Cincinnati, OH

513.983.1100

www.pg.com

Sales: $64.6 billion

Sales:

$64.6 billion (estimated) for personal care, oral care and household products. Net sales: $78.9 billion. Net income: $12.7 billion for the year ended June 30, 2010.

Key Personnel:

Bob MacDonald, chairman, president and chief operating officer; Werner Geissler, vice chairman global operations; Dimitri Panayotopoulos, vice chairman, global beauty & grooming; Robert A. Steele, vice chairman, health care strategy; Charles V. Bergh, group president, global male grooming, beauty & grooming; Bruce Brown, chief technology officer; Giovanni Ciserani, group president, Western Europe and global discounter and pharmaceutical channels; Linda W. Clement-Homes, chief diversity officer & senior vice president, global business services; Virginia C. Drosos, group president, global female beauty; Philip J. Duncan, global design officer; Mary Lynn Ferguson-McHugh, group president, global family care; Thomas M. Finn, president, global health care; Robert L. Fregolie Jr., global customer business development officer; John P. Goodwin, president, global braun, beauty & grooming; R. Keith Harrison Jr., global product supply officer; Christopher D. Hassall, global external relations officer; Melanie L. Healey, group president, North America and global hyper, super, mass channel; Deborah A. Henretta, group president, Asia and global specialty channel; Colleen E. Jay, president, global female beauty, beauty & grooming; Robert Jongstra, president, special assignment; Joan M. Lewis, global consumer & market knowledge officer; Teri L. List, senior vice president & treasurer; Patrice Louvet, president, global prestige; Deborah P. Majoras, chieflegal officer & secretary; Jorge S. Mesquita, group president, global fabric care; Shekhar Mitra, senior VP-corporate R&D, materials science & technology and global beauty & grooming; Jon R. Moeller, chief financial officer; Moheet Nagrath, global human resources officer; Fillippo Passerini, president, global business services & chief information officer; Laurent L. Philippe, group president, CEEMA and global high frequency store channel; Charles E. Pierce, group president, global oral care; Marc S. Pritchard, global brand building officer; Martin Riant, group president, global baby care; Jeffrey K. Schomburger, president, global Walmart team; Valarie Sheppard, senior vice president & comptroller; Shannan Stevenson, president, greater China; Nancy K. Swanson, vice president, corporate; David S. Taylor, group president, global home care; Jorge A. Uribe, group president, Latin America and global club, cash & carry channel.

Major Products:

Beauty & Grooming—cosmetics, fragrances, hair care, antiperspirants and skin/beauty care marketed under such brands as Gillette, Pantene, Olay, DDF, Head & Shoulders, Hugo Boss, Secret, SK-II, Zest, Safeguard, Rejoice, Clairol, Herbal Essences, CoverGirl, Old Spice, Wella, Aussie and Ivory. Household—dish care, household cleaners and laundry care including brands such as Tide, Ariel, Downy, Lenor, Gain, Cascade, Ace, Cheer, Bold, Swiffer, Bounce, Dash, Dawn, Fairy, Joy, Febreze, Era, Dreft, Daz, Vizir, Salvo, Mr. Proper, Mr. Clean, Flash, Viakal, Alomatik, Ivory, Maestro Limpio and Rindex. Health Care—toothpaste and brushes, mouthwash and teeth whitening products including brands such as Scope, Crest and Vicks.

New Products:

Beauty & Grooming—Herbal Essences new formulas, Olay Body Care Collections; Natural Instincts Week 2 Color Refresher, Wella Professionals Care, Wella Pro Series, Crest 3D White 2 Hour Express Whitestrips, Crest Clinical, Secret Natural Minerals, Olay Professional Pro-X Advanced Cleaning System, Nice ‘n Easy Color Blend Foam; Household—Downy Unstoppables, Ariel Touch of Lenor Fresh, Ultra Era, Tide/Vizir + Lenor scent touch, Tide Professional Whiteness Enhancer, compacted powder laundry detergent, Febreze Air Effects, Ambi Pur (acquisition). To be launched: Tide Pods (2012).

The Tide franchise gets a lift from Acti-Lift. Get ready for Tide Pods, which debut in 2012.

Comments:

It may be the biggest player on the block, but Procter & Gamble hasn’t lost focus on the things that have made it king-of-the-hill in the global household and personal products business. P&G will continue to rely on innovative new product launches, the world’s biggest advertising budget and a bushel of billion-dollar brands to keep climbing.

But the high cost of materials is starting to take its toll on the world’s largest consumer products company. For the nine months ended March 31, 2011, the company reported that gross margin contracted 140 basis points to 51.4% of net sales. The gross margin decline was driven by a 180-basis point increase in commodity and energy costs and unfavorable product mix from disproportionate growth in developing regions and low and mid-tier value products. These declines were partially offset by manufacturing cost savings and the favorable impact of volume scale leverage. At the same time, aggressive discounting in the household care space wreaked havoc on results.

Through the first nine months of fiscal 2011, corporate sales increased just 3% to nearly $61.7 billion on a 6% increase in unit volume. Volume growth was broad based with growth in all geographic regions, led by double-digit growth in Asia and high single digit growth in Latin America and Central and Eastern Europe, Middle East and Africa (CEEMEA). All six of the business segments contributed to volume growth, with high single-digit growth in the baby care and family care and fabric care and home care segments, mid-single-digit growth in the beauty, grooming and health care segments, and a low single-digit increase in the snacks and pet care segment. Organic volume, which excludes acquisitions and divestitures, was up 6%. Mix reduced net sales by 2% due mainly to disproportionate growth in developing regions and low and mid-tier value products, both of which have lower than company average selling prices. Unfavorable foreign exchange lowered net sales by 1% as key foreign currencies weakened versus the US dollar. Organic sales were up 4% driven by unit volume growth, partially offset by unfavorable mix. By category, beauty volume was up 5%, grooming volume rose 4% and fabric and home care volume jumped 7%.

More specifically, beauty sales for the nine months rose 2% to nearly $15.1 billion. During the third quarter, volume in retail hair care grew high single digits behind double-digit growth in developing regions due to initiative activity and distribution expansions in Asia and Latin America. Global market share of the hair care category was up nearly half a point. Volume in female beauty was flat as Olay skin care distribution expansion in Asia and Latin America and deodorants growth in North America were offset by a mid-single digit decline in developed regions driven by the Zest divestiture, competitive activity in cosmetics, and decreased shipments in skin due to an Olay UV reformulation and restage. Volume in salon professional declined high single digits due to the exit of non-strategic businesses and market contraction in Western Europe. Volume in prestige products was up high single digits behind the continued impact of fragrance initiatives, partially offset by minor brand divestitures.

Grooming sales increased 4% to $6.0 billion. Price increases, taken primarily across blades and razors in Latin America and developed regions, contributed 2% to net sales growth. Unfavorable foreign exchange reduced net sales by 2%. Volume grew high single digits in developing regions and was in line with the prior year period in developed regions. Volume in male grooming was up mid-single digits due to higher shipments of blades and razors, mainly in developing regions driven by market growth, and deodorants in North America, partially offset by softness in blades and razors in the developed regions. Global market share of the blades and razors category was down more than half a point. Volume in appliances decreased low single digits due to continuing economic difficulties in Western Europe as well as a high base period behind hair care appliances initiatives. Global market share of the dry shave category was in line with the prior year period. Net earnings increased 8% to $1.3 billion behind higher net sales and increased operating margin. Operating margin expanded due to higher gross margin and lower SG&A as a percentage of net sales. Gross margin increased due to price increases and the favorable impact of volume scale leverage. SG&A as a percentage of net sales was down due to lower foreign currency exchange costs and reduced overhead spending, partially offset by higher marketing spending.

Home care net sales increased 2% to $18.7 billion. Organic sales were up 3%. Volume grew 7%, while organic volume, which excludes the impact of the Ambi Pur acquisition, increased 6%. Lower pricing, mainly in developed regions, reduced net sales by 1%. Mix negatively impacted net sales growth by 2% mainly due to disproportionate growth of low and mid-tier product lines and powdered laundry detergents, which have lower than segment average selling prices. Unfavorable foreign exchange reduced net sales growth by 2%. Volume in developing regions was up double digits, while volume in developed regions grew mid-single digits. Fabric care volume increased mid-single digits mainly due to growth in developing regions behind initiative activity, increased distribution and market growth. Global market share of the fabric care category increased about half a point. Home care volume increased double digits due, in part, to the Ambi Pur acquisition. Organic volume in home care was also up double digits driven mainly by initiative activity, including the prior-period launches of Gain hand dishwashing liquid and Febreze Set & Refresh in North America, and geographic expansion of dish and air care product lines. Global market share of the home care category was up over one point. Batteries volume grew mid-single digits primarily due to price reductions executed through pack count increases in North America, which were implemented in January 2010, initiative activity in Western Europe and market growth and distribution expansion in Asia. Global market share of the batteries category increased about one point. Net earnings decreased 10% to $2.4 billion as net sales growth was more than offset by operating margin contraction. Operating margin declined primarily due to lower gross margin, mainly due to higher commodity costs and unfavorable product mix behind disproportionate growth of developing regions and low and mid-tier value products. SG&A as a percentage of net sales increased marginally behind higher marketing spending.

Big Personnel Moves

There have been several key personnel moves in the past few months. In May, Ed Shirley announced his retirement as vice chairman, beauty and grooming, after 33 years with the company. His retirement is effective Jan. 1, 2012. Until then, he will serve as vice chairman on special assignment. Meanwhile, Dimitri Panayotopoulos, vice chairman-global household care, was appointed vice chairman-global business units, assuming responsibility for both the beauty and grooming and household care businesses. Panayotopoulos will continue to report to McDonald.

Last month, Patrice Louvet, president, global prestige, was appointed president, global male grooming, succeeding Charles (Chip) V. Bergh who left P&G after 28 years service to pursue his aspiration to be CEO of a major company (his dreams came true in June when he was picked to lead Levi Strauss). Joanne Crewes, currently VP-global SKII and female beauty, Australasian, ASEAN, India, Japan and Korea, has been appointed president, global prestige, succeeding Louvet.

Pods on Hold

New products are the lifeblood of any consumer product company and P&G has been a leader in this area for decades and other companies recognize P&G’s prowess. For example, SymphonyIRI’s 2010 Pacesetters list included eight P&G products in the top 25 non-food list. During the past 16 years, P&G had 132 products on the top 25 Pacesetters list—more than its six largest competitors combined. In addition to the New Product Pacesetters, four P&G products are on track for future stardom; i.e, Pacesetter Rising Stars, including Gillette Fusion ProGlide and Tide plus Febreze Freshness Sport.

Last month, P&G postponed the launch of Tide Pods until next year on grounds of supply constraints, which may make it impossible for the company to meet the huge demand forecasted, according to reports.

The three-chamber Tide Pods are similar to water-soluble tablets for dishwashers, which have been embraced by consumers whole heartedly. Analysts say that the delay may prompt P&G’s competitors to speed up the launch of competitive products and pose a threat to Tide. Analysts suggest that Cincinnati-based P&G is taking precautions because it has already stumbled before in such high-profile launches as in case of Gillette Fusion ProGlide.

Analysts say that in such a competitive scenario, postponing such a mega launch could make situations tougher. Henkel and Unilever already sell similar highly condensed liquid-filled laundry tablets in Western Europe. Water-soluble tablets for dishwashers that can be easily adapted for laundry products also exist.

Meanwhile, new Downy fabric-softener in bead form called Unstoppables is set for launch. The product’s unique selling proposition is its ability to keep clothes smelling fresh in the closet for up to 12 weeks, according to the company.

Finally, an upgrade for Ariel laundry detergent, which P&G says uses 3-D technology, is also scheduled to come out this month. Aimed at consumers in developing countries, it will roll out to 50 markets over the next six months.

A Look at 2010

For fiscal 2010, P&G reported a 3% gain in corporate sales to $78.9 billion on a 4% increase in unit volume, but net earnings declined 5% to $12.7 billion. Volume increased low single digits in developed regions and mid-single digits in developing regions. P&G said all geographic regions contributed to volume growth, but gains were greatest in Asia and CEEMA where sales rose in the high single digits.

By category, beauty sales rose 3% to nearly $19.5 billion. Net earnings were up 2% to $2.7 billion. Volume growth was driven by high single-digit gains in developing regions, but developed region volume was flat. Hair care volume rose in the mid-single digits, but cost-conscious consumers skipped trips to the salon, which pushed salon professional volume down in the double digits. Beauty volume was up low single digits as higher shipments of female skin care and personal cleansing products in developing regions were somewhat offset by the discontinuation of Max Factor in North America, the fiscal 2009 divesture of Noxzema and volume share losses on non-strategic personal cleansing brands in developed regions. Meanwhile, grooming sales increased 3% to $7.6 billion and net earnings were up 9% to nearly $1.5 billion. Gains were attributed to the launch of Fusion ProGlide.

Fabric care and home care sales rose 3% to $23.8 billion on a 6% increase in unit volume. Net earnings increased 10% to $3.3 billion. Fabric care volume grew mid-single digits behind new product launches, price reductions and merchandising activity. In July, 2010, Sara Lee completed the sale of its Ambi Pur air care business to P&G. The move gave P&G a bigger slice of the global air care category.

Of course, cost-cutting plays a role at P&G, too. Last year, the company noted that it had more than 16,000 product formulas that use more than 4000 colors in product labels and plastic packaging. By the end of 2012, P&G expects to reduce the number of formulas and package specifications by 30% and the number of colors used by 50-75%. Color simplification alone could generate annual savings of $50 million, according to P&G.