Online Exclusives

Follow the Leader

By Tom Branna, Editorial Director | January 22, 2013

Procter & Gamble may be 175 years old, but its new innovation program has company executives thinking like a startup.

After 175 years, Procter & Gamble was beginning to show its age. Sales were disappointing, growth strategies in emerging markets were failing and costs were out of whack. Things got so bad last year that institutional investors were calling for P&G CEO Bob MacDonald to step aside and let someone else steer a ship that had become so large, many feared it would be unable to maneuver around an increasingly complex household and personal products industry landscape. Some even suggested that it was time to break up this $84 billion behemoth into more manageable business units. Could the company that gave the world brands such as Tide, Febreze and Pampers stay nimble enough to innovate?

That’s probably not what William Procter, a candle maker, and James Gamble, a soap maker, envisioned when they arrived in Cincinnati, married sisters and founded Procter & Gamble in 1837. Ivory, the floating soap, hit the market in 1879. According to company historians, Ivory was developed after company executives uncovered the consumer insight that soap was hard to find at the bottom of the washtub. It was the first breakthrough brand for a company that would go on to invent the term “category building.”

 
The Ivory Towers of P&G’s headquarters in Cincinnati.
P&G’s global reach is legendary, but the company didn’t enter it’s first market outside the US until it pushed into Canada in 1915; the UK was added in 1930, and Latin America and Western Europe soon followed. In 1935, P&G entered Asia and in the 1950s, Africa was added. In 1964, Happi’s first year of existence, P&G set up shop in India. Today, P&G products can be found in more than 180 countries around the world and has more than 25 billion-dollar brands.
 
A 1965 print ad for Secret deodorant spray.
Aside from product development, P&G is credited with creating modern marketing, with innovations such as print advertisements in the 1890s to radio spots in the 1920s. More specifically, in 1924, P&G became the first company to conduct deliberate, data-based market research with consumers in an effort to understand their wants and anticipate their needs. In 1941, P&G became one of the first companies to establish a consumer relations department to handle consumer complaints. One of the world’s best pitchmen, Charmin’s Mr. Whipple (aka George the Grocer), debuted in 1964. Toll-free numbers were added in 1973 and email debuted in the 1980s.

 
Brand Building

Innovations the all are, but P&G’s long-term success has always depended on the new products that roll out of its R&D labs.Following the launch of Tide in 1946, P&G launched Crest, the first fluoride toothpaste, in 1955. The company made a major acquisition in 1957 when it purchased Clorox. Pampers, the first mass market disposable diaper, came along in 1961. In 1966, P&G introduced Scope mouthwash and Gain detergent. Biz detergent came along in 1967, and Olestra and Pringles came to be in 1968.

A replica storefront at P&G’s Beckett Ridge Innovation Center homage to the company’s soap-and-candle roots.
But Procter & Gamble lost one of its best-known brands in 1969 when it was forced to divest Clorox following an anti-trust ruling. At the time of the 1957 purchase, the Federal Trade Commission challenged the Clorox acquisition on the grounds that it might reduce competition or tend to create a monopoly in household liquid bleaches, a violation of the Clayton Act. Even though Procter & Gamble allowed Clorox to handle its own affairs, in 1967 the U.S. Supreme Court upheld the commission's order that Procter & Gamble divest itself of the Clorox operation. By 1969 Clorox had been spun off as a public company, with a listing on the New York Stock Exchange. In 1972, Bounce softener was introduced, and a year later, P&G acquired The Nippon Sunhome Company and began operations in Japan.

Corporate sales topped $10 billion in 1980, Pert Plus, the world’s first 2-in-1 shampoo and conditioner debuted in 1986 and P&G marked its 150th anniversary in 1987. In 1989, the company entered the cosmetics category with the acquisition of Noxell and its Cover Girl and Noxzema products. In 1991, P&G expanded its presence in that segment with the purchase of Max Factor and Betrix.
 
By 1993, company sales exceeded $30 billion and for the first time, more than 50% of sales came from outside the US. In 1998, P&G rolled out Swiffer, Mach 3, Febreze and Dryel. A year later, the company entered the pet nutrition field with the acquisition of Iams. In 2001, P&G introduced Crest WhiteStrips and acquired Clairol. Wella was added in 2003 and two years later, in 2005, the company acquired Gillette. Tide Pods hit stores just last year.

The company currently spends more than $2 billion on R&D and more than $350 million on consumer insights. To keep the innovations coming, in 2001, P&G launched Connect + Develop, a crowd-sourcing tool, led to the development of Mr. Clean Magic Eraser. Since Connect + Develop debuted, P&G has been in contact with more than two million researchers, entrepreneurs and companies to consider new ways of succeeding in the FMCG space.

P&G chairman and CEO Bob McDonald.
Yet, despite all those connections, in recent years, the number of novel new product introductions has declined, leaving analysts and investors questioning the P&G model.
 
“Our pace has slowed,” admitted Jorge Mesquita, group president of new business creation and innovation, in a presentation to analysts in November 2012. To pick up the pace and get growing again, P&G formed the LEAP team made up of R&D managers, technologists, marketers, industrial designers and “consumerists.”

A New Start
 
With its stock price sagging and its string of new product launches waning, P&G executives are determined to get the company up and growing again through a broad array of new product initiatives.

For example, the company’s new goal for open innovation calls on partnerships to deliver $3 billion toward P&G’s annual sales growth. Mesquita even went so far as to promise that 40% of the company’s upcoming launches are “disruptive solutions” that will create markets of their own. The other 60% of the new products will meet the needs of consumers in established markets (defined as those with $5 billion or more in sales).
 
“New business creation is the ultimate form of innovation,” maintained Mesquita. “To create new products and brands to fit consumer needs and build shareholder values.”

The goal of all of these initiatives is triple the pace of innovation, which will lead to more category growth and a bigger share of the market.

New products that are set to debut in the US include:
• Olay Fresh Effect BB cream, a tinted skin moisturizer with sunscreen;
• Fusion Mach 3 for Sensitive Skin;
• Vidal Sassoon Professional Series, a 20-SKU hair care collection and
• Cascade Platinum, an automatic dishwash detergent that cleans the machine as well as it cleans dishes.

Tide Pods represent a big shift in how consumers do their laundry.
“Innovation is at the heart of everything we do at P&G. It differentiates our brands, prevents commoditization of categories and brands and wins the consumer-value equation,” explained Bruce Brown, chief technology officer.
 
Brown noted that P&G regularly tops the SymphonyIRI New Product Pacesetters list, which acknowledges the top new products rolled out during the previous year. In fact, P&G has placed 140 products on the list during the past 17 years—more than its six biggest competitors combined.

“(Innovation) creates value for our retail partners and creates new businesses,” explained Brown. “It enabled us to deliver sustained growth for 175 years.”

Procter & Gamble has topped the household and personal products industry since Happi debuted in 1964, and leads the Top 50 Report today. With company executives determined to keep the innovation pipeline flowing, there’s a strong possibility that P&G will headline the list 50 years from now as well.
 
 
  • Trade Association Directory 2017

    February 2, 2017
    Contact details of trade associations that serve various segments of our industry and are mentioned frequently in Happi.

  • What the Halal  Is Going On?

    What the Halal Is Going On?

    Imogen Matthews , In-Cosmetics||February 2, 2017
    Demand for these beauty products is surging thanks to a fastgrowing Muslim population.

  • Relief for Sensitive Scalps

    Relief for Sensitive Scalps

    Guadalupe Pellon and Annette Mehling , BASF||February 2, 2017
    BASF researchers detail the attributes of the company’s highly effective hair care system focusing on scalp sensitivity.

  • Cargo Says Aloha To Spring/Summer

    Cargo Says Aloha To Spring/Summer

    Christine Esposito, Associate Editor||February 13, 2017
    Cargo Cosmetics has rolled out its new Spring/Summer collection with Hawiianan singer Anuhea.

  • Cashing In on Coconuts

    Cashing In on Coconuts

    Melissa Meisel, Associate Editor||February 6, 2017
    Organic to Green is making waves for its new oils and eco-friendly packaging.

  • Monday Morning Quarterback

    Monday Morning Quarterback

    Christine Esposito, Associate Editor||February 6, 2017
    Super Bowl commercials are big business. Let’s look at some of personal and household care brands that bought spots this year

  • Catch These Rising Stars of Beauty

    Catch These Rising Stars of Beauty

    Nancy Jeffries, Contributing Editor||February 6, 2017
    Who won what at Fashion Group International's Rising Star awards show

  • Coast To Coast

    Coast To Coast

    Melissa Meisel, Associate Editor||January 30, 2017
    Natural hand wash brand is aiming to make an environmental difference.

  • Switch It Up

    Switch It Up

    Christine Esposito, Associate Editor||January 30, 2017
    Chicago startup seeks to shake up the AP/deo category with a new launch that meshes sustainability, style and scent.

  • Skin of Color Society Connects Experts

    Skin of Color Society Connects Experts

    Melissa Meisel, Associate Editor||January 16, 2017
    Dermatologists from across the nation share information and ideas.

  • Erasa

    Erasa's New Evangelist(a)

    January 9, 2017
    Impressed by the performance of its hero SKU, supermodel Linda Evangelista joins the company in a hand's on role.

  • Discourse on Disclosure

    Discourse on Disclosure

    Tom Branna, Editorial Director||January 6, 2017
    Transparency impacts the cleaning industry.

  • The Top Stories of 2016

    The Top Stories of 2016

    December 26, 2016
    The companies and topics that grabbed headlines and your attention this year.

  • Positive Influence

    Positive Influence

    December 19, 2016
    Co-founder Elizabeth Scherle talks about her growing consumer review platform, top beauty products and more.

  • Pro Pigments

    Pro Pigments

    Melissa Meisel, Associate Editor||December 12, 2016
    Makeup brand Kryloan has a rich history in the industry and now open doors at a NYC flagship.

  • Fast Forward

    Fast Forward

    Melissa Meisel, Associate Editor||December 12, 2016
    Doug Cooper of IP Brands is thinking ahead when it comes to beauty trends.

  • Olivia Care Pays It Forward

    Olivia Care Pays It Forward

    Christine Esposito, Associate Editor||December 12, 2016
    Seeking post-election unity, a small natural personal care company hopes to cause a big wave of giving.

  • Patent Activity: Colgate-Palmolive

    Patent Activity: Colgate-Palmolive

    December 6, 2016
    New oral care compositions, the use of radish root ferment filtrate in a cleanser and more.

  • Sparkle & Shine

    Sparkle & Shine

    Melissa Meisel, Associate Editor||November 21, 2016
    Glam packaging and upscale scent combos are big at Yankee Candle for Holiday 2016.

  • Cos Bar: Turning 40 and Hitting Fast Forward

    Cos Bar: Turning 40 and Hitting Fast Forward

    Christine Esposito, Associate Editor||November 21, 2016
    With a recent investor infusion, a new CEO and rebranding effort underway, this luxury beauty retailer has big plans.

  • Organic Matter

    Organic Matter

    Christine Esposito, Associate Editor||November 14, 2016
    FTC and USDA hold a public roundtable to discuss consumers’ perception of organic claims.

  • Help for Up Above

    Help for Up Above

    Christine Esposito, Associate Editor||November 14, 2016
    A brand from Down Under is touting a new formulation for what’s missing on top.

  • Skin Care Sensation

    Skin Care Sensation

    Melissa Meisel, Associate Editor||November 7, 2016
    Circ Cell aims to be unique with formulations that uphold skin tone.

  • Get Ready, ‘Cause Here it Comes…

    Get Ready, ‘Cause Here it Comes…

    Christine Esposito, Associate Editor||November 1, 2016
    Skinphonic is a new brand created with a team of beauty experts and fronted by singer Smokey Robinson.

  • Hair for Me!

    Hair for Me!

    October 31, 2016
    Function of Beauty fulfills the promise of personalization in the beauty space—one bottle at a time.

  • A Facial Bar Grows in Brooklyn

    A Facial Bar Grows in Brooklyn

    Christine Esposito, Associate Editor||October 24, 2016
    With three doors in Canada, Blitz Facial Bar opens its first US location in one of the hippest areas of New York.

  • Free and Clear

    Free and Clear

    Melissa Meisel, Associate Editor||October 17, 2016
    OY-L aims for zero-chemical skin care.

  • Coming Clean on a Host of Issues

    Coming Clean on a Host of Issues

    October 17, 2016
    Cleaning Products Conference is set for Nov. 9-11, 2016 in Washington DC.