Procter & Gamble
Selected Procter & Gamble advertising
|See separate profiles for brand 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).
Procter & Gamble
1 Procter & Gamble Plaza
Cincinnati, Ohio 45202
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.
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.
Recent stories from Adbrands Weekly Update:
Adbrands Weekly Update 21st May 2015: Capping a series of giant media reviews announced over the past few months, Procter & Gamble joins the party with a review of its mammoth North American business, worth almost $2.7bn in billings. The main US incumbent is Publicis Groupe's Starcom MediaVest, which is already having a pretty dismal 2015. Even a retention is likely to entail a sizeable cut in fees, and the group is also defending a similar review by Coca-Cola. SMV faces a stiff challenge from Carat, which manages planning for selected P&G brands in the US as well as buying in Canada, and has been on a new business roll for the past couple of years. The capture of P&G would be Carat's biggest victory over Starcom MediaVest in the US since it poached the General Motors account in 2012. WPP's MediaCom is also on the group roster for some international markets (including Puerto Rico), but most observers expect this to be a shoot-out between Publicis Groupe and Dentsu Aegis.
Adbrands Weekly Update 30th Apr 2015: P&G reported another set of lacklustre figures for its 3Q, dented by the rising value of the dollar against international currencies, but also volume declines across every division except grooming. The hard-pressed beauty business suffered a 5% volume decline, and reported sales were down by 11% (or 3% organic, excluding currencies). Reported sales for the whole group fell 8% to $18.1bn, though excluding currencies and divestitures growth would have been 1%. Net earnings slumped 17%. For the nine-month year to-date, net sales were down 4%, and net income by almost 29%. In a worrying development for its agencies, P&G also unveiled a new strategy to improve profitability by slashing marketing costs by as much as another $500m a year, not in terms of overall spend but by consolidating the number of separate agency relationships it maintains to cut fees. That's bad news for many of the thousands of different agencies P&G works with around the globe, not least for Publicis Groupe, its single biggest partner. The group is already preparing to divest at least half, or possibly more, of its beauty division. Further details are expected with P&G's 4Q results in July, along with news of a possible successor to current CEO AG Lafley.
Adbrands Weekly Update 16th April 2015: P&G CEO AG Lafley could be preparing to step down as early as this summer, according to the Wall Street Journal, though he is expected to remain chairman. This is the second term at the head of P&G for Lafley, 68 this year. He was brought out of semi-retirement in 2013 to take back control from former right hand man Bob McDonald, under whose leadership the group suffered a sharp slump in performance. Almost two years, full recovery is still some way off. There has been no public statement, but P&G executives, including Lafley himself, are said to have hinted at the forthcoming change in private meetings with analysts and investors. David Taylor, who currently heads P&G's beauty, grooming & health divisions, is widely expected to be named as Lafley's successor.
Adbrands Weekly Update 29th Jan 2015: Currencies were a major feature of Procter & Gamble's 2Q results (its fiscal year runs to June). "Unprecedented currency devaluations," said CEO AG Lafley, contributed to a challenging quarter. "Virtually every currency in the world devalued versus the US dollar, with the Russian Ruble leading the way. While we continue to make steady progress on the strategic transformation of the company... the considerable business portfolio, product innovation, and productivity progress was not enough to overcome foreign exchange." Revenues for the quarter fell 4% including a negative 5% swing caused by exchange rates. Organic growth at constant rates and excluding disposals was 2% overall, but there was a continuing 1% decline at the group's troubled beauty division. That was offset by 4% growth at baby fem & family care, 3% at home & fabric care and 2% at grooming. However the biggest red flag was a second consecutive 30%-plus plunge in quarterly profits, partly caused by losses on discontinued operations such as Duracell. For the half year to-date, net earnings have fallen by almost a third. "The outlook for the year remains challenging," said Lafley.
Adbrands Weekly Update 22nd Jan 2015: Procter & Gamble appeared to elevate David Taylor, one of four current divisional heads, into pole position to succeed CEO AG Lafley, who came out of retirement in 2013 with a brief to reignite slowing performance. Taylor was previously president of global health & grooming, but has now added oversight of the still-underperforming beauty division. As a result he will have responsibility for around 43% of P&G's global revenues and almost half of combined profits. Current beauty leader Deb Henretta transfers to a newly created role as group president of global ecommerce, giving her responsibility for developing direct online sales of products, but also effectively putting her out of contention for the succession. At the same time, Patrice Louvet, head of prestige, cosmetics and professional hair care, moves up to overall president, global beauty, reporting to Taylor as group president, global beauty, grooming & health. Separately, P&G promoted Kristine Decker to the role of director of North America brand operations, with oversight for the packaged goods giant's domestic media budget. She succeeds Jodi Allen, now VP North America Hair Care. Decker was previously brand director for the Iams and Eukanuba business now owned by Mars.
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.
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 were 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). In Jan 2015, with beauty still under-performing, Taylor was handed additional responsibility for beauty as well as grooming & health, a move which appeared to put him in pole position to succeed Lafley. Deb Henretta moved at the same time to a newly created position as group president, ecommerce, and Patrice Louvet moved up to president, global beauty, reporting to Taylor. See P&G Beauty & Grooming and P&G Household Care for other business unit heads.
Werner Geissler retired 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). Phil Duncan is VP & global design officer, overseeing product design and packagaing.
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 Kristine Decker (brand director, 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.
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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.
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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
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