focus seriously on China. foreign trade was still restricted and was channeled through 'friendship stores' where consumers with access to foreign currency could buy a limited range of imported goods. P&G had initiated an exercise to learn how consumers used them. P&G's Global Marketing Officer and his team of 3. Brand Stretching Brand stretching was another strategy adopted by P&G in China.. in order to observe their behavior. pet nutrition products and baby products. One of the most prominent SEZs came up near the village of Shenzhen. The company's market research revealed that though there were several shampoo marketers in China.. If the strategy failed. Jim Stengel. "We've changed our standard of innovation so we can serve more of the world's consumers.. During that time. P&G invested significantly in consumer research. P&G had moved away from its 'premium' image to a company that catered to all segments of the population. The Marketing Strategies Though P&G usually carried out extensive market research activities.. Within three years of its launch. there were some occasions when it used the gut instincts of its marketers to formulate its marketing strategies. Market Research P&G was a pioneer in developing the discipline of market research during the 1920s. This strategy had a considerable risk element. China was also the sixth largest market for the company. Instead of finding out what products consumers used. As of May 2005. In China. P&G aspired for market share leadership in all its core categories including personal and beauty care products. in Guangdong province. there was explosive industrial growth in this belt.500 marketing executives visited places where consumers lived and worked. So it's now a better brand experience for the target consumer and a lower product cost structure than the competition can deliver. Hence. P&G hence launched Head & Shoulders. For instance. laundry products. the Chief Technology Officer of P&G. most Chinese experts warned the company that 'nobody in China could afford to purchase Head & Shoulders. Hong Kong and Taiwan totaled US$ 2 billion. even though it was priced three times higher than the local brands. by the early 2000s. China increased the number of economic zones to 14. P&G China's contribution to the global revenues of P&G was 3. Chinese-speaking market researcher. P&G conducted its first market research in the Chinese market in Beijing and Shanghai in 1985. sales of P&G in mainland China. a brand that was known for its anti-dandruff properties.' However. According to Gilbert Cloyd. with a cumulative average annual growth rate of 25 percent between 2002 and 2005. and widened the scope of activity. In 2005. As a result of the SEZs.5%.. Head & Shoulders became China's bestselling shampoo. At this time. Dandruff was a common hair problem among the Chinese consumers. the government started establishing Special Economic Zones (SEZ) to promote free trade. P&G sent Berenike Ullmann (Ullmann). P&G rejected such advice and entered the market with a sound strategy. the company had made significant changes in the way it handled market research. to understand and develop the Chinese consumer market. In China too. However.. a young. .
The HR Strategies P&G's HR strategy focused on superior recruiting and retention of its employees. With time. To avoid direct competition from global FMCG companies such as P&G. P&G faced stiff competition from local companies such as the Nice group (that manufactured detergents) and CBons (a national shampoo and skin care products company)..To avoid cannibalization while stretching a brand. After careful deliberations. Crest held about 55% market share of the up-market segment. In May 2005. P&G brought in experienced Americans to manage the country's operations. In its initial years in China. the locals gained experience and were absorbed into senior positions. these local companies had concentrated on lower segment consumers and had emerged as leaders in this segment. out of which only about 50 were not Chinese.. P&G conducted extensive studies to understand the preferences of different groups of consumers so as to develop a distinctive product that could also be differentiated at the point of sale. P&G employed 4.. . with a price 30 percent lower than that of its premium product and on par with its competitor . eight years after the Chinese launch of P&G's Crest toothpaste.000 people in China. It provided world-class training programs to build general business skills as well as core functional skills. The Challenges Though P&G's Chinese operations were highly successful.. the company faced challenges in the form of fierce competition from local Chinese manufacturers and the presence of fake products. P&G was among the first multinationals to conduct campus placements in reputed Chinese universities and had gained strong awareness among university students.. it launched 'New Crest' toothpaste in 2004. At the time of the launch of this product.. Crest was a premium brand in China and by 2000. About 70% of the total toothpaste market consisted of middle and lower-end segments.Colgate's middle-market toothpaste. It trained these locals to think the American way. P&G believed in promoting from within the organization and so the company recruited people who were starting their career or had little work experience. Achievers were also given overseas assignments. The company also hired Chinese at that time but gave them a set plan to follow.
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