Procter and Gamble

Procter & Gamble

Profile

* For a limited period, this profile and selected other Adbrands pages which would normally be available only to subscribers, have been opened to all users. Please note that access to most other profiles as well as the account assignments database is still limited to paid subscribers *

Procter & Gamble is a giant in household products, for many years the world's biggest advertiser, and the company which defined many of the marketing strategies which we now take for granted. It was the first company to advertise nationally direct to consumers (in 1880) and it literally created the concept of "soap opera" by sponsoring radio and television dramas targeting women. Other inventions included the first Fluoride-based toothpaste (Crest), the revolutionary synthetic detergent Tide, and the first mass-marketed disposable nappy, Pampers. Yet P&G found life in the last few years of the 20th century more difficult than it may have expected, with earnings below expectations and a series of management shake-ups as a result of under-performance. New CEO AG Lafley got the group back on track during 2002 with the purchases of Clairol and Wella and a renewed focus on core products. Following dynamic performance in 2003 and 2004, P&G demonstrated the strength of its recovery with the January 2005 announcement that it had agreed a deal to acquire legendary personal care products rival Gillette. The next few years delivered strong growth. However Lafley's retirement in 2009 prefaced a new slowdown in performance from which the group has yet to fully emerge. In 2013, in a surprise development, Lafley was reinstated as CEO.

Selected Procter & Gamble advertising

See separate profiles for brand advertising

Advertising

Who handles Procter & Gamble advertising? Click here for a listing of P&G advertising account assignments from Adbrands.net. Including unmeasured media, P&G declared advertising expenditure for fiscal 2013 of $9.73bn. AdAge estimated global measured advertising expenditure of $11.47bn in 2013. In the US, Kantar (in Advertising Age) reported measured media expenditure in calendar 2013 of $3.47bn, out of an estimated total of $4.99bn. Biggest spending brands were Crest (measured spend $275m), Olay ($248m), Cover Girl ($215m), Gillette ($185m), DayQuil/NyQuil ($158m), Febreze ($157m), Swiffer ($153m), Pantene ($144m) and Tide ($128m).

Competitors

See Household Care and Personal Care indexes for other companies

Contact

Procter & Gamble
1 Procter & Gamble Plaza
Cincinnati, Ohio 45202
United States
Tel: +1 513 983 1100

Brands & Activities

Procter & Gamble defined the nature of packaged goods brand marketing in the second half of the century, and despite an alarming wobble in the crossover from the 20th to the 21st centuries, it was by 2004 once again setting the pace for other marketers to match. Between 2003 and 2010, the group consistently delivered strong growth and an unbeatable line up of products, virtually all of which occupied the #1 or #2 position in their respective markets. No other company can boast as dynamic a line-up of brands, including 25 worth more than $1bn a year in sales. But with sales now over $80bn, a question has begun to emerge regarding future development. It's hard to see just where P&G can go next before the sheer size of the company begins to push it towards demerger. Several brands have already been divested, several others are still prime candidates for sale. 

Procter & Gamble is a giant in packaged consumer goods, the worldwide #1 in baby care, fabric care, feminine care and haircare, and a major force in virtually every other sector in which it operates. The company controls around 300 brands in total, marketed across over 160 countries, but the portfolio is led by an expanding collection of what are now 25 billion-dollar brands. The biggest of these are: Pampers (sales of around $11.25bn in 2013, Euromonitor/Sanford Bernstein estimates), Tide (around $5bn), Ariel ($4bn), Pantene ($3.8bn) and Olay ($3.4bn). They are supported by Always, Bounty, Charmin, Iams, Downy and Crest. Wella, Actonel and Head & Shoulders joined the club in 2004; Dawn topped $1bn in sales in 2005. Gillette Mach 3 razors, Gillette Series grooming products, Duracell, Braun and Oral-B were added to the portfolio in 2006. Gain was a new member in 2007, followed by Gillette Fusion during 2008, Ace in 2010 and Febreze in 2011. More recent additions to the billion-dollar-club are SK-II skincare and Vicks, both of which surpassed that level for the first time in 2012. Another 20 brands have sales between $500m and $1bn per annum, including Cover Girl, Eukanuba, Herbal Essences, Swiffer and Tampax. 

P&G's resurgence in the 2000s followed a wobble at the end of the 1990s. After several years of strong development, P&G suddenly appeared to hit a brick wall. Growth dried up, several key brands lost their leadership of the market to rivals, and new product launches proved disappointing or even to be downright failures. After two years of further internal restructuring, P&G had found its way forward again by early 2002, and delivered strong growth, much of it fuelled by acquisitions, between 2004 and 2010. Yet concerns began to emerge once more in 2011 as a result of a slowdown in growth, rising costs, and some extraordinary planning errors, not least in the botched launch of new Tide Pods in the US.

In addition to its marketing skills, P&G has long been recognised for its exceptional strength in research and development, not just of new products, but also component ingredients and packaging design. The group comes up with more new ideas than even it can develop commercially. As a result, since 2000, it has greatly increased its willingness to form mutually beneficial "innovation partnerships" with other companies. In one such arrangement P&G licenses technology it developed for plastic wrappings to smaller company Clorox for use in products sold under the latter's Glad brand. In 2008 it agreed to lend a wide range of other packaging technologies, including non-splatter nozzles for plastic bottles, to food company ConAgra

Procter & Gamble's corporate structure has undergone a series of changes since the late 1990s. In 1998, the group abandoned its arrangement as a collection of separate geographic businesses in favour of global divisions specialising in specific sectors. This greatly accelerated the worldwide roll-out of key products with what was ultimately considerable financial gain. Since then, these divisions have been steadily consolidated, from seven to five to four to three global business units (GBUs) in July 2007, and then to just two in February 2011, when P&G Health & Well Being was split and absorbed into its two partner groups, P&G Beauty & Grooming and P&G Household Care. See separate profiles for brands and activities. A third GBU provides worldwide marketing, market development and other corporate functions. In another group reshuffle in June 2013, P&G was reordered once more into four divisions: Beauty; Fabric & Home Care; Health & Grooming; and Baby, Feminine & Family Care

Several brands, considered to be non-core, have been sold in recent years. In the second half of the 20th century, P&G assembled a sizeable portfolio of food products, but this business was quickly overshadowed by more attractive market segments such as beauty or family care. The Snacks & Coffee division gained a largely unexpected new lease of life in the 1990s from the sudden popularity of Sunny Delight and Pringles, yet it remained an uncomfortable fit with P&G's other interests. Plans were announced in 2001 to spin these brands off into a joint venture with Coca-Cola, but these foundered as a result of objections from shareholders. That same year, Jif peanut butter and Crisco cooking oils were spun off into JM Smucker. After several months looking for a buyer, Sunny Delight and German juice brand Punica were sold to venture capital firm JW Childs in 2004. Folgers coffee, too, was transferred to Smucker during 2008, leaving Pringles as P&G's last remaining food product. A plan to transfer that business to snack company Diamond Foods collapsed in 2011, and the brand was eventually sold to Kellogg's.

Another major divestment was the Duracell battery business, which is to be transferred to Berkshire Hathaway in 2015. Warren Buffett agreed to take over the standalone business from P&G for a net value of around $2.9bn. The deal is to be structured as a slightly unconventional but highly tax-efficient asset swap. Berkshire will surrender an existing shareholding in P&G, worth $4.7bn at current prices, back to the company, which will in return inject $1.8bn in cash into the Duracell Company as a parting dowry. As a result, both companies avoid a sizeable tax penalty that would have been generated by a straight sale of assets. 

Recently, the group has established a major presence in sports sponsorship. It signed up as an official sponsor of the US national team in the 2010 Winter Olympics, promoting several individual products, mostly family-oriented brands, in a wide-ranging and imaginative campaign. The apparent success of that campaign led to the group signing up in summer 2010 as top-line sponsor of the main Summer games. Commencing with the 2012 London Olympics, that ten-year deal covers three summer and two winter Olympics. In addition, P&G became the first corporate sponsor with rights to promote multiple different brands under its IOC partnership agreement. Its 2012 "Thank You Mom" campaign, celebrating the support given to athletes by their mothers, was widely regarded as one of the year's standout campaigns, and won a Creative Emmy as the Best TV Commercial of the Year. 

Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 20th Nov 2014: Procter & Gamble found a buyer for its Duracell battery business in the form of billionaire investor Warren Buffett. He has agreed to take over the standalone business from P&G for a net value of around $2.9bn. The deal is to be structured as a slightly unconventional but highly tax-efficient asset swap. Buffett's Berkshire Hathaway holding company already holds a shareholding in P&G, which it inherited when the packaged goods giant engulfed Gillette - a longtime Buffett favourite - for stock. It will surrender these shares, worth $4.7bn at current prices, back to P&G, which will in return inject $1.8bn in cash into the Duracell Company as a parting dowry. As a result, both companies avoid a sizeable tax penalty that would have been generated by a straight sale of assets. However some investors flagged up the deal as a vote of no confidence by Buffett in P&G itself, in that he would rather own a small maker of alkaline batteries than have shares in the world's biggest, but slightly challenged, packaged goods giant.

Adbrands Weekly Update 6th Nov 2014: The cash-strapped government of Argentina has accused the local arm of Procter & Gamble of tax fraud, hiding income and over-billing for imports in order to take currency out of the country. The government forcibly suspended all the company's commercial operations. As a result, the world's biggest packaged goods marketer is prohibited from selling its products in Argentina until it has resolved the investigation, most probably with payment of a steep fine. P&G's local sales are around $800k annually. The group denied tax fraud but said it was working with the government to understand and resolve the issue.

Adbrands Weekly Update 30th Oct 2014: Procter & Gamble scraped a modest 2% increase in profits for the first quarter of its new financial year, despite flat sales that were virtually unchanged on the year-ago period as a result of currency fluctuations. The organic lift was 2%, all of it from the health and baby/feminine/family care divisions. The biggest change was official confirmation of the disposal of Duracell. Divestment of that product has been expected for at least the past couple of years. P&G said it expects to spin the business off to shareholders as a standalone entity, probably in 2H 2015. Annual sales for Duracell are around $2bn.

Adbrands Weekly Update 23rd Oct 2014: Procter & Gamble made a number of changes to its senior management team. Mary Lynn Ferguson-McHugh was appointed as group president, global family care, and Gary Coombe as her successor in the role of president, P&G Europe. Separately, the head of P&G's global Wella professional salon business Adil Mehboob-Khan resigned to become co-CEO of eyewear giant Luxottica, alongside Massimo Khan. A string of other major changes at P&G were announced this morning as we went to press. These include the retirement of several senior leaders including North America president Melanie Healey and P&G president Joanne Crewes. New appointments include Carolyn Tastad, who becomes president, North America selling & market operations; Jeff Schomberger becomes global sales officer, customer business  development; Patrice Louvet takes over as president, P&G Prestige and adds responsibility for global salon professional; Charlie Pierce becomes president, global grooming; Steve Bishop becomes president, global oral care.

Adbrands Weekly Update 7th Aug 2014: Procter & Gamble CEO AG Lafley scraped a year of modest growth in a challenging environment and announced plans to streamline the group's portfolio significantly by selling, closing or merging as many as 100 different brands in order to focus on a core of the 70 to 80 brands that currently generate the majority of revenues and profits. "Less will be much more," Lafley told analysts. "We are going to create a faster growing, more profitable company that's far simpler to operate." Comparable full year revenues to June edged up by just 1% to $83.06bn, though that figure was actually down 1% on the previous year's reported total because of disposals including Iams. Net earnings gained 3% to $11.64bn. On a divisional basis there was a further 2% decline in reported revenues from the group's troubled beauty business, while grooming was flat (though profits were up in both). The other three operating divisions reported modest increases in revenues of between 1% and 2%, but declines in profitability. However the biggest contributor to declining sales was currency. Organic sales for all divisions were either flat or low single digit positive, with overall growth stable at 3%. Lafley acknowledged that the results were below par: "we could have and should have done better".

More from Adbrands Weekly Update

Financials

Despite its growing challenges and several divestments, P&G's total revenues have continued to rise steadily, reaching a new high of $84.17bn for the year to June 2013, up just 1% on the previous year. However net income has come under greater pressure as a result of the increase in commodity costs, as well as higher marketing spend. After peaking in 2009 at $13.4bn (including a large gain from Folgers), net profits slid back in each of the two following years, shedding 9% in 2012 to $10.76bn. That figure included a $1.58bn impairment charge against professional haircare operations. For the year to 2013, there was a 5% recovery to $11.31bn.

For the year to June 2014, the group scraped another modest increase, with comparable revenues up 1% to $83.06bn. However, that figure was down 1% on the previous year's reported figure because of disposals. Net earnings rose 3% to $11.64bn.

The US accounted for 36% of revenues in ye 2013 or $30.3bn (and Canada for just 3%). Approximately 18% comes from Western Europe, 15% from Central & Eastern Europe, the Middle East & Africa, 18% from Asia and 10% from Latin America. P&G's largest customer is Walmart, contributing 14% of consolidated sales in ye 2013, or $11.8bn. 

Management

Following his appointment as CEO in 2000, Alan ("AG") Lafley was responsible for orchestrating a spectacular rejuvenation of P&G after several years of stagnation. Over the next nine years he effectively doubled the group's revenues as a result of a series of bold and generally successful acquisitions, and established a strong presence at the higher end of the beauty and personal care market. He stepped down as CEO in July 2009 and was replaced by group chief operating officer Bob McDonald. Lafley passed over the role of chairman to McDonald as well from January 2010. Clayt Daley retired as CFO at the end of 2008 and was replaced by Jon Moeller. Yet McDonald's reign was marked by a sharp decline in performance as growth stalled and costs soared. With McDonald under increasing pressure from investors, the board announced his resignation from July 2013, and the reinstatement of the 66-year-old AG Lafley. Since Lafley is already past retirement age, one of his key tasks is to find a suitable successor to take over the baton in 2015 or 2016.

The return of Lafley highlighted one of the other serious problems which emerged under McDonald's command: the departure of several other potential leaders among P&G's top ranks. McDonald's main rival for the top job, Susan Arnold, departed the group in 2009 as soon as it became clear that she would not be named CEO. Following a further restructuring in July 2011, Dimitri Panayotopoulos was appointed as group vice chairman, global business units, with reporting responsibility for all the group's brand businesses, effectively introducing a new layer between previous divisional bosses and the CEO role. That probably contributed to the departure of several other managers. Ed Shirley, previously head of global beauty & grooming, resigned to become CEO of Bacardi; "Chip" Bergh quit to become CEO of Levi Strauss; Christopher de la Puente took the top job at LVMH's Sephora division. 

In June 2013, Lafley announced a reshuffle of the group's global business units, in effect elevating four executives to a position as potential candidates to succeed him as CEO. These are Martin Riant (group president, global baby, feminine & family care), Deb Henretta (group president, global beauty), David Taylor (group president, global health & grooming) and Giovanni Ciserani (group president global fabric & home care). See P&G Beauty & Grooming and P&G Household Care for other business unit heads.

Werner Geissler is due to retire as group vice chairman, and head of global operations at the end of 2014, along with several other executives, prompting several new appointments. As a result, the new team includes Carolyn Tastad (president, North America selling & market operations), Gary Coombe (president, Western Europe), Hatsunori Kiriyama (president, Asia & global specialty stores channel), Shannan Stevenson (president, Greater China), Mohamed Samir (president, India, Middle East & Africa) and Tarek Farahat (president, Latin America). Other senior central officers include Jeff Schomberger ( global sales officer, & president, customer business development) and Ioannis Skoufalos (global product supply officer). 

The marketing team was headed for several years by James Stengel until his retirement at the end of October 2008. He was replaced by Marc Pritchard, now global brand building officer. That change led to further changes in the company's marketing line-up. Other senior officers in the marketing team now include Jodi Allen (VP, North America operations & marketing), Greg Ross (director of global media innovation), Lisa Hillenbrand (director of global marketing), Stewart Atkinson (VP, global brand building purchases), Joan Lewis (global consumer & market knowledge officer), Chris Hassall (global external relations officer), Lyn Boles (VP, global advertising), Steven Squire (director of advertising development), Ted McConnell (digital innovation director), Randy Peterson (digital innovation manager), Alex Tosolini (VP, global e-commerce) and Ilonka Laviz (marketing director, digital brand-building strategy & global strategy). Freddy Bharucha is chief marketing officer for P&G in Asia.

Worldwide

Procter & Gamble Brazil Procter & Gamble Germany
Procter & Gamble India Procter & Gamble Japan
Procter & Gamble France Procter & Gamble Western Europe
Procter & Gamble UK Procter & Gamble Hungary
Procter & Gamble Balkans Procter & Gamble Israel
Procter & Gamble Argentina Procter & Gamble Korea
Procter & Gamble China Procter & Gamble Turkey
Procter & Gamble Czech Republic Procter & Gamble Russia
Procter & Gamble Hong Kong Procter & Gamble Venezuela

Background

In the early years of the 19th century, William Procter and James Gamble were among the thousands of immigrants attracted by the promise of a better life in the new United States. An Englishman and an Irishman respectively, they were each separately on their way across the US to the frontier land of the West, but broke their journey in Cincinnati, then being transformed into one of the country's biggest meat-packing centres under the nickname "Porkopolis". By sheer chance, Procter and Gamble fell in love with and married sisters Olivia and Elizabeth Ann Norris. Their father-in-law persuaded them not just to settle in the fast-expanding city but also to combine their skills as a candlemaker and soapmaker and set up in business together. In 1837, in the midst of a bitter recession, the partnership of Procter & Gamble was formed. The fledgling company survived not just the recession but also the Civil War which followed. In fact, that war brought considerable benefits as lucrative government contracts for soap and candles pushed sales through the $1m barrier. 

By the late 1870s the business was being managed by the founders' sons. In 1879, James Norris Gamble developed an inexpensive hard white soap of a similar quality to imported castile toilet soap, but made from vegetable oil rather than exorbitantly expensive olive oil. Better still, it was pure enough, and cheap enough, to be used for laundry and other general cleaning purposes as well as for personal washing. This was a significant issue at a time when most general purpose soap was made from animal fats. (Bluntly highlighting its benefits, an early ad for Procter & Gamble's soap asked "Are you certain that the plate you eat and the cup you drink from have not been washed with soap made from diseased cattle?"). Gamble's cousin Harley Procter, who supervised the marketing of the company's products, named the new soap Ivory. A national advertising campaign was launched during the following decade, highlighting not just the soap's purity ("99 44/100% pure"), but also the fact that it floated on water, thus avoiding the risk of being lost in the bath or laundry tub. The latter attribute, an entirely accidental by-product of the way the soap was made, turned out to be its most memorable feature as far as the public was concerned. Other soap manufacturers soon replicated the purity of Ivory, but no other competitor could compete with this additional gimmick. By the 1890s, Ivory was being advertised simply as: "Ivory Soap. It Floats."

The success of Ivory encouraged the partners to establish their own research laboratory in 1890, the first such dedicated facility in the United States. A stream of innovative new products followed. By experimenting with other chemical processes involving vegetable and cottonseed oil, the company developed a way of "hydrogenating" liquid oils to produce a solid cake. This led to the creation of Procter & Gamble's first food product, a shortening for baking made entirely from vegetable oil. Unlike lard this new product, launched in 1912 as Crisco, didn't go rancid, didn't taste of meat, and was far cheaper than butter for making cakes. However it was also a complete change of pace for a soap and candle company, so for the first time, Procter & Gamble looked beyond its inhouse resources, appointing the advertising agency J Walter Thompson to come up with ways of selling it to the public. Thompson's Stanley Resor and Helen Lansdowne came up with what was then the biggest advertising and sampling campaign ever attempted in the United States, as well as a series of ads which proclaimed Crisco as "An absolutely new product. A scientific discovery which will affect every kitchen in America."  It was to be P&G's first and last involvement with JWT, which subsequently became one of the main agencies for arch-rival Lever (later Unilever).

The next milestone in Procter & Gamble's development was the creation of its first perfumed beauty soap, designed to compete with established brands Lux (from Lever Brothers) and Cashmere Bouquet (from Palmolive). At least partly emulating a similar move the year before by Lever Brothers, P&G mounted a huge research project to determine the correct approach for this new launch. The company sent out hundreds of researchers to conduct door-to-door interviews with literally thousands of housewives all over America. These women were asked to give their views on everything from the shape of the bar and its perfume to the design of the wrapper and even its name. First choice for the brand was Cameo, but when this was found to be already trademarked, the company selected instead Camay, launched in 1926. This new product also gave the company its first experience of brand management, since Camay had to be clearly differentiated from P&G's existing Ivory, still its flagship product.


In 1930, P&G took its first steps outside North America, with the purchase of British manufacturer Thomas Hedley & Sons, makers of Fairy Soap. Five years later, a factory was established in the Philippines. The company also continued to experiment with new chemical processes, refining its soap ingredients to produce first flakes and then granules, which dissolved much faster in water. 

During the 1920s and 1930s, P&G was one of the United States' most adventurous marketers. That process had begun with the huge research effort put behind the launch of Camay, but it was quickly applied to other products as well. Many of the women interviewed for Camay had said they listened to the radio while doing the housework, but wanted to be entertained not instructed. This inspired the idea of creating a program that would run at a time when housewives were listening and would create a happy association between entertainment and P&G's products. The company tested the water in 1933 with "Ma Perkins", a radio serial about a widow forced to juggle financial and family problems, which also promoted the company's Oxydol laundry detergent. This proved so popular with listeners that P&G quickly commissioned a string of other radio shows for its products (though none came close to matching the popularity of "Oxydol's Own Ma Perkins", which ran for 27 years). 

These programs quickly became known as "soap operas" because of their combination of high emotional drama with product endorsements for detergent. By 1939, P&G's radio department was producing no less than 21 separate radio shows every week. Also that year, just five months after the introduction of television, P&G aired its first TV commercial (for Ivory soap) during the first televised major league baseball game. (The company remained faithful to soap opera, sponsoring daytime US TV dramas, including the longest-running series of all, As The World Turns, right up to the beginning of the 21st century. ATWT finally ended in September 2010). Neil McElroy, the marketing manager responsible for P&G's innovations in the 1930s rose to president of the company, before becoming US Secretary of Defense from 1957 to 1960. He returned to P&G as executive chairman until his death in 1972.

By 1945, P&G's sales had reached almost $350m. The first year of peace after World War II marked an important watershed for the company. Although it had achieved some success with the launch of Dreft a decade earlier, that product had significant disadvantages as well. It lathered in hard water, but it wasn't especially effective at removing ground-in dirt from fabrics. However, P&G's scientists continued to refine the chemical processes involved until they finally came up with a new formulation that was capable of handling all kinds of dirt. In 1946, P&G launched Tide, the so-called "washing miracle". Cheaper than rival products, but also far more effective at removing dirt, Tide took the US by storm, stealing market-leadership from then-dominant Unilever within four years. This triumph for P&G marked a new phase in what now became a furious rivalry with the Anglo-Dutch combine. 

In 1955 Crest was introduced. It was another breakthrough, the first toothpaste with fluoride clinically proven to fight cavities. In an unprecedented marketing coup, P&G eventually won an endorsement from the American Dental Association, and this seal of approval quickly gave the product leadership of the sector. In 1957, the company acquired bleach manufacturer The Clorox Company. However that purchase was subsequently over-ruled by regulators and Clorox was spun out again in 1969. Also in 1957, P&G bought toilet tissue maker Charmin Paper Mills, and this division was responsible for the invention of the first disposable mass-produced diaper, Pampers, in 1963.

The company also strengthened its existing businesses, expanding into new food and beverage categories, most notably with the acquisition of Folgers coffee in 1963, and building on its strong laundry reputation with Downy, its first fabric softener. There was also a growing focus on international businesses. Convinced that success in new geographic markets required on-the-ground operations, P&G began building start-up businesses, first in Mexico, then in Europe and Japan. By 1980, P&G was doing business in 23 countries around the world with sales of nearly $11 billion.

The 1980s and 1990s saw further diversification as P&G moved aggressively into healthcare and cosmetic products through the acquisition of Norwich Eaton Pharmaceuticals (Pepto-Bismol, Chloraseptic and Dantrium) in 1982; GD Searle (makers of Metamucil) and Richardson-Vicks (Vicks, Pantene shampoo and Olay) in 1985; Noxell (Cover Girl, Noxsema and Clarion), Max Factor, Shulton (Old Spice) and Ellen Betrix in the late 1980s and early 1990s. Richardson-Vicks and Max Factor, in particular, dramatically expanded P&G's international presence. The $1.8bn acquisition of Tambrands, makers of Tampax, in 1997 made P&G the world #1 in feminine protection.

One key to the group's success in the early 1990s was a constant process of rationalisation, stripping costs and unnecessary bureaucracy to improve efficiency, and selling off underperforming product lines. Between 1990 and 1995, P&G's president Ed Arzt presided over wide-ranging cost-cutting programmes which greatly enhanced the company's efficiency and profitability, but also resulted in poor staff morale, earning Arzt the nickname of "the Prince of Darkness". The title was also a reference to a long-standing but wholly fictitious allegation that P&G funded the Church of Satan, and that this "fact" was reflected in their moon-and-stars logo. This story first began circulating in 1980, and in 1996 P&G sued rival manufacturer Amway for propagating the absurd myth which continues to circulate even now (see Urban Legends for more). The two companies launched a series of suits and counter-suits. In 2003, a federal court finally begged the two sides to stop suing each other, and in 2007, four former employees of Amway were ordered to pay P&G $10m in damages. 

Arzt's successor from 1995, John Pepper, presided over a period of consolidation and internal reconciliation mid-decade, but sales stayed flat. The appointment in 1999 of new president Durk Jager, a former Arzt protege, was widely interpreted to signal a shift back towards aggressive expansion. P&G issued a promise to double sales to $70bn by 2006, relying on growth within the core businesses, and expansion into Eastern Europe, China and South America. In order to achieve this, the company announced an ambitious global restructuring of its business to streamline the operation further. P&G moved from its previous structure of four regional divisions each handling all product lines, into seven worldwide divisions each specialising in one product segment. Shortly afterwards the company announced that it would shed 15,000 jobs - or almost 14% of workforce - in order to make savings of $900m annually. 

Yet for the next four years, P&G was plagued by flat sales and a lack of dynamic growth. Acknowledging that it had not launched an important new brand since Always in 1984, P&G promised to streamline its product development operation as well to introduce brands worldwide more quickly. Yet none of the launches which followed caused much of a stir with consumers. Dryel was a home cleaning aid for dry-clean-only clothing; Swiffer, an innovative, dust-attracting cleaning cloth. Both were rolled out worldwide, but Dryel was later dropped in Europe after disappointing sales, and subsequently sold. P&G's best-selling US deodorant Secret launched into Europe the same year but was later pulled from the market in several territories when it failed to capture significant market share. Other underwhelming innovations included Impress plastic wrap, Fit Fruit & Vegetable Wash and ThermaCare disposable heat wraps. 

Meanwhile the company continued to bolster its portfolio through acquisition. In 1999, P&G announced a move into the petfood market with the $2.3bn purchase of The Iams Company. In the same month, the group paid $265m for PUR drinking water filtration systems. The group also strengthened existing product lines, acquiring various regional businesses including Taiwanese manufacturer Long Chen Paper, maker of Delight and Tender facial and bathroom tissue. The company was also briefly drawn into discussions about a possible three-way merger with drug companies Warner-Lambert and American Home Products (now Wyeth). 

In a bid to improve profitability, the group began a wholesale restructuring of its brand portfolio, offloading products with limited international potential. These included Hawaiian Punch fruit drink (to Cadbury Schweppes), Attends adult incontinence products, Oxydol laundry detergent, Chloraseptic throat spray, Prell shampoo, Comet kitchen cleaner, skin care brand Clearasil (to Boots), Spic'n'Span, Cinch, Frymax and Whirl oils, and European skincare brands Biactol and Topexan. In a further bid to boost efficiency, P&G waved its marketing clout and told its agencies it would no longer pay commission. Instead, the company moved towards a incentive system based on global sales for specific brands, instead of a percentage of spend. Yet by early 2000, it had become apparent that none of these policies was achieving the required goal of kickstarting growth. In March the group's shares crashed by 30% when the company issued a shock profits warning. A few months later P&G was forced to admit that it had seriously misjudged its strategy, issuing another profits warning, and announcing the resignation of Durk Jager after only 18 months. John Pepper came out of retirement to take back the role of chairman, while AG (Alan) Lafley, president of the beauty care division, was promoted to CEO.

It took Lafley some time to find his feet. In 2001, the group made the startling announcement that it was spinning off its Sunny Delight and Pringles brands into a new stand-alone joint venture with Coca-Cola. Yet the Coke deal was later abandoned in the face of opposition from Coca-Cola investors who felt they were getting poor value. Another embarrassment was the failure of a high-profile launch of a new range of cosmetics under the Olay brand. Despite these setbacks, P&G announced its biggest ever acquisition in May 2001. After several months of negotiation, the company agreed to buy the Clairol haircare business from Bristol Myers-Squibb, outbidding Japanese rival Kao Corporation with a whopping $4.95bn in cash. Clairol's weak subsequent performance led to accusations that P&G had overpaid. Mid-year the group was yet again embarrassed when it was forced to admit that executives in its haircare division had employed a corporate intelligence agency to spy on Unilever, even searching the rival company's litter bins looking for discarded documents. P&G reported its first loss for 12 years in the final quarter of fiscal 2001. Shortly afterwards the group announced another round of brand sales: Jif peanut butter and Crisco cooking oils, facial cleanser Sea Breeze, Ammens talcum powder, Vitapointe hair creme and Condition 3-in-1 styling aids. In addition, the company's Impress food wrap business was transferred into a new entity controlled by Clorox

If P&G did little more than tread water in 2001, it finally began to rediscover its way forward the following year. In 2002 CEO Lafley pushed forward a series of initiatives designed to return focus to the company's established brands. The attention given to uninspired new launches during the late 1990s had caused performance of core products such as Pampers, Crest, Tampax and others to stall. Lafley gave new impetus to expanding and developing these staples of the business, cutting prices and boosting innovation in order to beat back competitors which had stolen P&G's market share over the previous few years. Performance began to improve even before the end of 2002, and has continued to bolster sales and profits ever since. 

Meanwhile the acquisition drive continued. In 2003, after months of negotiation, P&G was able to finalise an agreement to acquire the controlling stake in German haircare giant Wella from its family shareholders. Another German brand, Nivea, slipped out of P&G's grasp. Having spent several years negotiating with Nivea's owners Beiersdorf regarding a takeover, a consortium led by Tchibo, already a minority shareholder in Beiersdorf, bought out controlling shareholder Allianz for E4.4bn. In 2004, P&G bought out its minority partner in China, Hutchison Whampoa, for $1.85bn. At the beginning of the following year, the group announced its biggest deal to-date, offering to buy The Gillette Company for around $53.4m in shares. The deal was approved by regulators with only a small number of adjustments, and was completed in October 2005.

Over the next few years the group gradually adopted a more streamlined structure with twin teams responsible for operations and brand building respectively, reporting to CEO Lafley. The brand building team was headed by Susan Arnold. Formerly vice chair & president, global beauty care, oral care, personal health and pharmaceuticals, she took up a new central role as president, global business units in July 2007. Operations were overseen by Bob McDonald, named as chief operating officer at around the same time. The two were widely seen as rivals for the top job. That competition finally came to an end in March 2009, when Arnold announced her resignation. A few months later, Bob McDonald was named as new group CEO. 

Last full revision 21st August 2013


Adbrands.net. All rights reserved Mind Advertising Ltd 1998-2014