P&G Targets Developing Markets

Skin serums that cost $200 a jar won’t cut it in China…nor, for that matter, will $10 shampoos. No wonder why Procter & Gamble is trying to understand the needs of the very poor in developing markets. That’s why the company launched its $2-a-day program in 2009.


Many consumers in these areas make do on annual salaries of less than $200, and yet, they are P&G’s target consumers in many developing markets. That explains why P&G employees spent weeks in rural China and other regions to learn about these consumers wants and needs. According to P&G’s findings, beauty care and cleanliness are very important to these underserved consumers, who are willing to spend money on products if they address their specific needs.


After studying their habits, P&G says it will adapt its products to the daily needs of consumers in the world’s poorer regions, where monetary and natural resources like water are scarce—which explains why products that require a lot of rinsing just won’t do in rural China.


According to Chairman Bob MacDonald, the company has identified underdeveloped markets as a big growth opportunity. P&G says developing markets are growing at 6% to 8% annually, compared with 1% to 2% in the developed world. Right now, P&G gets 34% of its revenues from developing markets, but hopes to move that percentage to 50% by 2020. However, with the exception of China and a few other companies, P&G trails both Colgate and Unilever in these developing markets.


To get back in the race, MacDonald says he is moving the company’s center of gravity from the West to Asia and Africa. Right now, Chinese consumers spend $3 a year on P&G products, but the company hopes to boost that spending to $11.50 in the next few years. In contrast, U.S. consumers spend nearly $100 a year on P&G products.


To reach its goal, P&G is spending money. The P&G Beijing Innovation Center (BJIC), is a $70 million home for the company’s regional R&D efforts. The company has invested more than $1 billion in China, and McDonald says it will spend another $1 billion in the next five years.