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.
blog comments powered by Disqus
  • Sustainability is Omnipresent

    Sustainability is Omnipresent

    Christine Esposito , Associate Editor||July 1, 2016
    Industry stakeholders convene in New York City for Organic Monitor’s annual event

  • Perceived Perfection

    Perceived Perfection

    Christine Esposito, Associate Editor||July 1, 2016
    From primers to pressed powders, facial cosmetics help create the illusion of a flawless complexion.

  • Preserve & Serve

    Preserve & Serve

    Melissa Meisel , Associate Editor||July 1, 2016
    Suppliers with innovative preservatives provide staying power for formulations.

  • Pushin’ the Cushion

    Pushin’ the Cushion

    Christine Esposito, Associate Editor||July 26, 2016
    AmorePacific, the creator of the cushion compact, continues to improve its unique product.

  • Cozy Makes a Splash

    Cozy Makes a Splash

    Melissa Meisel, Associate Editor||July 25, 2016
    Expands reach in CVS and introduces new collection.

  • Senior Skin Care

    Senior Skin Care

    Christine Esposito, Associate Editor||July 19, 2016
    McCord Research and Product Quest Manufacturing roll out new hospital-grade skin care kits for seniors to use at home.

  • Naterra Expands Tree Hut Range

    Naterra Expands Tree Hut Range

    Melissa Meisel, Associate Editor||July 18, 2016
    New ‘Bare’ collection is out now.

  • An Antioxidant Arsenal

    An Antioxidant Arsenal

    July 11, 2016
    BioRewind is Dermarché Labs' new anti-aging regimen that delivers broad-spectrum antioxidant protection against free radicals

  • Enter Éclair

    Enter Éclair

    Christine Esposito, Associate Editor||July 5, 2016
    A new naturals line rolls out in Rite Aid stores nationwide.

  • Patent Update

    Patent Update

    June 30, 2016
    J&J's anti-aging patent, LVMH and cannabis essential oil, transdermal botulinum toxins and more in recent patent news.

  • Start Stuffing The Ballot Box (Again)!

    Start Stuffing The Ballot Box (Again)!

    June 28, 2016
    Vote on the finalists in Happi's reader's choice Anti-Aging Product of the Year contest!

  • What

    What's Next for the UK?

    Sarah Boumphrey, Euromonitor International||June 27, 2016
    Euromonitor weighs in on how Brexit could impact consumer product companies.

  • The Future of Innovation

    The Future of Innovation

    Nancy Jeffries, Contributing Editor||June 27, 2016
    Fashion Institute of Technology graduate students tackle a far-reaching topic for their Capstone project.

  • Henkel Grabs the Sun

    Henkel Grabs the Sun

    Ian Bell, Euromonitor International||June 24, 2016
    Euromonitor's Ian Bell on the impact the purchase will have on the US detergent industry.

  • To The Max

    To The Max

    Melissa Meisel, Associate Editor||June 20, 2016
    Velvet 59 is on the rise at locations like Ricky’s NYC.

  • Problems for Preservatives

    Problems for Preservatives

    June 20, 2016
    David Steinberg details the issues surrounding this critical ingredient category.

  • You’re So Sensitive!

    You’re So Sensitive!

    June 13, 2016
    P&G teaches dermatologists a thing or two about common skin maladies—and some common household chores to boot!

  • Voyage to Better Skin

    Voyage to Better Skin

    June 13, 2016
    Skin Inc. rolls out new light-based device to US market.

  • Patent Update

    Patent Update

    June 9, 2016
    Avon’s use of melicope extract, skin care with SPF and chicory root, microdermabrasion cream and more in recent patents.

  • What’s New at Bath & Body Works?

    What’s New at Bath & Body Works?

    Melissa Meisel, Associate Editor||June 6, 2016
    Tropical scents are leading the way this season so far.

  • Exploring Green in Vegas

    Exploring Green in Vegas

    Christine Esposito, Associate Editor||June 6, 2016
    Cosmoprof North America sets the stage for brands dedicated to the growing and evolving eco-friendly beauty space.

  • We

    We're Surrounded!

    Tom Branna, Editorial Director||May 30, 2016
    Industry experts explain the important role that the skin microbiome plays in human health.

  • Luxury Re-Coded

    Luxury Re-Coded

    Nancy Jeffries, Online Editor||May 25, 2016
    Consumers have new expectations for beauty.

  • Big Business at Beiersdorf

    Big Business at Beiersdorf

    Melissa Meisel, Associate Editor||May 23, 2016
    VP of marketing shares info on winning products and more.

  • Procter Reels in Doctors

    Procter Reels in Doctors

    May 16, 2016
    The Procter & Gamble stand was abuzz during the annual meeting of the American Academy of Dermatology.

  • If You’re Going to San Francisco…

    If You’re Going to San Francisco…

    Tom Branna, Editorial Director||May 13, 2016
    Be sure to contact the Bay Area Beauty Association.

  • Representatives Connect

    Representatives Connect

    Melissa Meisel, Associate Editor||May 8, 2016
    Re:Beauty offers a new direct sales opportunity.

  • Kitchen Counter Cosmetics

    Kitchen Counter Cosmetics

    Christine Esposito, Associate Editor||May 2, 2016
    LOLI box marks the convergence of natural and organic ingredients, subscription service and DIY cosmetic chemistry.