proctor & gamble project
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GROWTH AND EXPANSION OF FMCG WITH SPECIAL REFERENCE TO PROCTOR AND GAMBLE
Dissertation submitted to SEETHALAKSHMI RAMASWAMI COLLEGE (AUTONOMOUS AND ACCREDITED BY NAAC) Affiliated to BHARATHIDASAN UNIVERSITY in partial Fulfilment of the requirements for the Award of the degree of MASTER OF COMMERCE (CORPORATE FINANCE) Submitted by
K.KASTHURI B.NIVEDHA M.NIVEDHA K.SUDHA R.SURYA
12 PCO 007 12 PCO 013 12 PCO 014 12 PCO 017 12 PCO 018 Under the guidance of
DR.R.LALITHA, M.Com.,M.Phil.,PGDCA.,Ph.D.,M.A(YHE) DR.R.VIJAYALAKSHMI, M.Com.,M.Phil.,Ph.D
DEPARTMENT OF COMMERCE SEETHALAKSHMI RAMASWAMI COLLEGE (AUTONOMOUS AND ACCREDITED BY NAAC) TIRUCHIRAPALLI-620 002 MARCH 2013
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ACKNOWLEDGEMENT
We express our deep sense of gratitude and sincere thanks to all who motivated us in various ways in the preparation of this project. It is our honour to convey our heartfelt thanks to SEETHALAKSHMI RAMASWAMI COLLEGE (AUTONOMOUS) for having introduced project work in the syllabus which helped to acquire wide experience and knowledge. We express our grateful thanks to DR.(MS) KANAKA BHASHYAM, M.A., M.Phil., PGDJ., Ph.D., the principal of Seethalakshmi Ramaswami College (Autonomous). We take this opportunity to express our gratitude to MRS. M.GUNAVATHI, M.Com., M.Phil., DLL., Ph.D., Head of the Department of Commerce for having encouraged us to complete this project successfully. We wish to acknowledge our indebtedness and deep sense of gratitude to DR.R.LALITHA,M.Com.,M.Phil.,PGDCA.,Ph.D.,M.A(YHE) and DR.R.VIJAYALAKSHMI, M.Com.,M.Phil.,Ph.D for her valuable guidance & suggestions at each and every step of this dissertation’s. We extend our thanks to our parents, friends and all the teaching faculties for their co-operation and support. We could be failing our duty if we do not thank GOD, the ALMIGHTY who is the author of all our inspiration and enthusiasm to complete our study successfully.
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CONTENT
CHAPTER PARTICULARS PAGE NO.
I.
INTRODUCTION
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II.
COMPANY PROFILE
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III.
ANALYSIS OF P& G ON VARIOUS HEADS SUSTAINABILITY
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IV.
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V.
RECOMMENDATION AND SUGGESTION
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CHAPTER – I
INTRODUCTION
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Meaning of FMCG
FMCG stands for Fast Moving Consumer Goods. It is also referred to on occasion as CPG, an abbreviation of Consumer Packaged Goods. They are described as being reasonably low cost items that are supplied and sold in a very short time period - often these types of products have a short shelf life, hence having a short sale time. FMCG's are often bought in bulk to take advantages of economies of scale due to their low price, profit margins are often small so the sale of large quantities over a short period of time is vital to make worthwhile. FMCG's can be split into highly perishable and non-highly perishable goods. Highly perishable goods include meats, vegetables, fruit, and bakery items - anything that has a reasonably short shelf life. In contrast, products such as wine, beer and spirits, canned foods and toiletries have a longer shelf life and do not perish quickly. Nonetheless, these products are in high demand and as a result product turnover is high; they do not spend long on the supermarket shelves. Fast Moving Consumer Goods are recognised as being a frequent consumer purchase, and what that involves a low level of risk and/or emotion.
Characteristics of FMCGs:
From the consumers' perspective:
Frequent purchase Low involvement (little or no effort to choose the item – products with strong brand loyalty are exceptions to this rule) Low price
From the marketers' angle:
High volumes Low contribution margins Extensive distribution networks High stock turnover
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FMCG CATEGORY AND PRODUCTS Category
Household care
Products
Fabric wash (laundry soaps and synthetic detergents); household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellents, metal polish and furniture polish
Food and health beverages
Soft drinks; staples/cereals; Beverages bakery products (biscuits, bread, cakes);food; chocolates; ice cream; tea; coffee; soft drinks; processed fruits, vegetables; dairy products; bottled water; branded flour; branded rice; branded sugar; juices etc.
Personal care
Oral care, hair care, skin care, personal wash(soaps); cosmetics and toiletries; deodorants; Perfumes; feminine hygiene;
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SWOT analysis of FMCG
Strengths:
Low operational costs Presence of established distribution networks in both urban and rural areas Presence of well-known brands in FMCG sector
Weaknesses:
• • • Lower scope of investing in technology and achieving economies of scale, especially in small sectors Low exports levels "Me-tooʺ products, which illegally mimic the labels of the established brands. These products narrow the scope of FMCG products in rural and semi-urban market.
Opportunities:
• • • • • Untapped rural market Rising income levels, i.e. increase in purchasing power of consumers Large domestic market- a population of over one billion. Export potential High consumer goods spending
Threats:
• • • Removal of import restrictions resulting in replacing of domestic brands Slowdown in rural demand Tax and regulatory structure
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TOP 10 FMCG COMPANIES IN INDIA
FMCG (Fast Moving Consumer Goods) or Consumer Packaged Goods (CPG) – are products that are sold quickly and at relatively low cost. Below is a List
of Top 10 FMCG Companies in India 2012.
1. ITC (Indian Tobacco Company)
Market Capitalization (Rs. Crore): 151,078
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It presence in FMCG, Hotels, Paper boards & Specialty Papers, Packaging, Agri-Business, and Information Technology.ITC Ltd, traditional businesses of Cigarettes, Hotels, Paperboard‘s, Packaging and Agri-Exports.
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2. HINDUSTAN UNILEVER
Market Capitalization (Rs. Crore): 67,858
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India’s largest consumer products with products such as soaps, tea, detergents and shampoos with over 700 million Indian are using its products.
3. NESTLE INDIA
Market Capitalization – (Rs. Crore): 39,819 A subsidiary of Nestlé S.A. of Switzerland. A largest food and beverage manufacturer in the world with many popular and largest selling products such as MAGGI, NESCAFE, KITKAT and MILKMAID.
4. DABUR INDIA
Market Capitalization Crore): 18,632
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(Rs.
They has 17 ultra modern manufacturing units around the globe and its products marketed in over 60 countries.
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5. GODREJ CONSUMER PRODUCTS
Market Capitalization (Rs.Crore): 13,335 –
A Household, hair colors, household insecticides and Personal Care Products.
6. P&G (Proctor and Gamble India)
Market Capitalization – (Rs. Crore): 12,838 Acquisition by Gillette.
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7. COLGATE-PALMOLIVE
Market Capitalization (Rs.Crore): 12,764
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The leading Tooth Paste Brand in India.
8. GSK (Glaxosmithkline Consumer Healthcare)
Market Capitalization (Rs.Crore): 9,842 A pharmaceutical industry and over 100,000 Worldwide.
employees
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9. MARICO
Market Capitalization - (Rs.Crore): 9,078 And the company present in more than 25 countries across Asia and the African continent.
10. EMAMI
Market Capitalization - (Rs.Crore): 6,836 And over 20,000 employees. Products are paper , writing instruments, edible oil and cultivation, bio-diesel, hospitals, contemporary art, pharmacy, cement, real estate and retail.
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BENEFITS OF FMCG COMPANIES Cumulative Profits
For a retailer's bottom line, the key benefit of CPGs/FMCGs is the cumulative profit they provide. CPGs/FMCGs have a low profit margin, which means that a small percentage of each each unit sale represents profit. However, CPGs/FMCGs also sell in very high quantities. This means that those small profits add up and can form a significant portion of a retailer's total profits for a fiscal period. This profit serves any number of financial purposes in the business.
Cross Merchandising Opportunities
Retailers thrive when customers buy multiple items on each visit. CPGs/FMCGs provide opportunities for cross merchandising, which occurs when a business places two products from different categories close to one another in a strategic arrangement. For example, an electronics retailer may sell remote controls that have high profit margins but don't fall into the CPG/FMCG category. A shelf of batteries (which are CPGs/FMCGs) next to those remotes provides a chance to boost sales and earn profit on two items when customers choose to buy the batteries they will need to operate their new remotes at the same time.
Brand Appeal
When a retailer offers CPGs/FMCGs, it can rely on the brand appeal that they generate to drive sales. Most CPGs/FMCGs come from brands that advertise heavily. This means that when customers see CPGs/FMCGs on store shelves they have pre-existing emotional relationships with those brands, which may not be true of the other items that the retailer sells. Seeing recognizable brands may build trust between the customer and retailer or lead to an additional purchase based on brand awareness, with no special effort from the retailer.
Diversification
Selling CPGs/FMCGs spreads a retailer's revenue sources over a broader spectrum of goods. The profits can help offset slow sales for other products during seasonal dips in demand or periods of reduced consumer confidence. In the category of CPGs/FMCGs, retailers can choose from among an almost unlimited range of product types including pharmaceuticals, food items, beverages, household products and disposable items. The range is so broad that some retailers, such as grocery stores and convenience markets, stay in business selling them exclusively.
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Characteristics of FMCG in India
Branding: Creating strong brands is important for FMCG companies and they
devote considerable money and effort in developing bands. With differentiation on functional attributes being difficult to achieve in this competitive market, branding results in consumer loyalty and sales growth.
Distribution Network: Given the fragmented nature of the Indian retailing
industry and the problems of infrastructure, FMCG companies need to develop extensive distribution networks to achieve a high level of penetration in both the urban and rural markets. Once they are able to create a strong distribution network, it gives them significant advantages over their competitors.
Contract Manufacturing: As FMCG companies concentrate on brand building,
product development and creating distribution networks, they are at the same time outsourcing their production requirements to third party manufacturers. Moreover, with several items reserved for the small scale industry and with these SSI units enjoying tax incentives, the contract manufacturing route has grown in importance and popularity.
Large Unorganized Sector : The unorganised sector has a presence in most
product categories of the FMCG sector. Small companies from this sector have used their locational advantages and regional presence to reach out to remote areas where large consumer products have only limited presence. Their low cost structure also gives them an advantage.
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CHAPTER – II
COMPANY PROFILE
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COMPANY PROFILE
Neither William Procter nor James Gamble ever intended to settle in Cincinnati. Although the city was a busy center of commerce and industry in the early nineteenth century, William, emigrating from England, and James, arriving from Ireland, were headed farther west. Despite their intentions, however, both men ended their travels when they arrived at the Queen City of the West – William, to care for his ailing wife Martha, who soon died, and James, to seek medical attention for himself. William Procter quickly established himself as a candle maker. James Gamble apprenticed himself to a soap maker. The two might never have met had they not married sisters, Olivia and Elizabeth Norris, whose father convinced his new sons-in-law to become business partners. In 1837, as a result of Alexander Norris‘ suggestion, a bold new enterprise was born: Procter & Gamble. 1837 — 1890 The Partnership Years.1837 was a difficult time to start a business. Although Cincinnati was a bustling marketplace, the U.S. was gripped by financial panic. Hundreds of banks were closing across the country. There was widespread concern that the United States was bankrupt. Yet, William and James launched their new enterprise, more concerned about how to compete with the 14 other soap and candle makers in their city than with the financial panic shaking their country. Their calm in the midst of that economic storm reflected their forward-looking approach to the business – an approach that became the hallmark of Procter & Gamble. In the 1850s, for example, despite rumours of an impending civil war in the U.S., they built a new plant to sustain their growing business. Later, they pioneered one of the nation‘s first profit-sharing programs and were amo.ng the first in American industry to invest in a research laboratory. By 1890, the fledgling partnership between Procter and Gamble had grown into a multi-million dollar corporation. Nevertheless, P&G still had its eyes on the future. 1837 On April 12, 1837, William Procter and James Gamble start making and selling their soap and candles. On August 22, they formalize their business relationship by pledging $3,596.47 apiece. The formal partnership agreement is signed on October 31, 1837. 1850 The Moon and Stars begins to appear in the 1850s as the unofficial trademark of Procter & Gamble. Wharf hands used the symbol to distinguish boxes of Star Candles. By the 1860s, the Moon and Stars appears on all Company products and correspondence. Once a
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staple of the Company‘s product line, candles decline in popularity with the invention of the electric light bulb. The Company discontinues candle manufacturing in the 1920s. 1859-1862 Twenty-two years after the partnership is formed, P&G sales reach $1 million. The Company now employs 80 people. During the Civil War, Procter & Gamble is awarded several contracts to supply soap and candles to the Union armies. These orders keep the factory busy day and night, building the Company‘s reputation as soldiers return home with their P&G products. 1879 James Norris Gamble, son of the founder and a trained chemist, develops an inexpensive white soap equal to high-quality, imported castiles. Inspiration for the soap‘s name – Ivory – came to Harley Procter, the founder‘s son, as he read the words ―out of ivory palaces‖ in the Bible one Sunday in church. The name seems a perfect match for the white soap‘s purity, mildness and long-lasting qualities. 1882 Harley Procter convinces the partners to allocate $11,000 to advertise Ivory nationally for the first time. Ivory‘s purity and floating capability are first advertised across the country in the Independent, a weekly newspaper. 1890 — 1945 A Company Built on Innovation. By 1890, P&G was selling more than 30 different types of soap, including Ivory. Fueled by full-color print ads in national magazines, consumer demand for P&G soaps continued to grow. To meet this increasing demand, the Company expanded its operations outside Cincinnati, with a plant in Kansas City, Kansas, followed by a plant in Ontario, Canada. As each new plant opened, P&G would embark on plans for another. The research labs were as busy as the plants. Innovative new products rolled out one after another – Ivory Flakes, a soap in flake form for washing clothes and dishes; Chipso, the first soap designed for washing machines; Dreft, the first synthetic house-hold detergent; and Crisco, the first all-vegetable shortening that changed the way consumers cooked. Each of these new products came from P&G‘s in-depth understanding of consumer needs and pioneering approach to market research. And they were marketed through equally innovative techniques, including radio ―soap operas,‖ product sampling and promotional premiums.
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1890-1896 After running the Company as a partnership for 53 years, the partners incorporate to raise additional capital for expansion. William Alexander Procter, son of the founder, is named the first president. P&G sets up an analytical lab at Ivorydale to study and improve the soap-making process. It is one of the earliest product research labs in America. King Camp Gillette invents the first safety razor. P&G‘s first color print advertisement – an ad for Ivory – appears in Cosmopolitan magazine picturing this ―Ivory Lady.‖ 1901-1917 American Safety Razor Company formed in Boston, Massachusetts, later becoming the Gillette Co. William Cooper Procter becomes the head of the Company following the death of his father, William Alexander Procter. P&G introduces Crisco, the first all-vegetable shortening. Crisco provides a healthier alternative to cooking with animal fats and is more economical than butter. The Company builds its first manufacturing facility outside the United States, in Canada. Employing 75 people, the plant produces Ivory soap and Crisco. U.S. Government requests Gillette supply razors and blades for the entire U.S. Armed Forces during WWI. 1923-1930 Crisco sponsors cooking shows on network radio, placing P&G among the medium‘s advertising innovators. A market research department is created to study consumer preferences and buying habits – one of the first such organizations in industry. In response to the growing popularity of perfumed beauty soaps, P&G introduces Camay. William Cooper Procter turns the reins of the Company over to Richard R. Deupree. 1931 P&G‘s brand management system begins to take shape in the late 1920s. In 1931, Neil McElroy, the Company‘s promotion department manager, creates a marketing organization based on competing brands managed by dedicated groups of people. The system provides more specialized marketing strategies for each brand and Procter & Gamble‘s brand management system is born. 1933-1939 Dreft, the first synthetic detergent developed for household use, is introduced. The discovery of detergent technology lays the groundwork for a revolution in cleaning technology. `William Cooper Procter dies and a monument is erected at Ivorydale in his honor. He is the last member of the founding families to run the Company.
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The Company expands its international presenc with the acquisition of the Philippine Manufacturing Company – the Company‘s first operations in the Far East. P&G celebrates its 100th anniversary. Sales reach $230 million. Just five months after the introduction of television in the U.S., P&G airs its first TV commercial (for Ivory Soap) during the first televised major league baseball game. 1943-1946 The Company creates its first division – the Drug Products Division – to sell its growing line of toilet goods. Tide, ―the washing miracle,‖ is introduced. Tide incorporates a new formula that cleans better than anything currently on the market. Its superior performance at a reasonable price makes Tide the country‘s leading laundry product by 1950. 1947 — 1952 P&G‘s detergent technology leads to the development of a wide range of products such as granulated and liquid detergents, shampoos, toothpastes and household cleaning products that provide growth opportunities in the 1950s and beyond. Neil H. McElroy assumes leadership of P&G. P&G establishes an Overseas Division to manage the Company‘s growing international business 1950-1955 The first subsidiary on the South American continent is established in Venezuela. A new research facility, Miami Valley Laboratories, opens in Cincinnati. MVL is the Company‘s first facility dedicated solely to upstream research The Company begins operations in continental Europe by leasing a small plant in Marseilles, France, from the Fournier-Ferrier Company, a detergent manufacturer. Crest, the first toothpaste with fluoride clinically proven to fight cavities, is introduced. P&G announces plans to form individual operating divisions to better manage its growing lines of products. This divisionalization also creates separate line and staff organizations. 1956 The new General Office building opens, signifying P&G‘s continuing commitment to downtown Cincinnati. P&G announces plans to form individual operating divisions to better manage its growing lines of products. This divisionalization also creates separate line and staff organizations. The new General Office building opens, signifying P&G‘s continuing commitment to downtown Cincinnati 1957 P&G enters the consumer paper products business with the acquisition of Charmin Paper Mills, a regional manufacturer of toilet tissue, towels and napkins. Howard J. Morgens
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takes over Company leadership when Neil McElroy leaves to serve as the U.S. Secretary of Defense. 1960 Crest sales skyrocket when The American Dental Association recognizes the toothpaste as ―an effective decay-preventive dentifrice.‖ P&G GmbH opens its first office in Frankfurt, Germany, with 15 employees. Three years later, Germany‘s first plant in Worms begins production of Fairy cleaning powder and Dash laundry detergent. 1961 Although Pampers‘ first test market in Peoria, Illinois, is unsuccessful, it leads to an improved Pampers product at a lower cost that eventually replaces cloth diapers as the preferred way to diaper babies. 1963-1968 P&G enters the coffee business with the acquisition of Folger‘s Coffee. The first paper plant built by P&G opens in Mehoopany, Pennsylvania. Pringle‘s, with its unique stackable shape and resealable can, is introduced into test market. 1972-1973 Bounce combines softening agents with a nonwoven sheet to soften clothes in the dryer. It quickly becomes the second largest selling fabric softener after Downy. The Company begins manufacturing and selling P&G products in Japan through the acquisition of The Nippon Sunhome Company. The new company is called Procter & Gamble Sunhome Co. Ltd. 1974-1981 Ed Harness is elected to head. Didronel is introduced. A treatment for Paget‘s disease, it is one of the Company‘s first pharmaceutical products the Company. Sales reach $10 billion. John G. Smale becomes head of Procter & Gamble. 1982-1984 P&G increases its prescription and over-the-counter health care business with the acquisition of Norwich Eaton Pharmaceuticals. The Company introduces a superior feminine protection product, Always/Whisper, which becomes the leading world brand in its category by 1985. Gillette acquires Oral B, founded in 1950. Liquid Tide is introduced. This represents the results of global research with surfactants developed in Japan, fragrance in Europe and packaging from the United States.
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1985 The Company significantly expands its over-the-counter and personal health care business worldwide with the acquisition of Richardson- Vicks, owners of Vicks respiratory care and Oil of Olay product lines. P&G opens the General Offices Tower building, the expansion of Procter & Gamble‘s world headquarters in Cincinnati, Ohio. 1986 Ultra Pampers and Luvs Super Baby Pants are introduced – with effective, new technology that makes diapers thinner. P&G creates the industry‘s first multi-functional customer teams. The Company develops a new technology that enables consumers to wash and condition their hair using only one product. Pert Plus/Rejoice shampoo quickly becomes one of the leading worldwide shampoo brands. 1987 P&G celebrates its 150th anniversary. The Company increases its presence in the European personal care category, with the acquisition of the Blendax line of products, including Blend-a-med and Blendax toothpastes. P&G announces several major organization changes with the creation of category management and a product supply system which integrates purchasing, manufacturing, engineering and distribution. 1988-1989 The Company announces a joint venture to manufacture products in China. This is the Company‘s first operation in the largest consumer market in the world. Refill packs are introduced in Germany for liquid products like Lenor fabric softener. Germany‘s retail grocers name Lenor‘s refill pouch the invention of the year. The Company enters the cosmetics and fragrances category with the acquisition of Noxell and its Cover Girl and Noxzema products. 1990 Edwin L. Artzt is named to lead the Company. The Company expands its presence in the male personal care market with the acquisition of Shulton‘s Old Spice product line. Most of the laundry detergent brands are reformulated to incorporate P&G‘s compact technology. Introduced in Japan with the Cheer and Ariel brands, the technology is expanded to 36 brands in 20 different countries during the year.
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1991 The acquisitions of Max Factor and Betrix increase the Company‘s worldwide presence in the cosmetics and fragrances category. P&G opens its first operation in Eastern Europe with the acquisition of Rakona in Czechoslovakia. New businesses in other Eastern European countries – Hungary, Poland and Russia – follow throughout the year. 1992 P&G receives the World Environment Center Gold Medal for International Corporate Environmental Achievement. Pantene Pro-V is introduced. Originally a small part of the 1985 Richardson-Vicks acquisition, Pantene becomes the fastest growing shampoo in the world. 1993 Company sales exceed $30 billion. For the first time in Company history, more than 50% of sales come from outside the U.S. The Japan Headquarters and Technical Center opens on Rokko Island in Kobe City, Japan. The complex consolidates headquarters and product development operations. 1994-1995 P&G enters the European tissue and towel market with the acquisition of the Germanbased company, VP Schickedanz. John E. Pepper becomes P&G‘s ninth Chairman and Chief Executive, and Durk I. Jager becomes President and Chief Operating Officer. 1996 The U.S. Food and Drug Administration grants approval of Olestra for use in salty snacks and crackers. Olestra, marketed under the brand name Olean, is a calorie-free fat replacer that provides the full taste of fat without the added fat calories. The Company continues to expand its global reach with acquisitions of the U.S. baby wipes brand Baby Fresh – complementing the Company‘s global diaper business and its strong European Pampers Baby Wipes business 1996-1998 Gillette acquires Duracell, originally founded in the early 1920s. The Company expands its feminine protection expertise into a new global market with the acquisition of Tambrands. Tampax Tampon is the market leader worldwide.
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P&G announces Organization 2005, a new global organizational design to drive innovative ideas to world markets faster. Mach 3 razor is introduced. P&G provides a foundation for future growth by investing in new breakthrough products. Febreze, Dryel and Swiffer are introduced and sold around the world in less than 18 months. 1999-2002 Durk Jager becomes Chairman of the Board and Chief Executive. A.G. Lafley becomes President and Chief Executive. Reflect.com, P&G‘s initial Internet brand, is launched. It is the first to offer truly customized beauty care products online. Crest WhiteStrips launches in the U.S. P&G acquires the Clairol business from Bristol-Myers Squibb Co. Clairol is a world leader in hair color and hair care products. A.G. Lafley is elected Chairman of the Board. Bruce Byrnes and R. Kerry Clark are elected ViceChairman of the Board. 2003-2004 FDA approves switching Prilosec, a treatment for frequent heartburn, from a prescription to an over-thecounter (OTC) product. P&G‗s Children's Safe Drinking Water Program wins the World Business Award from the United Nations Development Program & International Chamber of Commerce in support of the UN‗s Millenium Development goals. Actonel becomes a billion dollar brand, and P&G's first pharmaceutical brand to reach this important milestone. 2005 P&G and Gillette merge into one company and add five more billion dollar brands to our product portfolio, including Gillette and Braun‗s shaving and grooming products, the Oral-B dental care line and Duracell batteries.
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Purpose, Values & Principles
Foundation
P&G Purpose, Values and Principles are the foundation for P&G‘s unique culture. Throughout the history of over 170 years, P&G has grown and changed while these elements have endured, and will continue to be passed down to generations of P&G people to come. P&G Purpose unifies us in a common cause and growth strategy of improving more consumers‘ lives in small but meaningful ways each day. It inspires P&G people to make a positive contribution every day. P&G Values reflect the behaviours that shape the tone of how they work with each other and with their partners.
PURPOSE
P&G brands and P&G people are the foundation of P&G‘s success. P&G people bring the values to life as they focus on improving, the lives of the world‘s consumers.
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VALUES
Integrity
They are honest and straightforward with each other. They operate within the letter and spirit of the law. They uphold the values and principles of P&G in every action and decision. They are data-based and intellectually honest in advocating proposals, including, recognizing risks.
Leadership
Everyone should have responsibility in their area, with a deep commitment to delivering leadership results. They have a clear vision of where they going. They focus their resources to achieve leadership objectives and strategies. They develop the capability to deliver the company strategies and eliminate organizational barriers.
Ownership
The company accept personal accountability to meet their business needs, improve their systems and it will improve their effectiveness. Each one act like owners, treating the Company‘s assets as their own and behaving with the Company‘s long-term success in mind.
Passion for Winning
They are determined to be the best at doing what matters most.
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They have a healthy dissatisfaction with the status quo. They have a compelling desire to improve and to win in the marketplace.
Ownership
P&G colleagues, customers and consumers, and treat them as they want to be treated. They have confidence in each other‘s capabilities and intentions. They believe that people work best when there is a foundation of trust.
PRINCIPLES
P&G Show Respect for All Individuals
They believe that all individuals can and want to contribute to their fullest potential. They inspire and enable people to achieve high expectations, standards and challenging goals. They are honest with people about their performance.
The Interests of the Company and the Individual Are Inseparable
They believe that doing what is right for the business with integrity will lead to mutual success for both the Company and the individual. their quest for mutual success ties us together. They encourage stock ownership and ownership behaviour.
P&G Strategically Focused in Their Work
They operate against clearly articulated and aligned objectives and strategies. They usually do work and ask for work that adds value to the business. They simplify, standardize and streamline our current work whenever possible.
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Innovation Is the Cornerstone of P&G Success
They place great value on big, new consumer innovations. Challenge convention and reinvent the way we do business to better win in the marketplace.
Value Personal Mastery
They believe it is the responsibility of all individuals to continually develop themselves and others. They encourage and expect outstanding technical mastery and executional excellence.
P&G Seek to Be the Best
They strive to be the best in all areas of strategic importance to the Company. Their performance are rigorously versus the very best internally and externally. They learn from both of their successes and failures.
P&G Are Externally Focused
They develop superior understanding of consumers and their needs. They create and deliver products, packaging and concepts that build winning brand equities. They develop close, mutually productive relationships with their customers and their suppliers. They incorporate sustainability into products, packaging and operations.
Mutual Interdependency Is a Way of Life
It work together with confidence and trust across business units, functions, categories and geographies. They take pride in results from reapplying others‘ ideas.
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P&G INDIA BRANDS
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Ambi Pur
Though we strive hard to keep our homes and our cars clean and tidy, the results are rarely satisfactory. Odours that linger in our homes just before guests arrive, or a persistent stench that never leaves the car, not only adversely affect our mood, but also that of our guests. With this in mind, P&G experts have bottled the fragrance of freshness with the new Ambi Pur range for both homes and cars.
Ariel
Introduced in 1991, Ariel was the first to bring the 'compact detergent' technology, the enzyme technology for safe and superior stainremoving power and the 'smart eyes' technology into India, with an aim of becoming India's best stain removal detergent. Ariel contains safe ingredients for all fabrics under recommended usage conditions for laundry. The Ariel product range in India includes different variants to meet your specific needs like Ariel OxyBlu, Ariel Oxyblu Ultramatic, Ariel Front O Mat, Ariel 2in1.
Duracell
Duracell batteries have a history of providing dependable power when and where you need it the most. Our range of Batteries gives you the right power for all your device needs, providing up to 10x performance. The product range in India includes Duracell and Duracell Ultra. Duracell is available in sizes AAA, AA, C, D, and 9-volt while Duracell Ultra is available in sizes AA and AAA sizes.
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Gillette
Gillette® has been at the heart of men‘s grooming for over 100 years. Each day, more than 600 million men around the world trust their faces and skin to Gillette‘s innovative razors and shaving products designed for the unique needs of men – helping them to look, feel and be their best every day. The razor range in India includes Gillette Vector, Gillette Mach3, Gillette Mach3 Turbo, Gillette Guard and Gillette Mach3 Turbo Sensitive and Gillette Fusion. The Shave Care range includes Gillette Fusion HydraGel, Gillette Series Sensitive Skin Foam, Gillette Series After Shave & Gillette Classic Shave Foam Sensitive Skin. The Gillette Skincare regimen is a no-fuss and efficient solution in caring for the health and appearance of men‘s skin and includes a special range of designed-for-men Gillette Skincare Foaming Wash, Gillette Skincare Scrub, Gillette Skincare Facial Moisturizer with Aloe Vera, Gillette Skincare Facial Moisturizer with SPF and Gillette Skincare Lotion 100ml.
Head & Shoulders
Since 1950, Head & Shoulders has been at the forefront of scalp and hair science, significantly advancing the treatment of dandruff and scalp problems. Along with professional advice and expert insight we have a wide range of products to care for your scalp and nurture your hair. Head & Shoulders is available in 8 variants in India including Men Hair Retain, Complete Care for Dry Scalp, Anti Hair fall, Smooth & Silky, Cool Menthol, Clean & Balanced, Thick & Long & Silky Black.
Olay
Olay is a product truly born in love created by Graham Wulff for his wife Dinah in 1950s to address her frustration with the then thick and waxy beauty creams. Today, Olay is one of the most recognizable brands in the world. Yet through all the changes and innovations, the philosophy upheld by Graham Wulff remains just as relevant as ever: Help women look and feel beautiful and Challenge what‘s possible with their skin.
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Oral-B
Oral-B continuously strives to work closely with the dental professionals and deliver high quality products, which make us leaders* in the $ 4.5 billion toothbrush category, marketing toothbrushes for children & adults, as well as inter-dental products such as Dental Floss. In India, Oral-B has an innovative range of toothbrushes including Cross Action Prohealth 7 Benefits, Cross Action Pro-health Superior Clean and Advantage Sensitive toothbrush. Oral-B‘S floss range includes Ultra Floss & Essential Floss.
Pampers
As a result of constant research and innovation in understanding the needs of babies at various stages of development, Pampers Active Baby has been voted as the best diaper by Indian moms with the guarantee of superior dryness for an uninterrupted sleep of 12 hours. Pampers has an answer for all your needs with its innovative product range that includes Pampers, Pampers Active Baby, Pampers Active Baby Pants, all designed especially for providing a night of Golden Sleep for the baby.
Pantene
The New Pantene Amino Pro-V Complex range of shampoo & conditioner comes in three variants suited for individual needs - Pantene Nourished Shine, Pantene Hair Fall Control & Pantene Smooth & Silky. Enriched with the goodness of pro-vitamins and three essential aminos, Pantene restores your hair with its lost beauty while making your hair ten times stronger.
33
Tide
Tide is the World‘s Oldest & Most Trusted Detergent brand and is the Market Leader in 23 Countries around the world. Launched in India in mid-2000, Tide provides ‗Outstanding Whiteness‘ on white clothes & excellent cleaning on coloured clothes as well. Tide‘s Fabric Whitening Agents clean clothes without bleaching or removing colour from a garment. The Tide range in India includes Tide (Detergent) and Tide (Bar with Whiteons). Tide Naturals was launched in India in December 2009. Packed with the benefits of lemon and chandan, it provides great cleaning while keeping the hands soft.
Vicks
Vicks has long been invested in the science and research of respiratory health and through that dedication has developed a wide range of therapeutic products that offer effective relief for all the major signs and symptoms of the common cold, flu and sinus pain and pressure. The Vicks product range in India includes Vicks Cough drops, Vicks Vaporub, Vicks Inhaler, Vicks Vapocool, and Vicks Action 500 Extra.
Whisper
Whisper understands that we're each very different, and offers a wide range of sanitary napkins to suit every girl or woman's needs. With the right menstrual pad, you could take the first step to having a Happy Period. Whisper has a wide range of products in India which includes Whisper Ultra Regular Wings, Whisper Ultra XL Wings, Whisper Ultra Heavy Flow Overnights Wings, Whisper Maxi Regular, Whisper Maxi XL Wings, Whisper Choice Regular, Whisper Choice Wings and Whisper Choice Ultra Wings.
34
CHAPTER – III
ANALYSIS OF P&G ON VARIOUS HEADS
35
SWOT ANALYSIS FINANCIAL ANALYSIS MARKET ANALYSIS TECHNICAL ANALYSIS
36
37
PROCTER & GAMBLE SWOT ANALYSIS
―SWOT is an acronym for the internal Strengths and Weaknesses of a firm and the environmental Opportunities and Threats facing that firm. SWOT analysis is a widely used technique through which managers create a quick overview of a company‘s strategic situation. The technique is based on the assumption that an effective strategy derives from a sound ―fit‖ between a firm‘s internal resources (strengths and weaknesses) and its external situation (opportunities and threats). A good fit maximizes a firm‘s strengths and opportunities and minimizes its weaknesses and threats. Accurately applied, this simple assumption has powerful implications for the design of a successful strategy.‖
Procter & Gamble P&G is the world's largest consumer goods company that markets more than 300 brands in over180 countries. The company is engaged in producing beauty, health, fabric, home, baby, family and personal care products. The company's product portfolio also includes pet health products and snacks. The company's leading market position along with its strong brand portfolio provides it with a significant competitive advantage. However, slowdown in global economic condition is making it increasingly difficult for branded product manufacturers like P&G to maintain their sales volume and revenue growth.
38
Strengths
The large scale, on which the P & G operates, is one of its strengths. It is a global leader for different product categories like fabric, home, baby, beauty, health and personal care in many countries. Its three hundred products are sold in over one hundred and eighty countries.
The strong branding of P & G makes it one of the most successful brands in the world.
The company has a vast experience in oral and personal hygiene products as they are working since...
Also, it has an extensive experience in marketing in different market segments and is one
of the best marketers in the world.
P & G is tightly integrated with some of the largest retailers in United States of America as well as world around. and around the world Distribution channels all over the world
Gross profit margin of the company is 15 times the industry average P & G is known for its diverse brand portfolio. The company is able to customize its global products and brands according to the local preferences.
P & G invests greatly in its research and development to. About $2 billion are invested every year by P & G for improving and introducing new products. The end-consumer understanding of P & G and its large database of consumers make its research and development strong.
Weaknesses
Many of the top brands of P & G are losing their market share rapidly. In online media leadership and presence P & G is lagging behind. The beauty and health products by P & G are mostly for women. P & G does not make and offer any private label products for the retail customers and is, missing an opportunity.
39
The large scale operation of the company makes the culture heavy and processes slow. This also leads to quality control problems. P & G does not divest its weak or poor brands. The major customers of P & G are located at some of the places and it concentrates heavily as them. When P & G acquired Clairol business in year 2001, it was unable to grow this business. The Clairol Herbal Essence brand failed to enter new markets as the market had access to better and innovative products. This shows weakness of P & G in the beauty care division.
Opportunities An opportunity for P & G is health and beauty products for men. With the acquisition of
Gillette, the company now has several growth opportunities in this market segment.
P & G has doubled its Environmental Goals for the year 2012 and thus, promises more value for the environment concerned customers today.
Using the online social networks and internet marketing techniques is also an opportunity for P & G.
Divest brands that are not in accordance or do not meet P & G's long-term goals
Company is constantly trying to pursue growth overseas.
40
Threats
There is a cut throat competition in the fast moving consumer's goods markets today.
Companies like Kimberly Clark, Unilever, Johnsons & Johnsons and Colgate-Palmolive etc pose a serious threat to its market share in different countries.
The competitors are making their product portfolios diverse day b day and using different
marketing and promotional strategies to increase their market share.
In the market many substitutes are available for P & G products at cheaper prices. The private label growth is also a serious threat to the P & G's market share. Due to recession, the consumer spending has decreased globally. Also, the prices for
raw materials are increasing so cost to the company is increasing.
41
42
STRATEGY
They are focused on strategies that the right for the long- term health of the Company and will deliver total shareholder return in the top one-third of their peer group. The Company’s long-term financial targets are:
Grow organic sales 1% to 2% faster than market growth in the categories and geographies in which they compete, Deliver earnings per share (EPS) growth of high single digits to low double digits, and Generate free cash flow productivity of 90% or greater. In order to achieve these targets, they are prioritizing the strategies and resources that will make P&G more focused and fit to win over the near- and long-terms.
IMPROVING PRODUCTIVITY AND CREATING A COST SAVINGS CULTURE They have taken significant steps to accelerate cost savings and create a more cost focused culture within the Company, including a five-year, $10 billion cost savings initiative, which was announced in February 2012. The cost savings program is based on:
The reduction of approximately 5,700 non-manufacturing overhead positions by the end of fiscal year 2013. Approximately $1.2 billion in annual cost of goods savings across raw materials, manufacturing and transportation and warehousing expenses. Generating efficiencies to enable us to grow marketing costs at a slightly slower rate than sales growth while still increasing consumer reach and effectiveness, saving approximately $1 billion over the five year period.
43
Procter and Gamble: Still a Champion Blue-Chip Procter and Gamble (NYSE: PG) is a worldwide consumer products company, and one of the largest companies in the world. The company has grown its dividend for well over 50 years, and has a market cap of almost $190 billion.
-Seven Year Revenue Growth Rate: 5.7% -Seven Year EPS Growth Rate: 4.7% -Seven Year Dividend Growth Rate: 11% -Current Dividend Yield: 3.28% -Balance Sheet Strength: Strong, but with Goodwill The returns have been positive since, PG dividend stock report from 2011 when called the stock fairly valued and a ―hold‖, but the company seems to have a diminished moat and lackluster growth prospects. Over the long-run, earnings will begin inching up and the rate of return will be positive, but they don‘t view the current valuation as appropriate for the stock performance with a margin of safety. They would desire a 10% pullback or more to invest. Overview Founded in 1837, Procter and Gamble (symbol: PG) is now one of the largest companies in the world. They sell their products in over 180 countries and currently have a market capitalization of over $180 billion. The company is known as one of the most solid blue chip dividend stocks with the history of more than five decades of consecutive annual dividend growth and large product diversification. The company operates in numerous segments, as outlined below:
Beauty
With brands like Head and Shoulders, Pantene, and Olay, Procter and Gamble brings in 24% of its sales and 22% of its earnings from its beauty segment.
Grooming
Another 10% of sales and 16% of earnings come from the grooming segment, which includes brands like Braun, Fusion, and Gillette.
44
Health Care
Procter and Gamble offers a number of feminine care, oral care, and symptom-care products, including Oral-B, Vicks, and Always. The company generates 15% of sales and 17% of earnings from this segment.
Fabric/Home Care
The company has a variety of brands like Duracell batteries, Tide detergent, and Febreeze air care, from which it generates 32% of revenue and 26% of earnings.
Baby/Family Care
Through brands like Bounty, Charmin, and Pampers, Procter and Gamble generates 19% of sales and 19% of earnings from baby and family care products. In terms of geographic exposure, 39% of sales come from North America, 19% come from Western Europe, 18% come from Asia, 14% come from Africa, the Middle East, and Central/Eastern Europe, and 10% come from Latin America.
45
RATIOS
Price to Earnings: 22 Price to Free Cash Flow: 22 Price to Book: 3 Return on Equity: 17%
REVENUE CHART
Sales grew at an annualized rate of 5.7% over this period, but over a more recent period, sales growth has been flat. The company has restated numbers which are not shown here, and those points to mild growth. In some ways, the chart is not quite as bad as it looks, because the company was actively divesting brands over this period, including selling the large Folgers coffee brand to Smuckers, rather than focusing on growth. Still, investors are broadly and correctly unimpressed by Procter and Gamble‘s performance over this period.
46
Earnings and Dividends
In terms of earnings per share, the company grew at an annualized rate of 4.7%. However, earnings have declined over the later period as part of the cost-cutting. The company has stated that it targets high single digit EPS growth. When combined with a dividend yield of over 3%, that would mean long-term low double-digit returns. As far as the dividend is concerned, it currently yields 3.28% with a payout ratio of under 60%. The dividend has grown by a rate of 11% annually, and the most recent increase was 7%.
47
Approximate historical dividend yield at beginning of each year: Year Current 2012 2011 2010 2009 2008 2007 2006 3.28% 3.1% 3.0% 2.9% 1.8% 2.5% 1.9% 1.9% Yield
Like many stocks, PG was overvalued several years ago, and had a lower yield. Plus, the payout ratio increased from around 40% to around 60% over this period. In most years, PG spends more on stock buybacks than on dividends. Over the last 3 years, the company spent over $17 billion on share repurchases and over $17 billion on dividends. Based on 2012 results, the company‘s shareholder yield is around 5.4%.
BALANCE SHEET
Total debt/equity for the company is under 50%, and the debt/income ratio is under 3 xs. However, over 80% of the existing shareholder equity consists of goodwill. Much of PG‘s growth was due to acquisitions. The interest coverage ratio is very solid, at over 17. Taking everything into account, Procter and Gamble has a rather strong balance sheet, with manageable debt levels, a high interest coverage ratio, and good investment grades. The only real downside to the balance sheet is the large quantity of goodwill, but overall, it‘s in good shape.
48
INVESTMENT THESIS
Procter and Gamble is the largest company in the world at what it does, and has 25 billion-dollar brands. The company‘s goals, as stated in their most recent annual report, were for an organic sales growth rate of 1-2% above global market growth rates, earnings growth in the high single digits or low double digits, and for free cash flow to be 90% of earnings. The company has pursued a global growth strategy, and has achieved 23% compound annual sales growth in Brazil, 25% compound annual sales growth in Russia, 27% compound annual sales growth in India, and 17% compound annual sales growth in China, over the last 10-year period. For example, if a company can achieve 2% annual volume growth and 3% pricing growth on that volume (basically in line with a standard inflation rate), then the revenue growth is around 5%. If a company then buys back 3% of its market cap in stock buybacks each year and net profit margins remain static, then EPS growth is in the ballpark of 8%. Add a 3% dividend yield, and P&G got a good investment on your hands. But if margins deteriorate, or volume growth halts, then the picture can change. In addition, if the valuation of the stock is too high, it drives down the dividend yield and reduces the number of shares that the company can repurchase, which in turn reduces the EPS growth rate. That‘s something that not everyone realizes: that for a company that does buybacks, a high stock valuation results in a measurable reduction in EPS growth compared to if the stock valuation were low. Slow and profitable growth works great when the valuation is low enough to provide double-digit returns. For Procter and Gamble, they announced earlier in 2012 a plan to save $10 billion in operations by the end of 2016. Specifically, they call for $6 billion in savings on cost of goods (which comes out to around $1.2 billion per year), $3 billion in savings on overhead (reducing the number of employees, at about $600 million per year), and then $1 billion in savings from marketing, or around $200 million per year. To do this and keep the top line intact means that these savings can go towards dividends, buybacks, or strengthening the balance sheet.
49
RISKS
Procter and Gamble faces commodity cost risk and global currency risk. More specifically, they operate in a highly competitive industry, and if consumers are looking to reduce spending, they can switch and have switched to private label products. Plus, other branded companies with overlapping products, like Colgate, can fight for market share.
If the company doesn‘t make good use of its advertising, maintain pricing power, and continue to grow global volume, then their earnings growth rate won‘t match their target rate of high single digits or better per year.
50
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts in Millions Except Per Share Amounts) Consolidated Earnings Information Three Months Ended March 31 2012 2011 $ 19,893 9,789 6,399 % CHG 2 5 4 Nine Months Ended March 31 2012 2011 $ 60,653 29,327 19,010 % CHG 5 9 4 % % %
NET SALES
Cost of products sold Selling, general & administrative expense Goodwill & indefinite lived intangible impairment charges OPERATING INCOME Total interest expense Other non-operating income/(expense), EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES Income taxes on continuing operations NET EARNINGS FROM CONTINUING OPERATIONS NET EARNINGS FROM DISCONTINUED OPERATIONS Net earnings Less: net earnings attributable to non controlling interests NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE Effective tax rate
$ 20,194 10,237 6,636
% $ 63,468 % 31,894 % 19,769
22
0
-
1,576
0
(17) % (5) % 39 %
3,299 179 67
3,705 202 104
(11) % 10,229 (11) % (36) % 587 238
12,316 619 171
3,187
3,607
(12) %
9,880
11,868
(17) %
754
748
1
%
2,776
2,638
5
%
2,433
2,859
(15) %
7,104
9,230
(23) %
34
47
(28) %
133
158
2,467 56
2,906 33
(15) % 70 %
7,237 112
9,388 101
(23) % 11 %
2,411
2,873
(16) %
7,125
9,287
(23) %
23.7
%
51
20.7 %
28.1 %
22.2 %
BASIC NET EARNINGS PER COMMON SHARE (1): Earnings from continuing operations Earnings from discontinued operations BASIC NET EARNINGS PER COMMON SHARE DILUTED NET EARNINGS PER COMMON SHARE (1): Earnings from continuing operations Earnings from discontinued operations DILUTED NET EARNINGS PER COMMON SHARE $ 0.81 $ 0.94 (14) % $ 2.37 $ 3.04 (22) % $ 0.84 $ 0.99 (15) % $ 2.47 $ 3.18 (22) %
$ 0.01
$ 0.02
(50) % $ 0.05
$ 0.06
(17) %
$ 0.85
$ 1.01
(16) % $ 2.52
$ 3.24
(22) %
$ 0.01
$ 0.02
(50) % $ 0.05
$ 0.05
0
%
$ 0.82
$ 0.96
(15) % $ 2.42
$ 3.09
(22) %
DIVIDENDS PER COMMON SHARE Average diluted shares outstanding
$ 0.5250
$ 0.4818
9
% $ 1.5750
$ 1.4454
9
%
2,937.8
2,999.3
2,944.9
3,008.6
52
COMPARISONS AS A % OF NET SALES Gross margin Selling, general & administrative expense 49.3 32.9 % %
Basis Pt Chg 50.8 % (150) 32.2 % 70 49.7 % 31.1 %
Basis Pt Chg 51.6 % (190) 31.3 % (20)
Goodwill & indefinite lived intangible Impairment charges
0.1
%
0.0
% 10
2.5
%
0.0
% 250
Operating margin Earnings from continuing operations before income Taxes Net earnings NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE
16.3
%
18.6 % (230)
16.1 %
20.3 % (420)
15.8
%
18.1 % (230)
15.6 %
19.6 % (400)
12.0 11.9
% %
14.4 % (240) 14.4 % (250)
11.2 % 11.2 %
15.2 % (400) 15.3 % (410)
53
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts in Millions) Consolidated Cash Flows Information
Nine Months Ended March 31 2012 Cash and cash equivalents, beginning of period $ 2,768 2011 $ 2,879
Operating activities
Net earnings Depreciation and amortization Share-based compensation expense Deferred income taxes Gain on sale of businesses Goodwill and indefinite lived intangibles impairment charges 7,237 2,427 277 9,388 2,103 295
(5) (201) 1,576
186 (70) 0
Changes in:
Accounts receivable Inventories Accounts payable, accrued and other liabilities Other operating assets & liabilities Other TOTAL OPERATING ACTIVITIES (347) (287) (1,558) (495) (817) (223)
131
(831)
61 9,311
(84) 9,452
54
INVESTING ACTIVITIES
Capital expenditures Proceeds from asset sales Acquisitions, net of cash acquired Change in investments TOTAL INVESTING ACTIVITIES (2,663) 290 (4) (2,066) 89 (489)
90 (2,287)
97 (2,369)
FINANCING ACTIVITIES
Dividends to shareholders Change in short-term debt Additions to long-term debt Reductions of long-term debt Treasury stock purchases (4,521) (122) 3,985 (2,514) (4,023) (4,237) (420) 1,536 (188) (4,536)
Impact of stock options and other TOTAL FINANCING ACTIVITIES
1,439
691
(5,756)
(7,154)
Effect of exchange rate changes on cash and cash equivalents Change in cash and cash equivalents CASH EQUIVALENTS
(45)
138
1,223
67
$ 3,991
$ 2,946
55
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts in Millions) Consolidated Balance Sheet Information
March 31, 2012
Cash and cash equivalents Accounts receivable Total inventories Other TOTAL CURRENT ASSETS Net property, plant and equipment Net goodwill and other intangible assets Other non-current assets TOTAL ASSETS Accounts payable Accrued and other liabilities Debt due within one year TOTAL CURRENT LIABILITIES Long-term debt Other TOTAL LIABILITIES $ 3,991 6,200 7,239 5,678 23,108 20,384 86,262 4,851 $ 134,605 $ 6,684 8,449 11,771 26,904 21,341 20,451 68,696
June 30, 2011
$ 2,768 6,275 7,379 5,548 21,970 21,293 90,182 4,909 $ 138,354 $ 8,022 9,290 9,981 27,293 22,033 21,027 70,353
56
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts in Millions) Consolidated Earnings Information
Three Months Ended March 31, 2012
Earnings from % Change Continuing Versus Operations Year Ago Before Income Taxes % Change Versus Year Ago Net Earnings Attributable to Procter & Gamble % Change Versus Year Ago
Net Sales
Beauty Grooming Health Care Fabric Care and Home Care Baby Care and Family Care Corporate TOTAL COMPANY
$ 4,844 1,962 3,018 6,595
1 0 2 1
% % % %
$
710 530 638 1,161
1 -9 -3 -7
% $ % % %
523 398 411 716
3 -4 -4 -9
% % % %
4,153 (378) 20,194
5
% N/A
903 (755) 3,187
9
%
573 (210) 2,411
9
%
N/A -12 %
N/A -16 %
2
%
57
Nine Months Ended March 31, 2012
Earnings from % Change Continuing Versus Operations Year Ago Before Income Taxes % Change Versus Year Ago Net Earnings Attributable to Procter & Gamble % Change Versus Year Ago
Net Sales
Beauty Grooming Health Care Fabric Care and Home Care Baby Care and Family Care Corporate TOTAL COMPANY
$ 15,512 6,332 9,492 20,703
4 4 4 4
% % % %
$
2,652 1,861 2,222 3,643
-6 2 2 -7
% $ % % %
2,008 1,401 1,490 2,280
-7 2 3
% % %
-10 %
12,394 (965) 63,468
7
% N/A
2,511 (3,009) 9,880
5
%
1,583 (1,637) 7,125
6
%
N/A -17 %
N/A -23 %
5
%
58
Three Months Ended March 31, 2012
(Percent Change vs. Year Ago) * Volume Volume With Without Acquisitions Acquisitions/ Foreign / Divestitures Divestitures Exchange Beauty Grooming Health Care Fabric Care and Home Care Baby Care and Family Care Total Company 1 1 0 -3 % % % % 1 1 -1 -3 % % % % -1 -2 -1 -1 % % % %
Net Sales Price 5 3 3 7 % % % % Mix/Other -4 -2 0 -2 % % % % Growth 1 0 2 1 % % % %
3 0
% %
3 0
% %
-1 -1
% %
5 5
% %
-2 -2
% %
5 2
% %
59
Nine Months Ended March 31, 2012
(Percent Change vs. Year Ago) * Volume Volume With Without Acquisitions Acquisitions/ Foreign / Divestitures Divestitures Exchange Beauty Grooming Health Care Fabric Care and Home Care Baby Care and Family Care Total Company 2 1 1 -1 % % % % 3 1 1 -1 % % % % 2 2 1 1 % % % %
Net Sales Price 3 2 3 6 % % % % Mix/Other -3 -1 -1 -2 % % % % Growth 4 4 4 4 % % % %
2
%
2
%
1
%
4
%
0
%
7
%
1
%
1
%
1
%
4
%
-1
%
5
%
60
SHORT-TERM (OPERATING) ACTIVITY RATIOS
RATIOS (SUMMARY)
Procter & Gamble Co., Jun 30, 2012 Jun 30, 2011 Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007
Turnover Ratios
Inventory turnover Receivables turnover Payables turnover Working capital turnover 12.45 13.79 10.57 17.19 11.19 13.16 10.29 14.66 12.36 14.80 10.89 17.67 11.49 13.54 13.22 11.73 9.92 12.35 12.33 9.94 11.22 11.54 13.39 9.88
Average No. of Days
Average inventory processing period Add: Average receivable collection period 29 26 33 28 30 25 32 27 37 30 33 32
Operating cycle
Less: Average payables payment period
56
35
60
35
54
34
59
28
66
30
64
27
Cash conversion cycle
21
25
21
31
37
37
61
INVENTORY TURNOVER
Jun 30, 2012 Jun 30, 2011 Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007
Selected Financial Data (USD $ in millions)
Net sales Inventories 83,680 6,721 82,559 7,379 78,938 6,384 79,029 6,880 83,503 8,416 76,476 6,819
Inventory Turnover, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 12.45 – 11.19 11.02 12.36 10.51 11.49 10.01 9.92 10.56 11.22 –
Inventory turnover = Net sales / Inventories = 83,680 / 6,721 = 12.45
Ratio
Inventory turnover
Description
An activity ratio calculated as revenue divided by inventory.
The company
Procter & Gamble Co.'s inventory turnover deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.
62
RECEIVEBLE TURNOVER
Jun 30, 2012 Jun 30, 2011 Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007
Selected Financial Data (USD $ in millions)
Net sales Accounts receivable Procter & Gamble Co.1 Industry, Consumer Goods 83,680 6,068 82,559 6,275 78,938 5,335 79,029 5,836 83,503 6,761 76,476 6,629
Receivables Turnover, Comparison to Industry
13.79 13.16 14.80 13.54 12.35 11.54
–
12.21
11.17
12.64
12.03
–
Receivable turnover = Net Sales / Accounts receivable = 83,680 / 6,068 = 13.79
Ratio
Receivables turnover
Description
An activity ratio equal to revenue divided by receivables.
The company
Procter & Gamble Co.'s receivables turnover deteriorated from 2010 to 2011 but then slightly improved from 2011 to 2012.
63
PAYABLE TURNOVER
Jun 30, 2012 Jun 30, 2011 Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007
Selected Financial Data (USD $ in millions)
Net sales Accounts payable 83,680 7,920 82,559 8,022 78,938 7,251 79,029 5,980 83,503 6,775 76,476 5,710
Payables Turnover, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 10.57 – 10.29 13.32 10.89 11.93 13.22 15.94 12.33 13.46 13.39 –
Payable turnover = Net sales / Accounts payable = 83,680 / 7,920 = 10.57
Ratio
Description
The company
Procter & Gamble Co.'s payables turnover declined from 2010 to 2011 but then slightly increased from 2011 to 2012.
Payables An activity ratio calculated as turnover revenue divided by payables.
64
WORKING CAPITAL TURNOVER
Jun 30, 2012 Jun 30, 2011 Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007
Selected Financial Data (USD $ in millions)
Net sales Working capital 83,680 4,869 82,559 5,632 78,938 4,468 79,029 6,736 83,503 8,402 76,476 7,738
Working Capital Turnover, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 17.19 – 14.66 10.25 17.67 9.92 11.73 8.60 9.94 9.66 9.88 –
Working capital turnover = Net sales / working capital = 83,680 / 4,869 = 17.19
Ratio
Description
An activity ratio calculated as revenue divided by working capital.
The company
Procter & Gamble Co.'s working capital turnover deteriorated from 2010 to 2011 but then improved from 2011 to 2012 not reaching 2010 level.
Working capital turnover
65
AVERAGE INVENTORY PROCESSING PERIOD
No. Of days
Jun 30, 2012 Jun 30, 2011 Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007
Selected Financial Data
Inventory turnover 12.45 11.19 12.36 11.49 9.92 11.22
Average Inventory Processing Period (no. of days), Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 29 – 33 33 30 35 32 36 37 35 33 –
Average inventory processing period = 365 / Inventory turnover = 365 / 12.45 = 29
Ratio
Average inventory processing period
Description
An activity ratio equal to the number of days in the period divided by inventory turnover over the period.
The company
Procter & Gamble Co.'s average inventory processing period deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.
66
AVERAGE RECEIVEBLE COLLECTION PERIOD
No. Of days
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data
Receivables turnover 13.79 13.16 14.80 13.54 12.35 11.54
Average Receivable Collection Period (no. of days), Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 26 – 28 30 25 33 27 29 30 30 32 –
Average receivable collection period = 365 / receivable turnover = 365 / 13.79 = 26
Ratio
Average receivable collection period
Description
An activity ratio equal to the number of days in the period divided by receivables turnover.
The company
Procter & Gamble Co.'s average receivable collection period deteriorated from 2010 to 2011 but then slightly improved from 2011 to 2012.
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OPERATING CYCLE
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data
Average inventory processing period Average receivable collection period 29 26 33 28 30 25 32 27 37 30 33 32
Operating Cycle, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 56 – 60 63 54 67 59 65 66 65 64 –
Operating cycle = Average inventory processing period + Average receivable collection period = 29 + 26 = 56
Ratio
Operating cycle
Description
Equal to average inventory processing period plus average receivables collection period.
The company
Procter & Gamble Co.'s operating cycle deteriorated from 2010 to 2011 but then improved from 2011 to 2012 not reaching 2010 level.
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AVERAGE PAYABLES PAYMENT PERIOD
No. Of days
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data
Payables turnover 10.57 10.29 10.89 13.22 12.33 13.39
Average Payables Payment Period (no. of days), Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 35 – 35 34 28 30 27 –
27
31
23
27
Average payable payment period = 365 / payable turnover = 365 / 10.57 = 35
Ratio
Description
The company
Average payables payment period
An estimate of the average number of days it takes a company to pay its suppliers; equal to the number of days in the period divided by payables turnover ratio for the period.
Procter & Gamble Co.'s average payables payment period increased from 2010 to 2011 but then slightly declined from 2011 to 2012.
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CASH CONVERSION CYCLE
No. Of days
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data
Average inventory processing period Average receivable collection period Average payables payment period 29 33 30 32 37 33
26
28
25
27
30
32
35
35
34
28
30
27
Cash Conversion Cycle, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 21 – 25 36 21 37 31 42 37 38 37 –
Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period = 29 + 26 – 35 = 21
Ratio
Description
The company
Procter & Gamble Co.'s cash conversion cycle deteriorated from 2010 to 2011 but then improved from 2011 to 2012 not reaching 2010 level.
A financial metric that measures the length of Cash conversion time required for a company to convert cash invested in its operations to cash received as a cycle result of its operations; equal to average inventory processing period plus average receivables collection period minus average payables payment period.
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LONG-TERM (INVESTMENT) ACTIVITY RATIOS
RATIOS (SUMMARY)
Procter & Gamble Co.,
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Net fixed asset turnover Total asset turnover
4.11
3.88
4.10
4.06
4.05
3.91
0.63
0.60
0.62
0.59
0.58
0.55
Equity turnover
1.32
1.22
1.29
1.25
1.20
1.15
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NET FIXED ASSET TURNOVER
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data (USD $ in millions)
Net sales Net property, plant and equipment 83,680 20,377 82,559 21,293 78,938 19,244 79,029 19,462 83,503 20,640 76,476 19,540
Net Fixed Asset Turnover, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 4.11 – 3.88 4.10 4.06 4.05 3.91 –
3.67
3.47
3.62
4.10
Net fixed asset turnover = Net sales / Net property, plant and equipment = 83,680 / 20,377 = 4.11
Ratio
Net fixed asset turnover
Description
An activity ratio calculated as total revenue divided by net fixed assets.
The company
Procter & Gamble Co.'s net fixed asset turnover deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.
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TOTAL ASSET TURNOVER
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data (USD $ in millions)
Net sales Total assets 83,680 132,244 82,559 138,354 78,938 128,172 79,029 134,833 83,503 143,992 76,476 138,014
Total Asset Turnover, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 0.63 – 0.60 0.62 0.59 0.58 0.55 –
0.77
0.75
0.81
0.88
Total asset turnover = Net sales / Total asset = 83,680 / 132,244 = 0.63
Ratio
Total asset turnover
Description
An activity ratio calculated as total revenue divided by total assets.
The company
Procter & Gamble Co.'s total asset turnover deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.
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EQUITY TURNOVER
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data (USD $ in millions)
Net sales Shareholders' equity attributable to parent 83,680 63,439 82,559 67,640 78,938 61,115 79,029 63,099 83,503 69,494 76,476 66,760
Equity Turnover, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 1.32 – 1.22 2.19 1.29 2.11 1.25 2.25 1.20 2.39 1.15 –
Equity turnover = Net sales / Shareholders’ equity attributable to parent = 83,680 / 63,439 = 1.32
Ratio
Equity turnover
Description
An activity ratio calculated as total revenue divided by shareholders' equity.
The company
Procter & Gamble Co.'s equity turnover deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.
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LIQUIDITY ANALYSIS Procter & Gamble Co. (PG)
Ratios (Summary) Current Ratio Quick Ratio Cash Ratio
Ratios (Summary)
Procter & Gamble Co., liquidity ratios
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Current ratio
0.88
0.80
0.77
0.71
0.79
0.78
Quick ratio
0.42
0.33
0.34
0.34
0.33
0.40
Cash ratio
0.18
0.10
0.12
0.15
0.11
0.18
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CURRENT RATIO
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data (USD $ in millions)
Current assets Current liabilities 21,910 24,907 21,970 27,293 18,782 24,282 21,905 30,901 24,515 30,958 24,031 30,717
Current Ratio, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 0.88 – 0.80 0.77 0.71 0.79 0.78 –
1.10
1.20
1.10
1.07
Current ratio = Current assets / current liabilities = 21,910 / 24,907 = 0.88
Ratio
Current ratio
Description
A liquidity ratio calculated as current assets divided by current liabilities.
The company
Procter & Gamble Co.'s current ratio improved from 2010 to 2011 and from 2011 to 2012.
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QUICK RATIO
Jun 30, 2012 Jun 30, 2011 Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007
Selected Financial Data (USD $ in millions)
Cash and cash equivalents Investment securities Accounts receivable Total quick assets Current liabilities 4,436 – 2,768 – 2,879 – 4,781 – 3,313 5,354
228
202
6,068
6,275
5,335
5,836
6,761
6,629
10,504 24,907
9,043 27,293
8,214 24,282
10,617 30,901
10,302 30,958
12,185 30,717
Quick Ratio, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 0.42 – 0.33 0.34 0.34 0.33 0.40 –
0.75
0.82
0.70
0.69
Quick ratio = total quick assets / current liabilities = 10,504 / 24,907 = 0.42
Ratio
Quick ratio
Description
A liquidity ratio calculated as (cash plus short-term marketable investments plus receivables) divided by current liabilities.
The company
Procter & Gamble Co.'s quick ratio deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.
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CASH RATIO
Jun 30, 2012 Jun 30, 2011 Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007
Selected Financial Data (USD $ in millions)
Cash and cash equivalents Investment securities Total cash assets Current liabilities 4,436 – 4,436 24,907 2,768 – 2,768 27,293 2,879 – 2,879 24,282 4,781 – 4,781 30,901 3,313 228 3,541 30,958 5,354 202 5,556 30,717
Cash Ratio, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 0.18 – 0.10 0.12 0.15 0.11 0.18 –
0.33
0.35
0.28
0.23
Cash ratio = Total cash assets / Current liabilities = 4,436 / 24,907 = 0.18
Ratio
Cash ratio
Description
A liquidity ratio calculated as (cash plus short-term marketable investments) divided by current liabilities.
The company
Procter & Gamble Co.'s cash ratio deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.
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LONG-TERM DEBT AND SOLVENCY ANALYSIS Procter & Gamble Co. (PG) |
Ratios (Summary) Debt to Equity Debt to Capital Interest Coverage
Ratios (Summary)
Procter & Gamble Co., debt and solvency ratios
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Debt to equity
0.47
0.47
0.49
0.59
0.53
0.53
Debt to capital
0.32
0.32
0.33
0.37
0.35
0.35
Interest coverage
19.69
19.43
18.91
13.86
11.96
12.28
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DEBT TO EQUITY
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data (USD $ in millions)
Debt due within one year Long-term debt Total debt Shareholders' equity attributable to parent 8,698 21,080 29,778 63,439 9,981 22,033 32,014 67,640 8,472 21,360 29,832 61,115 16,320 20,652 36,972 63,099 13,084 23,581 36,665 69,494 12,039 23,375 35,414 66,760
Debt to Equity, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 0.47 – 0.47 0.49 0.59 0.53 0.53 –
1.01
0.97
0.97
0.87
Debt to equity = Total debt / Shareholders’ equity attributable to parent = 29,778 / 63,439 = 0.47
Ratio
Description
The company
Debt-to-equity ratio
A solvency ratio calculated as total debt divided by total shareholders' equity.
Procter & Gamble Co.'s debtto-equity ratio improved from 2010 to 2011 and from 2011 to 2012.
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DEBT TO CAPITAL
Jun 30, 2012 Jun 30, 2011 Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007
Selected Financial Data (USD $ in millions)
Debt due within one year Long-term debt Total debt Shareholders' equity attributable to parent Total capital 8,698 9,981 8,472 16,320 13,084 12,039
21,080 29,778 63,439
22,033 32,014 67,640
21,360 29,832 61,115
20,652 36,972 63,099
23,581 36,665 69,494
23,375 35,414 66,760
93,217
99,654
90,947
100,071
106,159
102,174
Debt to Capital, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 0.32 – 0.32 0.50 0.33 0.49 0.37 0.49 0.35 0.47 0.35 –
Debt to capital = Total debt / Total capital = 29,776 / 93,217 = 0.32
Ratio
Description
The company
Debt-to-capital ratio
A solvency ratio calculated as total debt divided by total debt plus shareholders' equity.
Procter & Gamble Co.'s debtto-capital ratio improved from 2010 to 2011 and from 2011 to 2012.
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INTEREST COVERAGE
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data (USD $ in millions)
Net earnings attributable to Procter & Gamble Add: Net earnings attributable to noncontrolling interests Add: Interest expense Add: Income tax expense (benefit) Earnings before interest and tax (EBIT) 10,756 11,797 12,736 13,436 12,075 10,340
148
130
110
–
–
–
769 3,468
831 3,392
946 4,101
1,358 4,032
1,467 4,003
1,304 4,370
15,141
16,150
17,893
18,826
17,545
16,014
Interest Coverage, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 19.69 – 19.43 14.76 18.91 12.20 13.86 10.17 11.96 20.33 12.28 –
Interest coverage = EBIT / Interest expense = 15,141 / 769 = 19.69 Ratio
Interest coverage ratio
Description
A solvency ratio calculated as EBIT divided by interest payments.
The company
Procter & Gamble Co.'s interest coverage ratio improved from 2010 to 2011 and from 2011 to 2012.
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MARKET ANALYSIS
Porter five forces competitive analysis for P&G
Threat of New Entrants P&G possess a significant amount of market share around the world. To compete P&G, A competitor must have a large sum of capital for heavy marketing and R&D. Firms That Specialize in nice market could possibly become a threat to P&G corresponding business segment.
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Power of Buyers: P&G is heavily dependent on wall mart and its affiliates for generating a major part of its revenue. High dependence upon Wal-Mart could reduce the bargaining power of P&G.
Power of Suppliers Supplier of P&G need key customer for profitable revenue generation and will have little bargaining power. Rising interest rate and declining availability of credit ultimately should not affect P&G’s relationship with its suppliers.
Threat of Substitutes
There are substantial no of substitutes for all of P&G‘s product offerings, creating an intense competitive environment. In order to differentiate itself P&G must continue to provide new and innovative products to the customer.
Intensity of Rivalry P&G has several strong competitors in different markets like AMWAY corporation, Colgate-Palmolive Company, Johnson & Johnson, Revlon, HUL among big and medium size competitors. Switching cost in this industry is quite low.
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Main competitors:
HUL KIMBERLY CLARK LIVER PVT. LTD. JOHNSON AND JOHNSON
COMPETITORS ON THE BASIS OF PRODUCT
PRODUCT NAME
Vicks
COMPETITORS NAME
Amirtanjan Bam, Zandu Bam, Cold Snap, Pharma’o cold Sunsilk, Clinic Plus
Pantene
Ariel
Surf Excel, Rin
Whisper
Kotex, Stayfree
Pamper
Huggies, Snuggy Baby Diapers
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STRENGTH IN STRUCTURE
Global Business Units (GBUs) Focus on consumers, brands and competitors in India. They are responsible for the innovation profitability from their businesses. Market Development Organizations (MDOs) are charged with knowing consumers and retailers in each market. Global Business Services (GBS) utilizes P&G talent and expert partners to provide best-in-class business support services at the lowest costs. Lean Corporate Functions ensure ongoing functional innovation and capability improvement.
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Business level
Efforts to build competitive advantage Collaborative partnership and strategic alliance Distribution channel
Functional level strategy
Human Resources Strategy R&D Technology Strategy Marketing and Sales Strategy
VALUE CHAIN ANALYSIS
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Analysis of Primary activity
P&G developed extensile economies from its scale of operations in finance, logistics, marketing, Research, new product development, technology innovation and other function.
Inbound and Outbound Logistics
P&G‘s goal has been to create adaptive, reactive supply networks that will link together sales and supply processes, inside and outside the organization, to improve product availability.
Operations
P&G organized into 3 business units Beauty Health and well-being Household care The operation group consists of market development organization and global business services
Sales and Marketing
The company markets more than 300 brands over 180 countries 23 of these brands are categorized by P&G as billion dollar brands. Majority of sales now coming from promotional events, pull systems of efficient distributors of consumer and industrial product.
Services
P&G emphasis on its principal business call of providing its customers with right products at right place all the time.
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Analysis and Support Activity
Firm Infrastructure:
Integrity Passion for Winning Leadership Trust Ownership
Product R&D
P&G has strong commitment to find the best researchers, and retain them with cultural design to reward success, stimulate learning, challenges compliancy and nurture innovation.
Human resources Strategy
Hire the best Challenges of P&G people from day1 Business and functional leaders activity recruiters, Teach and Coach Plan careers Never Stop Learning
Top 40 Businesses: They define their core business as the top 40 country/category combinations, 20 in Household Care and 20 in Beauty & Grooming, which generate the highest level of annual sales and profit. Top 10 Developing Markets: Maintaining the strong growth momentum they have established in developing markets is critical to delivering their near- and long-term growth objectives. They are focusing resources first on the markets that offer the greatest growth opportunity. They will assess the potential for further portfolio expansions beyond the top 10 developing markets based on the top- and bottom-line growth progress of the core business.
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TECHNICAL ANALYSIS
Innovation Wins Decades Innovation is the driving force behind their strategy, as it always has been at P&G. Their experience has proven that price promotion may win a quarter here and there, but innovation wins decades. There are many examples to prove this. Take their Laundry business in the U.K., for instance. In the late 1970s, there were competing hard just to defend and maintain our 35% market share leadership position. They stepped up their innovation efforts. In the three decades since, they have introduced a series of game-changing innovations such as Daz automatic detergent, concentrated liquid detergent, and most recently, Liquitabs. They now enjoy around a 50% share. P&G seen the same dynamic in Oral Care. In the 1990s, P&G lost their historical lead versus their top competitor because they simply outinnovated us. They stepped up their innovation game once again and delivered a string of product breakthroughs including Crest White strips, Crest Pro-Health, and Crest 3D White. P&G’s leadership of the U.S. Dentifrice category, which is now enabling us to expand these innovative products around the world. The investment continues to pay off. P&G currently have the strongest innovation and global expansion program in P&G history. They are globalizing products such as Gillette Fusion ProGlide, Crest 3D White, Laundry additives, and the Pampers thinness and absorbency upgrade. P&G also expanding successful marketing innovation such as the SHIKSHA education program in India, in which P&G contributes a brick to build a school for each pack of product purchased , or the Pampers “One Pack Equals One Vaccine” campaign with its focus on eradicating maternal and neonatal tetanus. The Old Spice “Smell like a Man, Man” campaign generated consumer excitement and demand that catapulted the brand to market leadership. P&G’s
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global sponsorship of the Olympic Games provides an outstanding platform for integrated, multi-branded commercial innovation. Today, an Innovation Council made up of three members from P&G and three members from Accenture meets regularly to understand the business needs and explore how new virtual reality technologies can help. Both Accenture and P&G harvest and share innovative ideas from within the team and across their respective organizations. P&G ultimately governs the program, and projects are prioritized on the technology readiness and business impact.
Top 20 Innovations:
Their 20 most important innovations offer significantly higher growth potential than the balance of the innovation portfolio. Therefore, the growth of the Company depends substantially on the success of their biggest innovations.
STRENGTHENING OUR UPSTREAM INNOVATION PROGRAM AND PIPELINE
Innovation has always been — and continues to be — P&G’s lifeblood. To consistently win with consumers around the world across price tiers and preferences, and to consistently win versus our best competitors, each P&G product category must have a full portfolio of innovation. The innovation portfolios must include a mix of commercial programs, incremental product improvements and discontinuous innovations. They have made the creation of more discontinuous innovation a top priority, dedicating R&D resources and funding to develop new innovations aimed at changing the game in existing product categories and creating new ones.
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Core Strengths
P&G focuses on five core strengths required to win in the consumer products industry. They are designed to lead in each of these areas.
Consumer Understanding No company in the world has invested more in market research than P&G. They interact with more than five million consumers each year in nearly 100 countries. They conduct over 15,000 research studies every year, and invest more than $350 million annually in consumer understanding. The insights they gain help us identify opportunities for innovation and better serve and communicate with our consumers. Innovation P&G is widely recognized as the industry‘s global innovation leader. Nearly all organic sales growth over the past decade has come from new brands or improved products. They collaborate with a global network of research partners, and more than half of all product innovation coming from P&G today includes at least one major component from an external partner. Their contributions have consistently helped us earn honours from the Symphony IRI New Product Pacesetters Report—the annual list of the biggest innovations in our industry. Over the past 16 years, P&G has had 132 products on the top 25 Pacesetters list— more than our six largest competitors combined. P&G earned 5th place among Fortune‘s 2011 list of the World‘s Most Admired Companies. And as of April 2011, P&G has won 22 ―Product of the Year‖ recognitions, as voted on by consumers in the US, UK, France, Holland, Italy, Spain, and South Africa.
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CHAPTER – IV
SUSTAINABILITY
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Sustainability changes that matters
P&G does this through the products and services it offers, manufacturing in an environmentally responsible manner, and through its social responsibility programs that improve lives for those in need around the world. Sustainability broadly at P&G to include both environmental sustainability and social responsibility.
ENVIRONMENTAL SUSTAINABILITY A long-term environmental sustainability vision that includes:
Powering our plants with 100% renewable energy Using 100% renewable or recycled materials for all products and packaging Having zero consumer and manufacturing waste go to landfills Designing products that delight consumers while maximizing our conservation of resources This vision is stretching, and we believe it will take us decades to achieve. We have set strategies in Products and Operations that help us deliver against our vision. To ensure we are holding ourselves accountable, we have two sets of goals, for 2012 and 2020, within Products and Operations.
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Long-Term Environmental Vision and 2020 Goals
P&G announced a long-term environmental sustainability vision in September 2010. We developed this vision over the course of a year, partnering with external experts and soliciting input from hundreds of P&G employees at all levels and functions. Our complete visionary end-points are outlined below. These end-points are long-term in nature because some of them will take decades to come to fruition.
Using 100% renewable or recycled materials for all products and packaging Having zero consumer waste go to landfills Designing products to delight consumers while maximizing the conservation of resources
Powering our plants with 100% renewable energy Emitting no fossil-based CO2 or toxic emissions Delivering effluent water quality that is as good as or better than influent water quality with no contribution to water scarcity Having zero manufacturing waste go to landfills
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2020 Sustainability Goals
In order to ensure we are making progress toward our long-term environmental sustainability vision, we have set the following goals for 2020 to hold ourselves accountable.
Replace Petroleum-Based Materials with Sustainably Sourced Renewable Materials Cold Water Washing Packaging Reduction Consumer Solid Waste
25%*
70% of total washing machine loads 20% (per consumer use)* Pilot studies in both developed and developing markets to understand how to eliminate landfilled/dumped consumer solid waste
*vs. 2010 baseline
Renewable Energy Powering our Plants Manufacturing Waste to Landfill Truck Transportation Reduction *vs. 2010 baseline
30%
< 0.5% (disposed) 20% (km/unit of volume)*
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SOCIAL RESPONSIBILITY
P&G‘s focus on purpose-inspired growth drives us to not only serve our consumers with superior product propositions, but also truly touch and improve the lives of more consumers, more completely by contributing towards the communities we operate in. Live, Learn and Thrive is P&G‘s global corporate cause, focusing on helping children in need around the world. The programs enable children to get off to a healthy start, receive access to education and build skills for life. Since 2007, P&G has improved the lives of over 315 million children. In India, our Corporate Social Responsibility initiatives ‘Shiksha’ and the‘Parivartan - Whisper School Program’ are helping children from lesser-privileged backgrounds, by giving them access to health and education.
SOCIAL RESPONSIBILITY PROGRAMS IN INDIA
Shiksha (Education): Padhega India. Badhega India.
P&G‘s flagship Corporate Social Responsibility Program Shiksha is an integral part of our global philanthropy program - Live, Learn & Thrive. Now in its 8th year, Shiksha has till date helped 280,000 underprivileged children access their right to education. The program has built & supported over 140 schools across India, in partnership with NGOs like Round Table India (RTI), Save the Children (STC), Army Wives Welfare Association (AWWA) and Navy Wives Welfare Association (NWWA), amongst others.
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Shiksha began with P&G India‘s research which revealed education as the one cause that consumers are most concerned about and are looking for a simple way to contribute to. With this insight and founded on P&G‘s purpose, Shiksha was launched in 2005 to enable consumers to contribute towards the cause of education of under-privileged children through simple brand choices. Since its inception, Shiksha has made a cumulative donation of over Rs. 22 crores towards helping children on the path to better education. This is a result of the support from our consumers who participated in the Shikshamovement by buying P&G brands for one quarter of the year, thus enabling P&G to contribute a part of the sales towards the cause.
Shiksha’s NGO Partners
Shiksha’s vision is to help India get to 100% Shiksha someday, and it is working towards this vision in partnership with NGOs like Save the Children India, Army Wives Welfare Association (AWWA), Navy Wives Welfare Association (NWWA) and Round Table India (RTI), amongst others. Each of Shiksha’s NGO partners focuses on a critical approach towards education, with NGO Round Table India specializing in building educational infrastructure and supporting schools across India, NGO Save the Children laying emphasis on the girl child via supporting the government‘s Kasturba Gandhi Balika Vidhyalays, and the NGOs AWWA and NWWA serving the unique educational needs of differently-abled children of naval and army officer‘s families.
Shiksha Schools
Shiksha aims to build the educational future of India ‘Brick – by – Brick’ by addressing the need for better educational infrastructure and building the tangible asset of schools. Shiksha’s interventions span across health and hygiene facilities at schools such as clean drinking water and separate toilets for boys and girls, advanced educational aids such as libraries and computer centres, as well as basic infrastructure needs such as classrooms.
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CHAPTER – V
RECOMMENDATION & SUGGESTION
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RECOMMENDED OR SUGGESTED STRATEGIES
The practice of incomplete market coverage should not be followed because you cannot hijack other company customers and new customers as well. All these scenarios require following strategies:
MARKET DEVELOPMENT STRATEGY:
P&G is emphasizing on urban areas while it has neglected the suburban areas, which is also a big market for soaps like safeguard. For this purpose, they should efficiently utilize their Marketing Information System to collect information about the demand and attitudes of the people in these areas. By using this strategy, safeguard can fetch the customers of competitors and will be successful in building new customers.
PRODUCT DEVELOPMENT STRATEGY:
It describes to develop new products or modify the existing products with respect to size, colour, packaging, etc. Safeguard is a well-perceived product among the customers, and at this moment, it is available in two sizes; 75gm and 125gm, which cannot satisfy the demand of every segment. While the products of the competitors are available in multiple sizes which provide abundant choices for purchases to customers for example Lifebuoy Gold has 140gm and 95gm and Medicare has80gm soap available in the market. This provides an opportunity to the customer to have multiple choices. It can be a threat for the market share of safeguard. On the other hand, in case of safeguard the choice to customer is very limited. This is what they have analyzed through market survey. Therefore, it is necessary that safeguard should be available in maximum possible sizes to meet the selection criteria of the customer. As far as launching of new product is concerned, it is not necessary for P&G at this moment, but in future, they will require taking this step as well because they have some other soap like ivory, and zest which are very famous in international market.
MARKET PENETRATION STRATEGY:
It describes that a company tries to sell more of its product by introducing new supplementary uses. Safeguard is that product, which contains such chemicals useful for beauty care as well. This characteristic, we have analyzed through its product formula. Therefore, it is more useful to supplement this idea with existing safeguard or introduce safeguard into different pack sizes especially for capturing the female customers.
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BIBLIOGRAPHY
WWW.PG.COM WWW.WIKIPEDIA.COM WWW.FMCG.COM WWW.PG.COM/EN_IN/
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Dissertation submitted to SEETHALAKSHMI RAMASWAMI COLLEGE (AUTONOMOUS AND ACCREDITED BY NAAC) Affiliated to BHARATHIDASAN UNIVERSITY in partial Fulfilment of the requirements for the Award of the degree of MASTER OF COMMERCE (CORPORATE FINANCE) Submitted by
K.KASTHURI B.NIVEDHA M.NIVEDHA K.SUDHA R.SURYA
12 PCO 007 12 PCO 013 12 PCO 014 12 PCO 017 12 PCO 018 Under the guidance of
DR.R.LALITHA, M.Com.,M.Phil.,PGDCA.,Ph.D.,M.A(YHE) DR.R.VIJAYALAKSHMI, M.Com.,M.Phil.,Ph.D
DEPARTMENT OF COMMERCE SEETHALAKSHMI RAMASWAMI COLLEGE (AUTONOMOUS AND ACCREDITED BY NAAC) TIRUCHIRAPALLI-620 002 MARCH 2013
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ACKNOWLEDGEMENT
We express our deep sense of gratitude and sincere thanks to all who motivated us in various ways in the preparation of this project. It is our honour to convey our heartfelt thanks to SEETHALAKSHMI RAMASWAMI COLLEGE (AUTONOMOUS) for having introduced project work in the syllabus which helped to acquire wide experience and knowledge. We express our grateful thanks to DR.(MS) KANAKA BHASHYAM, M.A., M.Phil., PGDJ., Ph.D., the principal of Seethalakshmi Ramaswami College (Autonomous). We take this opportunity to express our gratitude to MRS. M.GUNAVATHI, M.Com., M.Phil., DLL., Ph.D., Head of the Department of Commerce for having encouraged us to complete this project successfully. We wish to acknowledge our indebtedness and deep sense of gratitude to DR.R.LALITHA,M.Com.,M.Phil.,PGDCA.,Ph.D.,M.A(YHE) and DR.R.VIJAYALAKSHMI, M.Com.,M.Phil.,Ph.D for her valuable guidance & suggestions at each and every step of this dissertation’s. We extend our thanks to our parents, friends and all the teaching faculties for their co-operation and support. We could be failing our duty if we do not thank GOD, the ALMIGHTY who is the author of all our inspiration and enthusiasm to complete our study successfully.
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CONTENT
CHAPTER PARTICULARS PAGE NO.
I.
INTRODUCTION
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II.
COMPANY PROFILE
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III.
ANALYSIS OF P& G ON VARIOUS HEADS SUSTAINABILITY
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IV.
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V.
RECOMMENDATION AND SUGGESTION
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CHAPTER – I
INTRODUCTION
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Meaning of FMCG
FMCG stands for Fast Moving Consumer Goods. It is also referred to on occasion as CPG, an abbreviation of Consumer Packaged Goods. They are described as being reasonably low cost items that are supplied and sold in a very short time period - often these types of products have a short shelf life, hence having a short sale time. FMCG's are often bought in bulk to take advantages of economies of scale due to their low price, profit margins are often small so the sale of large quantities over a short period of time is vital to make worthwhile. FMCG's can be split into highly perishable and non-highly perishable goods. Highly perishable goods include meats, vegetables, fruit, and bakery items - anything that has a reasonably short shelf life. In contrast, products such as wine, beer and spirits, canned foods and toiletries have a longer shelf life and do not perish quickly. Nonetheless, these products are in high demand and as a result product turnover is high; they do not spend long on the supermarket shelves. Fast Moving Consumer Goods are recognised as being a frequent consumer purchase, and what that involves a low level of risk and/or emotion.
Characteristics of FMCGs:
From the consumers' perspective:
Frequent purchase Low involvement (little or no effort to choose the item – products with strong brand loyalty are exceptions to this rule) Low price
From the marketers' angle:
High volumes Low contribution margins Extensive distribution networks High stock turnover
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FMCG CATEGORY AND PRODUCTS Category
Household care
Products
Fabric wash (laundry soaps and synthetic detergents); household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellents, metal polish and furniture polish
Food and health beverages
Soft drinks; staples/cereals; Beverages bakery products (biscuits, bread, cakes);food; chocolates; ice cream; tea; coffee; soft drinks; processed fruits, vegetables; dairy products; bottled water; branded flour; branded rice; branded sugar; juices etc.
Personal care
Oral care, hair care, skin care, personal wash(soaps); cosmetics and toiletries; deodorants; Perfumes; feminine hygiene;
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SWOT analysis of FMCG
Strengths:
Low operational costs Presence of established distribution networks in both urban and rural areas Presence of well-known brands in FMCG sector
Weaknesses:
• • • Lower scope of investing in technology and achieving economies of scale, especially in small sectors Low exports levels "Me-tooʺ products, which illegally mimic the labels of the established brands. These products narrow the scope of FMCG products in rural and semi-urban market.
Opportunities:
• • • • • Untapped rural market Rising income levels, i.e. increase in purchasing power of consumers Large domestic market- a population of over one billion. Export potential High consumer goods spending
Threats:
• • • Removal of import restrictions resulting in replacing of domestic brands Slowdown in rural demand Tax and regulatory structure
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TOP 10 FMCG COMPANIES IN INDIA
FMCG (Fast Moving Consumer Goods) or Consumer Packaged Goods (CPG) – are products that are sold quickly and at relatively low cost. Below is a List
of Top 10 FMCG Companies in India 2012.
1. ITC (Indian Tobacco Company)
Market Capitalization (Rs. Crore): 151,078
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It presence in FMCG, Hotels, Paper boards & Specialty Papers, Packaging, Agri-Business, and Information Technology.ITC Ltd, traditional businesses of Cigarettes, Hotels, Paperboard‘s, Packaging and Agri-Exports.
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2. HINDUSTAN UNILEVER
Market Capitalization (Rs. Crore): 67,858
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India’s largest consumer products with products such as soaps, tea, detergents and shampoos with over 700 million Indian are using its products.
3. NESTLE INDIA
Market Capitalization – (Rs. Crore): 39,819 A subsidiary of Nestlé S.A. of Switzerland. A largest food and beverage manufacturer in the world with many popular and largest selling products such as MAGGI, NESCAFE, KITKAT and MILKMAID.
4. DABUR INDIA
Market Capitalization Crore): 18,632
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(Rs.
They has 17 ultra modern manufacturing units around the globe and its products marketed in over 60 countries.
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5. GODREJ CONSUMER PRODUCTS
Market Capitalization (Rs.Crore): 13,335 –
A Household, hair colors, household insecticides and Personal Care Products.
6. P&G (Proctor and Gamble India)
Market Capitalization – (Rs. Crore): 12,838 Acquisition by Gillette.
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7. COLGATE-PALMOLIVE
Market Capitalization (Rs.Crore): 12,764
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The leading Tooth Paste Brand in India.
8. GSK (Glaxosmithkline Consumer Healthcare)
Market Capitalization (Rs.Crore): 9,842 A pharmaceutical industry and over 100,000 Worldwide.
employees
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9. MARICO
Market Capitalization - (Rs.Crore): 9,078 And the company present in more than 25 countries across Asia and the African continent.
10. EMAMI
Market Capitalization - (Rs.Crore): 6,836 And over 20,000 employees. Products are paper , writing instruments, edible oil and cultivation, bio-diesel, hospitals, contemporary art, pharmacy, cement, real estate and retail.
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BENEFITS OF FMCG COMPANIES Cumulative Profits
For a retailer's bottom line, the key benefit of CPGs/FMCGs is the cumulative profit they provide. CPGs/FMCGs have a low profit margin, which means that a small percentage of each each unit sale represents profit. However, CPGs/FMCGs also sell in very high quantities. This means that those small profits add up and can form a significant portion of a retailer's total profits for a fiscal period. This profit serves any number of financial purposes in the business.
Cross Merchandising Opportunities
Retailers thrive when customers buy multiple items on each visit. CPGs/FMCGs provide opportunities for cross merchandising, which occurs when a business places two products from different categories close to one another in a strategic arrangement. For example, an electronics retailer may sell remote controls that have high profit margins but don't fall into the CPG/FMCG category. A shelf of batteries (which are CPGs/FMCGs) next to those remotes provides a chance to boost sales and earn profit on two items when customers choose to buy the batteries they will need to operate their new remotes at the same time.
Brand Appeal
When a retailer offers CPGs/FMCGs, it can rely on the brand appeal that they generate to drive sales. Most CPGs/FMCGs come from brands that advertise heavily. This means that when customers see CPGs/FMCGs on store shelves they have pre-existing emotional relationships with those brands, which may not be true of the other items that the retailer sells. Seeing recognizable brands may build trust between the customer and retailer or lead to an additional purchase based on brand awareness, with no special effort from the retailer.
Diversification
Selling CPGs/FMCGs spreads a retailer's revenue sources over a broader spectrum of goods. The profits can help offset slow sales for other products during seasonal dips in demand or periods of reduced consumer confidence. In the category of CPGs/FMCGs, retailers can choose from among an almost unlimited range of product types including pharmaceuticals, food items, beverages, household products and disposable items. The range is so broad that some retailers, such as grocery stores and convenience markets, stay in business selling them exclusively.
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Characteristics of FMCG in India
Branding: Creating strong brands is important for FMCG companies and they
devote considerable money and effort in developing bands. With differentiation on functional attributes being difficult to achieve in this competitive market, branding results in consumer loyalty and sales growth.
Distribution Network: Given the fragmented nature of the Indian retailing
industry and the problems of infrastructure, FMCG companies need to develop extensive distribution networks to achieve a high level of penetration in both the urban and rural markets. Once they are able to create a strong distribution network, it gives them significant advantages over their competitors.
Contract Manufacturing: As FMCG companies concentrate on brand building,
product development and creating distribution networks, they are at the same time outsourcing their production requirements to third party manufacturers. Moreover, with several items reserved for the small scale industry and with these SSI units enjoying tax incentives, the contract manufacturing route has grown in importance and popularity.
Large Unorganized Sector : The unorganised sector has a presence in most
product categories of the FMCG sector. Small companies from this sector have used their locational advantages and regional presence to reach out to remote areas where large consumer products have only limited presence. Their low cost structure also gives them an advantage.
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CHAPTER – II
COMPANY PROFILE
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COMPANY PROFILE
Neither William Procter nor James Gamble ever intended to settle in Cincinnati. Although the city was a busy center of commerce and industry in the early nineteenth century, William, emigrating from England, and James, arriving from Ireland, were headed farther west. Despite their intentions, however, both men ended their travels when they arrived at the Queen City of the West – William, to care for his ailing wife Martha, who soon died, and James, to seek medical attention for himself. William Procter quickly established himself as a candle maker. James Gamble apprenticed himself to a soap maker. The two might never have met had they not married sisters, Olivia and Elizabeth Norris, whose father convinced his new sons-in-law to become business partners. In 1837, as a result of Alexander Norris‘ suggestion, a bold new enterprise was born: Procter & Gamble. 1837 — 1890 The Partnership Years.1837 was a difficult time to start a business. Although Cincinnati was a bustling marketplace, the U.S. was gripped by financial panic. Hundreds of banks were closing across the country. There was widespread concern that the United States was bankrupt. Yet, William and James launched their new enterprise, more concerned about how to compete with the 14 other soap and candle makers in their city than with the financial panic shaking their country. Their calm in the midst of that economic storm reflected their forward-looking approach to the business – an approach that became the hallmark of Procter & Gamble. In the 1850s, for example, despite rumours of an impending civil war in the U.S., they built a new plant to sustain their growing business. Later, they pioneered one of the nation‘s first profit-sharing programs and were amo.ng the first in American industry to invest in a research laboratory. By 1890, the fledgling partnership between Procter and Gamble had grown into a multi-million dollar corporation. Nevertheless, P&G still had its eyes on the future. 1837 On April 12, 1837, William Procter and James Gamble start making and selling their soap and candles. On August 22, they formalize their business relationship by pledging $3,596.47 apiece. The formal partnership agreement is signed on October 31, 1837. 1850 The Moon and Stars begins to appear in the 1850s as the unofficial trademark of Procter & Gamble. Wharf hands used the symbol to distinguish boxes of Star Candles. By the 1860s, the Moon and Stars appears on all Company products and correspondence. Once a
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staple of the Company‘s product line, candles decline in popularity with the invention of the electric light bulb. The Company discontinues candle manufacturing in the 1920s. 1859-1862 Twenty-two years after the partnership is formed, P&G sales reach $1 million. The Company now employs 80 people. During the Civil War, Procter & Gamble is awarded several contracts to supply soap and candles to the Union armies. These orders keep the factory busy day and night, building the Company‘s reputation as soldiers return home with their P&G products. 1879 James Norris Gamble, son of the founder and a trained chemist, develops an inexpensive white soap equal to high-quality, imported castiles. Inspiration for the soap‘s name – Ivory – came to Harley Procter, the founder‘s son, as he read the words ―out of ivory palaces‖ in the Bible one Sunday in church. The name seems a perfect match for the white soap‘s purity, mildness and long-lasting qualities. 1882 Harley Procter convinces the partners to allocate $11,000 to advertise Ivory nationally for the first time. Ivory‘s purity and floating capability are first advertised across the country in the Independent, a weekly newspaper. 1890 — 1945 A Company Built on Innovation. By 1890, P&G was selling more than 30 different types of soap, including Ivory. Fueled by full-color print ads in national magazines, consumer demand for P&G soaps continued to grow. To meet this increasing demand, the Company expanded its operations outside Cincinnati, with a plant in Kansas City, Kansas, followed by a plant in Ontario, Canada. As each new plant opened, P&G would embark on plans for another. The research labs were as busy as the plants. Innovative new products rolled out one after another – Ivory Flakes, a soap in flake form for washing clothes and dishes; Chipso, the first soap designed for washing machines; Dreft, the first synthetic house-hold detergent; and Crisco, the first all-vegetable shortening that changed the way consumers cooked. Each of these new products came from P&G‘s in-depth understanding of consumer needs and pioneering approach to market research. And they were marketed through equally innovative techniques, including radio ―soap operas,‖ product sampling and promotional premiums.
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1890-1896 After running the Company as a partnership for 53 years, the partners incorporate to raise additional capital for expansion. William Alexander Procter, son of the founder, is named the first president. P&G sets up an analytical lab at Ivorydale to study and improve the soap-making process. It is one of the earliest product research labs in America. King Camp Gillette invents the first safety razor. P&G‘s first color print advertisement – an ad for Ivory – appears in Cosmopolitan magazine picturing this ―Ivory Lady.‖ 1901-1917 American Safety Razor Company formed in Boston, Massachusetts, later becoming the Gillette Co. William Cooper Procter becomes the head of the Company following the death of his father, William Alexander Procter. P&G introduces Crisco, the first all-vegetable shortening. Crisco provides a healthier alternative to cooking with animal fats and is more economical than butter. The Company builds its first manufacturing facility outside the United States, in Canada. Employing 75 people, the plant produces Ivory soap and Crisco. U.S. Government requests Gillette supply razors and blades for the entire U.S. Armed Forces during WWI. 1923-1930 Crisco sponsors cooking shows on network radio, placing P&G among the medium‘s advertising innovators. A market research department is created to study consumer preferences and buying habits – one of the first such organizations in industry. In response to the growing popularity of perfumed beauty soaps, P&G introduces Camay. William Cooper Procter turns the reins of the Company over to Richard R. Deupree. 1931 P&G‘s brand management system begins to take shape in the late 1920s. In 1931, Neil McElroy, the Company‘s promotion department manager, creates a marketing organization based on competing brands managed by dedicated groups of people. The system provides more specialized marketing strategies for each brand and Procter & Gamble‘s brand management system is born. 1933-1939 Dreft, the first synthetic detergent developed for household use, is introduced. The discovery of detergent technology lays the groundwork for a revolution in cleaning technology. `William Cooper Procter dies and a monument is erected at Ivorydale in his honor. He is the last member of the founding families to run the Company.
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The Company expands its international presenc with the acquisition of the Philippine Manufacturing Company – the Company‘s first operations in the Far East. P&G celebrates its 100th anniversary. Sales reach $230 million. Just five months after the introduction of television in the U.S., P&G airs its first TV commercial (for Ivory Soap) during the first televised major league baseball game. 1943-1946 The Company creates its first division – the Drug Products Division – to sell its growing line of toilet goods. Tide, ―the washing miracle,‖ is introduced. Tide incorporates a new formula that cleans better than anything currently on the market. Its superior performance at a reasonable price makes Tide the country‘s leading laundry product by 1950. 1947 — 1952 P&G‘s detergent technology leads to the development of a wide range of products such as granulated and liquid detergents, shampoos, toothpastes and household cleaning products that provide growth opportunities in the 1950s and beyond. Neil H. McElroy assumes leadership of P&G. P&G establishes an Overseas Division to manage the Company‘s growing international business 1950-1955 The first subsidiary on the South American continent is established in Venezuela. A new research facility, Miami Valley Laboratories, opens in Cincinnati. MVL is the Company‘s first facility dedicated solely to upstream research The Company begins operations in continental Europe by leasing a small plant in Marseilles, France, from the Fournier-Ferrier Company, a detergent manufacturer. Crest, the first toothpaste with fluoride clinically proven to fight cavities, is introduced. P&G announces plans to form individual operating divisions to better manage its growing lines of products. This divisionalization also creates separate line and staff organizations. 1956 The new General Office building opens, signifying P&G‘s continuing commitment to downtown Cincinnati. P&G announces plans to form individual operating divisions to better manage its growing lines of products. This divisionalization also creates separate line and staff organizations. The new General Office building opens, signifying P&G‘s continuing commitment to downtown Cincinnati 1957 P&G enters the consumer paper products business with the acquisition of Charmin Paper Mills, a regional manufacturer of toilet tissue, towels and napkins. Howard J. Morgens
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takes over Company leadership when Neil McElroy leaves to serve as the U.S. Secretary of Defense. 1960 Crest sales skyrocket when The American Dental Association recognizes the toothpaste as ―an effective decay-preventive dentifrice.‖ P&G GmbH opens its first office in Frankfurt, Germany, with 15 employees. Three years later, Germany‘s first plant in Worms begins production of Fairy cleaning powder and Dash laundry detergent. 1961 Although Pampers‘ first test market in Peoria, Illinois, is unsuccessful, it leads to an improved Pampers product at a lower cost that eventually replaces cloth diapers as the preferred way to diaper babies. 1963-1968 P&G enters the coffee business with the acquisition of Folger‘s Coffee. The first paper plant built by P&G opens in Mehoopany, Pennsylvania. Pringle‘s, with its unique stackable shape and resealable can, is introduced into test market. 1972-1973 Bounce combines softening agents with a nonwoven sheet to soften clothes in the dryer. It quickly becomes the second largest selling fabric softener after Downy. The Company begins manufacturing and selling P&G products in Japan through the acquisition of The Nippon Sunhome Company. The new company is called Procter & Gamble Sunhome Co. Ltd. 1974-1981 Ed Harness is elected to head. Didronel is introduced. A treatment for Paget‘s disease, it is one of the Company‘s first pharmaceutical products the Company. Sales reach $10 billion. John G. Smale becomes head of Procter & Gamble. 1982-1984 P&G increases its prescription and over-the-counter health care business with the acquisition of Norwich Eaton Pharmaceuticals. The Company introduces a superior feminine protection product, Always/Whisper, which becomes the leading world brand in its category by 1985. Gillette acquires Oral B, founded in 1950. Liquid Tide is introduced. This represents the results of global research with surfactants developed in Japan, fragrance in Europe and packaging from the United States.
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1985 The Company significantly expands its over-the-counter and personal health care business worldwide with the acquisition of Richardson- Vicks, owners of Vicks respiratory care and Oil of Olay product lines. P&G opens the General Offices Tower building, the expansion of Procter & Gamble‘s world headquarters in Cincinnati, Ohio. 1986 Ultra Pampers and Luvs Super Baby Pants are introduced – with effective, new technology that makes diapers thinner. P&G creates the industry‘s first multi-functional customer teams. The Company develops a new technology that enables consumers to wash and condition their hair using only one product. Pert Plus/Rejoice shampoo quickly becomes one of the leading worldwide shampoo brands. 1987 P&G celebrates its 150th anniversary. The Company increases its presence in the European personal care category, with the acquisition of the Blendax line of products, including Blend-a-med and Blendax toothpastes. P&G announces several major organization changes with the creation of category management and a product supply system which integrates purchasing, manufacturing, engineering and distribution. 1988-1989 The Company announces a joint venture to manufacture products in China. This is the Company‘s first operation in the largest consumer market in the world. Refill packs are introduced in Germany for liquid products like Lenor fabric softener. Germany‘s retail grocers name Lenor‘s refill pouch the invention of the year. The Company enters the cosmetics and fragrances category with the acquisition of Noxell and its Cover Girl and Noxzema products. 1990 Edwin L. Artzt is named to lead the Company. The Company expands its presence in the male personal care market with the acquisition of Shulton‘s Old Spice product line. Most of the laundry detergent brands are reformulated to incorporate P&G‘s compact technology. Introduced in Japan with the Cheer and Ariel brands, the technology is expanded to 36 brands in 20 different countries during the year.
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1991 The acquisitions of Max Factor and Betrix increase the Company‘s worldwide presence in the cosmetics and fragrances category. P&G opens its first operation in Eastern Europe with the acquisition of Rakona in Czechoslovakia. New businesses in other Eastern European countries – Hungary, Poland and Russia – follow throughout the year. 1992 P&G receives the World Environment Center Gold Medal for International Corporate Environmental Achievement. Pantene Pro-V is introduced. Originally a small part of the 1985 Richardson-Vicks acquisition, Pantene becomes the fastest growing shampoo in the world. 1993 Company sales exceed $30 billion. For the first time in Company history, more than 50% of sales come from outside the U.S. The Japan Headquarters and Technical Center opens on Rokko Island in Kobe City, Japan. The complex consolidates headquarters and product development operations. 1994-1995 P&G enters the European tissue and towel market with the acquisition of the Germanbased company, VP Schickedanz. John E. Pepper becomes P&G‘s ninth Chairman and Chief Executive, and Durk I. Jager becomes President and Chief Operating Officer. 1996 The U.S. Food and Drug Administration grants approval of Olestra for use in salty snacks and crackers. Olestra, marketed under the brand name Olean, is a calorie-free fat replacer that provides the full taste of fat without the added fat calories. The Company continues to expand its global reach with acquisitions of the U.S. baby wipes brand Baby Fresh – complementing the Company‘s global diaper business and its strong European Pampers Baby Wipes business 1996-1998 Gillette acquires Duracell, originally founded in the early 1920s. The Company expands its feminine protection expertise into a new global market with the acquisition of Tambrands. Tampax Tampon is the market leader worldwide.
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P&G announces Organization 2005, a new global organizational design to drive innovative ideas to world markets faster. Mach 3 razor is introduced. P&G provides a foundation for future growth by investing in new breakthrough products. Febreze, Dryel and Swiffer are introduced and sold around the world in less than 18 months. 1999-2002 Durk Jager becomes Chairman of the Board and Chief Executive. A.G. Lafley becomes President and Chief Executive. Reflect.com, P&G‘s initial Internet brand, is launched. It is the first to offer truly customized beauty care products online. Crest WhiteStrips launches in the U.S. P&G acquires the Clairol business from Bristol-Myers Squibb Co. Clairol is a world leader in hair color and hair care products. A.G. Lafley is elected Chairman of the Board. Bruce Byrnes and R. Kerry Clark are elected ViceChairman of the Board. 2003-2004 FDA approves switching Prilosec, a treatment for frequent heartburn, from a prescription to an over-thecounter (OTC) product. P&G‗s Children's Safe Drinking Water Program wins the World Business Award from the United Nations Development Program & International Chamber of Commerce in support of the UN‗s Millenium Development goals. Actonel becomes a billion dollar brand, and P&G's first pharmaceutical brand to reach this important milestone. 2005 P&G and Gillette merge into one company and add five more billion dollar brands to our product portfolio, including Gillette and Braun‗s shaving and grooming products, the Oral-B dental care line and Duracell batteries.
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Purpose, Values & Principles
Foundation
P&G Purpose, Values and Principles are the foundation for P&G‘s unique culture. Throughout the history of over 170 years, P&G has grown and changed while these elements have endured, and will continue to be passed down to generations of P&G people to come. P&G Purpose unifies us in a common cause and growth strategy of improving more consumers‘ lives in small but meaningful ways each day. It inspires P&G people to make a positive contribution every day. P&G Values reflect the behaviours that shape the tone of how they work with each other and with their partners.
PURPOSE
P&G brands and P&G people are the foundation of P&G‘s success. P&G people bring the values to life as they focus on improving, the lives of the world‘s consumers.
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VALUES
Integrity
They are honest and straightforward with each other. They operate within the letter and spirit of the law. They uphold the values and principles of P&G in every action and decision. They are data-based and intellectually honest in advocating proposals, including, recognizing risks.
Leadership
Everyone should have responsibility in their area, with a deep commitment to delivering leadership results. They have a clear vision of where they going. They focus their resources to achieve leadership objectives and strategies. They develop the capability to deliver the company strategies and eliminate organizational barriers.
Ownership
The company accept personal accountability to meet their business needs, improve their systems and it will improve their effectiveness. Each one act like owners, treating the Company‘s assets as their own and behaving with the Company‘s long-term success in mind.
Passion for Winning
They are determined to be the best at doing what matters most.
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They have a healthy dissatisfaction with the status quo. They have a compelling desire to improve and to win in the marketplace.
Ownership
P&G colleagues, customers and consumers, and treat them as they want to be treated. They have confidence in each other‘s capabilities and intentions. They believe that people work best when there is a foundation of trust.
PRINCIPLES
P&G Show Respect for All Individuals
They believe that all individuals can and want to contribute to their fullest potential. They inspire and enable people to achieve high expectations, standards and challenging goals. They are honest with people about their performance.
The Interests of the Company and the Individual Are Inseparable
They believe that doing what is right for the business with integrity will lead to mutual success for both the Company and the individual. their quest for mutual success ties us together. They encourage stock ownership and ownership behaviour.
P&G Strategically Focused in Their Work
They operate against clearly articulated and aligned objectives and strategies. They usually do work and ask for work that adds value to the business. They simplify, standardize and streamline our current work whenever possible.
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Innovation Is the Cornerstone of P&G Success
They place great value on big, new consumer innovations. Challenge convention and reinvent the way we do business to better win in the marketplace.
Value Personal Mastery
They believe it is the responsibility of all individuals to continually develop themselves and others. They encourage and expect outstanding technical mastery and executional excellence.
P&G Seek to Be the Best
They strive to be the best in all areas of strategic importance to the Company. Their performance are rigorously versus the very best internally and externally. They learn from both of their successes and failures.
P&G Are Externally Focused
They develop superior understanding of consumers and their needs. They create and deliver products, packaging and concepts that build winning brand equities. They develop close, mutually productive relationships with their customers and their suppliers. They incorporate sustainability into products, packaging and operations.
Mutual Interdependency Is a Way of Life
It work together with confidence and trust across business units, functions, categories and geographies. They take pride in results from reapplying others‘ ideas.
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P&G INDIA BRANDS
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Ambi Pur
Though we strive hard to keep our homes and our cars clean and tidy, the results are rarely satisfactory. Odours that linger in our homes just before guests arrive, or a persistent stench that never leaves the car, not only adversely affect our mood, but also that of our guests. With this in mind, P&G experts have bottled the fragrance of freshness with the new Ambi Pur range for both homes and cars.
Ariel
Introduced in 1991, Ariel was the first to bring the 'compact detergent' technology, the enzyme technology for safe and superior stainremoving power and the 'smart eyes' technology into India, with an aim of becoming India's best stain removal detergent. Ariel contains safe ingredients for all fabrics under recommended usage conditions for laundry. The Ariel product range in India includes different variants to meet your specific needs like Ariel OxyBlu, Ariel Oxyblu Ultramatic, Ariel Front O Mat, Ariel 2in1.
Duracell
Duracell batteries have a history of providing dependable power when and where you need it the most. Our range of Batteries gives you the right power for all your device needs, providing up to 10x performance. The product range in India includes Duracell and Duracell Ultra. Duracell is available in sizes AAA, AA, C, D, and 9-volt while Duracell Ultra is available in sizes AA and AAA sizes.
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Gillette
Gillette® has been at the heart of men‘s grooming for over 100 years. Each day, more than 600 million men around the world trust their faces and skin to Gillette‘s innovative razors and shaving products designed for the unique needs of men – helping them to look, feel and be their best every day. The razor range in India includes Gillette Vector, Gillette Mach3, Gillette Mach3 Turbo, Gillette Guard and Gillette Mach3 Turbo Sensitive and Gillette Fusion. The Shave Care range includes Gillette Fusion HydraGel, Gillette Series Sensitive Skin Foam, Gillette Series After Shave & Gillette Classic Shave Foam Sensitive Skin. The Gillette Skincare regimen is a no-fuss and efficient solution in caring for the health and appearance of men‘s skin and includes a special range of designed-for-men Gillette Skincare Foaming Wash, Gillette Skincare Scrub, Gillette Skincare Facial Moisturizer with Aloe Vera, Gillette Skincare Facial Moisturizer with SPF and Gillette Skincare Lotion 100ml.
Head & Shoulders
Since 1950, Head & Shoulders has been at the forefront of scalp and hair science, significantly advancing the treatment of dandruff and scalp problems. Along with professional advice and expert insight we have a wide range of products to care for your scalp and nurture your hair. Head & Shoulders is available in 8 variants in India including Men Hair Retain, Complete Care for Dry Scalp, Anti Hair fall, Smooth & Silky, Cool Menthol, Clean & Balanced, Thick & Long & Silky Black.
Olay
Olay is a product truly born in love created by Graham Wulff for his wife Dinah in 1950s to address her frustration with the then thick and waxy beauty creams. Today, Olay is one of the most recognizable brands in the world. Yet through all the changes and innovations, the philosophy upheld by Graham Wulff remains just as relevant as ever: Help women look and feel beautiful and Challenge what‘s possible with their skin.
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Oral-B
Oral-B continuously strives to work closely with the dental professionals and deliver high quality products, which make us leaders* in the $ 4.5 billion toothbrush category, marketing toothbrushes for children & adults, as well as inter-dental products such as Dental Floss. In India, Oral-B has an innovative range of toothbrushes including Cross Action Prohealth 7 Benefits, Cross Action Pro-health Superior Clean and Advantage Sensitive toothbrush. Oral-B‘S floss range includes Ultra Floss & Essential Floss.
Pampers
As a result of constant research and innovation in understanding the needs of babies at various stages of development, Pampers Active Baby has been voted as the best diaper by Indian moms with the guarantee of superior dryness for an uninterrupted sleep of 12 hours. Pampers has an answer for all your needs with its innovative product range that includes Pampers, Pampers Active Baby, Pampers Active Baby Pants, all designed especially for providing a night of Golden Sleep for the baby.
Pantene
The New Pantene Amino Pro-V Complex range of shampoo & conditioner comes in three variants suited for individual needs - Pantene Nourished Shine, Pantene Hair Fall Control & Pantene Smooth & Silky. Enriched with the goodness of pro-vitamins and three essential aminos, Pantene restores your hair with its lost beauty while making your hair ten times stronger.
33
Tide
Tide is the World‘s Oldest & Most Trusted Detergent brand and is the Market Leader in 23 Countries around the world. Launched in India in mid-2000, Tide provides ‗Outstanding Whiteness‘ on white clothes & excellent cleaning on coloured clothes as well. Tide‘s Fabric Whitening Agents clean clothes without bleaching or removing colour from a garment. The Tide range in India includes Tide (Detergent) and Tide (Bar with Whiteons). Tide Naturals was launched in India in December 2009. Packed with the benefits of lemon and chandan, it provides great cleaning while keeping the hands soft.
Vicks
Vicks has long been invested in the science and research of respiratory health and through that dedication has developed a wide range of therapeutic products that offer effective relief for all the major signs and symptoms of the common cold, flu and sinus pain and pressure. The Vicks product range in India includes Vicks Cough drops, Vicks Vaporub, Vicks Inhaler, Vicks Vapocool, and Vicks Action 500 Extra.
Whisper
Whisper understands that we're each very different, and offers a wide range of sanitary napkins to suit every girl or woman's needs. With the right menstrual pad, you could take the first step to having a Happy Period. Whisper has a wide range of products in India which includes Whisper Ultra Regular Wings, Whisper Ultra XL Wings, Whisper Ultra Heavy Flow Overnights Wings, Whisper Maxi Regular, Whisper Maxi XL Wings, Whisper Choice Regular, Whisper Choice Wings and Whisper Choice Ultra Wings.
34
CHAPTER – III
ANALYSIS OF P&G ON VARIOUS HEADS
35
SWOT ANALYSIS FINANCIAL ANALYSIS MARKET ANALYSIS TECHNICAL ANALYSIS
36
37
PROCTER & GAMBLE SWOT ANALYSIS
―SWOT is an acronym for the internal Strengths and Weaknesses of a firm and the environmental Opportunities and Threats facing that firm. SWOT analysis is a widely used technique through which managers create a quick overview of a company‘s strategic situation. The technique is based on the assumption that an effective strategy derives from a sound ―fit‖ between a firm‘s internal resources (strengths and weaknesses) and its external situation (opportunities and threats). A good fit maximizes a firm‘s strengths and opportunities and minimizes its weaknesses and threats. Accurately applied, this simple assumption has powerful implications for the design of a successful strategy.‖
Procter & Gamble P&G is the world's largest consumer goods company that markets more than 300 brands in over180 countries. The company is engaged in producing beauty, health, fabric, home, baby, family and personal care products. The company's product portfolio also includes pet health products and snacks. The company's leading market position along with its strong brand portfolio provides it with a significant competitive advantage. However, slowdown in global economic condition is making it increasingly difficult for branded product manufacturers like P&G to maintain their sales volume and revenue growth.
38
Strengths
The large scale, on which the P & G operates, is one of its strengths. It is a global leader for different product categories like fabric, home, baby, beauty, health and personal care in many countries. Its three hundred products are sold in over one hundred and eighty countries.
The strong branding of P & G makes it one of the most successful brands in the world.
The company has a vast experience in oral and personal hygiene products as they are working since...
Also, it has an extensive experience in marketing in different market segments and is one
of the best marketers in the world.
P & G is tightly integrated with some of the largest retailers in United States of America as well as world around. and around the world Distribution channels all over the world
Gross profit margin of the company is 15 times the industry average P & G is known for its diverse brand portfolio. The company is able to customize its global products and brands according to the local preferences.
P & G invests greatly in its research and development to. About $2 billion are invested every year by P & G for improving and introducing new products. The end-consumer understanding of P & G and its large database of consumers make its research and development strong.
Weaknesses
Many of the top brands of P & G are losing their market share rapidly. In online media leadership and presence P & G is lagging behind. The beauty and health products by P & G are mostly for women. P & G does not make and offer any private label products for the retail customers and is, missing an opportunity.
39
The large scale operation of the company makes the culture heavy and processes slow. This also leads to quality control problems. P & G does not divest its weak or poor brands. The major customers of P & G are located at some of the places and it concentrates heavily as them. When P & G acquired Clairol business in year 2001, it was unable to grow this business. The Clairol Herbal Essence brand failed to enter new markets as the market had access to better and innovative products. This shows weakness of P & G in the beauty care division.
Opportunities An opportunity for P & G is health and beauty products for men. With the acquisition of
Gillette, the company now has several growth opportunities in this market segment.
P & G has doubled its Environmental Goals for the year 2012 and thus, promises more value for the environment concerned customers today.
Using the online social networks and internet marketing techniques is also an opportunity for P & G.
Divest brands that are not in accordance or do not meet P & G's long-term goals
Company is constantly trying to pursue growth overseas.
40
Threats
There is a cut throat competition in the fast moving consumer's goods markets today.
Companies like Kimberly Clark, Unilever, Johnsons & Johnsons and Colgate-Palmolive etc pose a serious threat to its market share in different countries.
The competitors are making their product portfolios diverse day b day and using different
marketing and promotional strategies to increase their market share.
In the market many substitutes are available for P & G products at cheaper prices. The private label growth is also a serious threat to the P & G's market share. Due to recession, the consumer spending has decreased globally. Also, the prices for
raw materials are increasing so cost to the company is increasing.
41
42
STRATEGY
They are focused on strategies that the right for the long- term health of the Company and will deliver total shareholder return in the top one-third of their peer group. The Company’s long-term financial targets are:
Grow organic sales 1% to 2% faster than market growth in the categories and geographies in which they compete, Deliver earnings per share (EPS) growth of high single digits to low double digits, and Generate free cash flow productivity of 90% or greater. In order to achieve these targets, they are prioritizing the strategies and resources that will make P&G more focused and fit to win over the near- and long-terms.
IMPROVING PRODUCTIVITY AND CREATING A COST SAVINGS CULTURE They have taken significant steps to accelerate cost savings and create a more cost focused culture within the Company, including a five-year, $10 billion cost savings initiative, which was announced in February 2012. The cost savings program is based on:
The reduction of approximately 5,700 non-manufacturing overhead positions by the end of fiscal year 2013. Approximately $1.2 billion in annual cost of goods savings across raw materials, manufacturing and transportation and warehousing expenses. Generating efficiencies to enable us to grow marketing costs at a slightly slower rate than sales growth while still increasing consumer reach and effectiveness, saving approximately $1 billion over the five year period.
43
Procter and Gamble: Still a Champion Blue-Chip Procter and Gamble (NYSE: PG) is a worldwide consumer products company, and one of the largest companies in the world. The company has grown its dividend for well over 50 years, and has a market cap of almost $190 billion.
-Seven Year Revenue Growth Rate: 5.7% -Seven Year EPS Growth Rate: 4.7% -Seven Year Dividend Growth Rate: 11% -Current Dividend Yield: 3.28% -Balance Sheet Strength: Strong, but with Goodwill The returns have been positive since, PG dividend stock report from 2011 when called the stock fairly valued and a ―hold‖, but the company seems to have a diminished moat and lackluster growth prospects. Over the long-run, earnings will begin inching up and the rate of return will be positive, but they don‘t view the current valuation as appropriate for the stock performance with a margin of safety. They would desire a 10% pullback or more to invest. Overview Founded in 1837, Procter and Gamble (symbol: PG) is now one of the largest companies in the world. They sell their products in over 180 countries and currently have a market capitalization of over $180 billion. The company is known as one of the most solid blue chip dividend stocks with the history of more than five decades of consecutive annual dividend growth and large product diversification. The company operates in numerous segments, as outlined below:
Beauty
With brands like Head and Shoulders, Pantene, and Olay, Procter and Gamble brings in 24% of its sales and 22% of its earnings from its beauty segment.
Grooming
Another 10% of sales and 16% of earnings come from the grooming segment, which includes brands like Braun, Fusion, and Gillette.
44
Health Care
Procter and Gamble offers a number of feminine care, oral care, and symptom-care products, including Oral-B, Vicks, and Always. The company generates 15% of sales and 17% of earnings from this segment.
Fabric/Home Care
The company has a variety of brands like Duracell batteries, Tide detergent, and Febreeze air care, from which it generates 32% of revenue and 26% of earnings.
Baby/Family Care
Through brands like Bounty, Charmin, and Pampers, Procter and Gamble generates 19% of sales and 19% of earnings from baby and family care products. In terms of geographic exposure, 39% of sales come from North America, 19% come from Western Europe, 18% come from Asia, 14% come from Africa, the Middle East, and Central/Eastern Europe, and 10% come from Latin America.
45
RATIOS
Price to Earnings: 22 Price to Free Cash Flow: 22 Price to Book: 3 Return on Equity: 17%
REVENUE CHART
Sales grew at an annualized rate of 5.7% over this period, but over a more recent period, sales growth has been flat. The company has restated numbers which are not shown here, and those points to mild growth. In some ways, the chart is not quite as bad as it looks, because the company was actively divesting brands over this period, including selling the large Folgers coffee brand to Smuckers, rather than focusing on growth. Still, investors are broadly and correctly unimpressed by Procter and Gamble‘s performance over this period.
46
Earnings and Dividends
In terms of earnings per share, the company grew at an annualized rate of 4.7%. However, earnings have declined over the later period as part of the cost-cutting. The company has stated that it targets high single digit EPS growth. When combined with a dividend yield of over 3%, that would mean long-term low double-digit returns. As far as the dividend is concerned, it currently yields 3.28% with a payout ratio of under 60%. The dividend has grown by a rate of 11% annually, and the most recent increase was 7%.
47
Approximate historical dividend yield at beginning of each year: Year Current 2012 2011 2010 2009 2008 2007 2006 3.28% 3.1% 3.0% 2.9% 1.8% 2.5% 1.9% 1.9% Yield
Like many stocks, PG was overvalued several years ago, and had a lower yield. Plus, the payout ratio increased from around 40% to around 60% over this period. In most years, PG spends more on stock buybacks than on dividends. Over the last 3 years, the company spent over $17 billion on share repurchases and over $17 billion on dividends. Based on 2012 results, the company‘s shareholder yield is around 5.4%.
BALANCE SHEET
Total debt/equity for the company is under 50%, and the debt/income ratio is under 3 xs. However, over 80% of the existing shareholder equity consists of goodwill. Much of PG‘s growth was due to acquisitions. The interest coverage ratio is very solid, at over 17. Taking everything into account, Procter and Gamble has a rather strong balance sheet, with manageable debt levels, a high interest coverage ratio, and good investment grades. The only real downside to the balance sheet is the large quantity of goodwill, but overall, it‘s in good shape.
48
INVESTMENT THESIS
Procter and Gamble is the largest company in the world at what it does, and has 25 billion-dollar brands. The company‘s goals, as stated in their most recent annual report, were for an organic sales growth rate of 1-2% above global market growth rates, earnings growth in the high single digits or low double digits, and for free cash flow to be 90% of earnings. The company has pursued a global growth strategy, and has achieved 23% compound annual sales growth in Brazil, 25% compound annual sales growth in Russia, 27% compound annual sales growth in India, and 17% compound annual sales growth in China, over the last 10-year period. For example, if a company can achieve 2% annual volume growth and 3% pricing growth on that volume (basically in line with a standard inflation rate), then the revenue growth is around 5%. If a company then buys back 3% of its market cap in stock buybacks each year and net profit margins remain static, then EPS growth is in the ballpark of 8%. Add a 3% dividend yield, and P&G got a good investment on your hands. But if margins deteriorate, or volume growth halts, then the picture can change. In addition, if the valuation of the stock is too high, it drives down the dividend yield and reduces the number of shares that the company can repurchase, which in turn reduces the EPS growth rate. That‘s something that not everyone realizes: that for a company that does buybacks, a high stock valuation results in a measurable reduction in EPS growth compared to if the stock valuation were low. Slow and profitable growth works great when the valuation is low enough to provide double-digit returns. For Procter and Gamble, they announced earlier in 2012 a plan to save $10 billion in operations by the end of 2016. Specifically, they call for $6 billion in savings on cost of goods (which comes out to around $1.2 billion per year), $3 billion in savings on overhead (reducing the number of employees, at about $600 million per year), and then $1 billion in savings from marketing, or around $200 million per year. To do this and keep the top line intact means that these savings can go towards dividends, buybacks, or strengthening the balance sheet.
49
RISKS
Procter and Gamble faces commodity cost risk and global currency risk. More specifically, they operate in a highly competitive industry, and if consumers are looking to reduce spending, they can switch and have switched to private label products. Plus, other branded companies with overlapping products, like Colgate, can fight for market share.
If the company doesn‘t make good use of its advertising, maintain pricing power, and continue to grow global volume, then their earnings growth rate won‘t match their target rate of high single digits or better per year.
50
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts in Millions Except Per Share Amounts) Consolidated Earnings Information Three Months Ended March 31 2012 2011 $ 19,893 9,789 6,399 % CHG 2 5 4 Nine Months Ended March 31 2012 2011 $ 60,653 29,327 19,010 % CHG 5 9 4 % % %
NET SALES
Cost of products sold Selling, general & administrative expense Goodwill & indefinite lived intangible impairment charges OPERATING INCOME Total interest expense Other non-operating income/(expense), EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES Income taxes on continuing operations NET EARNINGS FROM CONTINUING OPERATIONS NET EARNINGS FROM DISCONTINUED OPERATIONS Net earnings Less: net earnings attributable to non controlling interests NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE Effective tax rate
$ 20,194 10,237 6,636
% $ 63,468 % 31,894 % 19,769
22
0
-
1,576
0
(17) % (5) % 39 %
3,299 179 67
3,705 202 104
(11) % 10,229 (11) % (36) % 587 238
12,316 619 171
3,187
3,607
(12) %
9,880
11,868
(17) %
754
748
1
%
2,776
2,638
5
%
2,433
2,859
(15) %
7,104
9,230
(23) %
34
47
(28) %
133
158
2,467 56
2,906 33
(15) % 70 %
7,237 112
9,388 101
(23) % 11 %
2,411
2,873
(16) %
7,125
9,287
(23) %
23.7
%
51
20.7 %
28.1 %
22.2 %
BASIC NET EARNINGS PER COMMON SHARE (1): Earnings from continuing operations Earnings from discontinued operations BASIC NET EARNINGS PER COMMON SHARE DILUTED NET EARNINGS PER COMMON SHARE (1): Earnings from continuing operations Earnings from discontinued operations DILUTED NET EARNINGS PER COMMON SHARE $ 0.81 $ 0.94 (14) % $ 2.37 $ 3.04 (22) % $ 0.84 $ 0.99 (15) % $ 2.47 $ 3.18 (22) %
$ 0.01
$ 0.02
(50) % $ 0.05
$ 0.06
(17) %
$ 0.85
$ 1.01
(16) % $ 2.52
$ 3.24
(22) %
$ 0.01
$ 0.02
(50) % $ 0.05
$ 0.05
0
%
$ 0.82
$ 0.96
(15) % $ 2.42
$ 3.09
(22) %
DIVIDENDS PER COMMON SHARE Average diluted shares outstanding
$ 0.5250
$ 0.4818
9
% $ 1.5750
$ 1.4454
9
%
2,937.8
2,999.3
2,944.9
3,008.6
52
COMPARISONS AS A % OF NET SALES Gross margin Selling, general & administrative expense 49.3 32.9 % %
Basis Pt Chg 50.8 % (150) 32.2 % 70 49.7 % 31.1 %
Basis Pt Chg 51.6 % (190) 31.3 % (20)
Goodwill & indefinite lived intangible Impairment charges
0.1
%
0.0
% 10
2.5
%
0.0
% 250
Operating margin Earnings from continuing operations before income Taxes Net earnings NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE
16.3
%
18.6 % (230)
16.1 %
20.3 % (420)
15.8
%
18.1 % (230)
15.6 %
19.6 % (400)
12.0 11.9
% %
14.4 % (240) 14.4 % (250)
11.2 % 11.2 %
15.2 % (400) 15.3 % (410)
53
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts in Millions) Consolidated Cash Flows Information
Nine Months Ended March 31 2012 Cash and cash equivalents, beginning of period $ 2,768 2011 $ 2,879
Operating activities
Net earnings Depreciation and amortization Share-based compensation expense Deferred income taxes Gain on sale of businesses Goodwill and indefinite lived intangibles impairment charges 7,237 2,427 277 9,388 2,103 295
(5) (201) 1,576
186 (70) 0
Changes in:
Accounts receivable Inventories Accounts payable, accrued and other liabilities Other operating assets & liabilities Other TOTAL OPERATING ACTIVITIES (347) (287) (1,558) (495) (817) (223)
131
(831)
61 9,311
(84) 9,452
54
INVESTING ACTIVITIES
Capital expenditures Proceeds from asset sales Acquisitions, net of cash acquired Change in investments TOTAL INVESTING ACTIVITIES (2,663) 290 (4) (2,066) 89 (489)
90 (2,287)
97 (2,369)
FINANCING ACTIVITIES
Dividends to shareholders Change in short-term debt Additions to long-term debt Reductions of long-term debt Treasury stock purchases (4,521) (122) 3,985 (2,514) (4,023) (4,237) (420) 1,536 (188) (4,536)
Impact of stock options and other TOTAL FINANCING ACTIVITIES
1,439
691
(5,756)
(7,154)
Effect of exchange rate changes on cash and cash equivalents Change in cash and cash equivalents CASH EQUIVALENTS
(45)
138
1,223
67
$ 3,991
$ 2,946
55
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts in Millions) Consolidated Balance Sheet Information
March 31, 2012
Cash and cash equivalents Accounts receivable Total inventories Other TOTAL CURRENT ASSETS Net property, plant and equipment Net goodwill and other intangible assets Other non-current assets TOTAL ASSETS Accounts payable Accrued and other liabilities Debt due within one year TOTAL CURRENT LIABILITIES Long-term debt Other TOTAL LIABILITIES $ 3,991 6,200 7,239 5,678 23,108 20,384 86,262 4,851 $ 134,605 $ 6,684 8,449 11,771 26,904 21,341 20,451 68,696
June 30, 2011
$ 2,768 6,275 7,379 5,548 21,970 21,293 90,182 4,909 $ 138,354 $ 8,022 9,290 9,981 27,293 22,033 21,027 70,353
56
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts in Millions) Consolidated Earnings Information
Three Months Ended March 31, 2012
Earnings from % Change Continuing Versus Operations Year Ago Before Income Taxes % Change Versus Year Ago Net Earnings Attributable to Procter & Gamble % Change Versus Year Ago
Net Sales
Beauty Grooming Health Care Fabric Care and Home Care Baby Care and Family Care Corporate TOTAL COMPANY
$ 4,844 1,962 3,018 6,595
1 0 2 1
% % % %
$
710 530 638 1,161
1 -9 -3 -7
% $ % % %
523 398 411 716
3 -4 -4 -9
% % % %
4,153 (378) 20,194
5
% N/A
903 (755) 3,187
9
%
573 (210) 2,411
9
%
N/A -12 %
N/A -16 %
2
%
57
Nine Months Ended March 31, 2012
Earnings from % Change Continuing Versus Operations Year Ago Before Income Taxes % Change Versus Year Ago Net Earnings Attributable to Procter & Gamble % Change Versus Year Ago
Net Sales
Beauty Grooming Health Care Fabric Care and Home Care Baby Care and Family Care Corporate TOTAL COMPANY
$ 15,512 6,332 9,492 20,703
4 4 4 4
% % % %
$
2,652 1,861 2,222 3,643
-6 2 2 -7
% $ % % %
2,008 1,401 1,490 2,280
-7 2 3
% % %
-10 %
12,394 (965) 63,468
7
% N/A
2,511 (3,009) 9,880
5
%
1,583 (1,637) 7,125
6
%
N/A -17 %
N/A -23 %
5
%
58
Three Months Ended March 31, 2012
(Percent Change vs. Year Ago) * Volume Volume With Without Acquisitions Acquisitions/ Foreign / Divestitures Divestitures Exchange Beauty Grooming Health Care Fabric Care and Home Care Baby Care and Family Care Total Company 1 1 0 -3 % % % % 1 1 -1 -3 % % % % -1 -2 -1 -1 % % % %
Net Sales Price 5 3 3 7 % % % % Mix/Other -4 -2 0 -2 % % % % Growth 1 0 2 1 % % % %
3 0
% %
3 0
% %
-1 -1
% %
5 5
% %
-2 -2
% %
5 2
% %
59
Nine Months Ended March 31, 2012
(Percent Change vs. Year Ago) * Volume Volume With Without Acquisitions Acquisitions/ Foreign / Divestitures Divestitures Exchange Beauty Grooming Health Care Fabric Care and Home Care Baby Care and Family Care Total Company 2 1 1 -1 % % % % 3 1 1 -1 % % % % 2 2 1 1 % % % %
Net Sales Price 3 2 3 6 % % % % Mix/Other -3 -1 -1 -2 % % % % Growth 4 4 4 4 % % % %
2
%
2
%
1
%
4
%
0
%
7
%
1
%
1
%
1
%
4
%
-1
%
5
%
60
SHORT-TERM (OPERATING) ACTIVITY RATIOS
RATIOS (SUMMARY)
Procter & Gamble Co., Jun 30, 2012 Jun 30, 2011 Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007
Turnover Ratios
Inventory turnover Receivables turnover Payables turnover Working capital turnover 12.45 13.79 10.57 17.19 11.19 13.16 10.29 14.66 12.36 14.80 10.89 17.67 11.49 13.54 13.22 11.73 9.92 12.35 12.33 9.94 11.22 11.54 13.39 9.88
Average No. of Days
Average inventory processing period Add: Average receivable collection period 29 26 33 28 30 25 32 27 37 30 33 32
Operating cycle
Less: Average payables payment period
56
35
60
35
54
34
59
28
66
30
64
27
Cash conversion cycle
21
25
21
31
37
37
61
INVENTORY TURNOVER
Jun 30, 2012 Jun 30, 2011 Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007
Selected Financial Data (USD $ in millions)
Net sales Inventories 83,680 6,721 82,559 7,379 78,938 6,384 79,029 6,880 83,503 8,416 76,476 6,819
Inventory Turnover, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 12.45 – 11.19 11.02 12.36 10.51 11.49 10.01 9.92 10.56 11.22 –
Inventory turnover = Net sales / Inventories = 83,680 / 6,721 = 12.45
Ratio
Inventory turnover
Description
An activity ratio calculated as revenue divided by inventory.
The company
Procter & Gamble Co.'s inventory turnover deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.
62
RECEIVEBLE TURNOVER
Jun 30, 2012 Jun 30, 2011 Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007
Selected Financial Data (USD $ in millions)
Net sales Accounts receivable Procter & Gamble Co.1 Industry, Consumer Goods 83,680 6,068 82,559 6,275 78,938 5,335 79,029 5,836 83,503 6,761 76,476 6,629
Receivables Turnover, Comparison to Industry
13.79 13.16 14.80 13.54 12.35 11.54
–
12.21
11.17
12.64
12.03
–
Receivable turnover = Net Sales / Accounts receivable = 83,680 / 6,068 = 13.79
Ratio
Receivables turnover
Description
An activity ratio equal to revenue divided by receivables.
The company
Procter & Gamble Co.'s receivables turnover deteriorated from 2010 to 2011 but then slightly improved from 2011 to 2012.
63
PAYABLE TURNOVER
Jun 30, 2012 Jun 30, 2011 Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007
Selected Financial Data (USD $ in millions)
Net sales Accounts payable 83,680 7,920 82,559 8,022 78,938 7,251 79,029 5,980 83,503 6,775 76,476 5,710
Payables Turnover, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 10.57 – 10.29 13.32 10.89 11.93 13.22 15.94 12.33 13.46 13.39 –
Payable turnover = Net sales / Accounts payable = 83,680 / 7,920 = 10.57
Ratio
Description
The company
Procter & Gamble Co.'s payables turnover declined from 2010 to 2011 but then slightly increased from 2011 to 2012.
Payables An activity ratio calculated as turnover revenue divided by payables.
64
WORKING CAPITAL TURNOVER
Jun 30, 2012 Jun 30, 2011 Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007
Selected Financial Data (USD $ in millions)
Net sales Working capital 83,680 4,869 82,559 5,632 78,938 4,468 79,029 6,736 83,503 8,402 76,476 7,738
Working Capital Turnover, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 17.19 – 14.66 10.25 17.67 9.92 11.73 8.60 9.94 9.66 9.88 –
Working capital turnover = Net sales / working capital = 83,680 / 4,869 = 17.19
Ratio
Description
An activity ratio calculated as revenue divided by working capital.
The company
Procter & Gamble Co.'s working capital turnover deteriorated from 2010 to 2011 but then improved from 2011 to 2012 not reaching 2010 level.
Working capital turnover
65
AVERAGE INVENTORY PROCESSING PERIOD
No. Of days
Jun 30, 2012 Jun 30, 2011 Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007
Selected Financial Data
Inventory turnover 12.45 11.19 12.36 11.49 9.92 11.22
Average Inventory Processing Period (no. of days), Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 29 – 33 33 30 35 32 36 37 35 33 –
Average inventory processing period = 365 / Inventory turnover = 365 / 12.45 = 29
Ratio
Average inventory processing period
Description
An activity ratio equal to the number of days in the period divided by inventory turnover over the period.
The company
Procter & Gamble Co.'s average inventory processing period deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.
66
AVERAGE RECEIVEBLE COLLECTION PERIOD
No. Of days
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data
Receivables turnover 13.79 13.16 14.80 13.54 12.35 11.54
Average Receivable Collection Period (no. of days), Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 26 – 28 30 25 33 27 29 30 30 32 –
Average receivable collection period = 365 / receivable turnover = 365 / 13.79 = 26
Ratio
Average receivable collection period
Description
An activity ratio equal to the number of days in the period divided by receivables turnover.
The company
Procter & Gamble Co.'s average receivable collection period deteriorated from 2010 to 2011 but then slightly improved from 2011 to 2012.
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OPERATING CYCLE
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data
Average inventory processing period Average receivable collection period 29 26 33 28 30 25 32 27 37 30 33 32
Operating Cycle, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 56 – 60 63 54 67 59 65 66 65 64 –
Operating cycle = Average inventory processing period + Average receivable collection period = 29 + 26 = 56
Ratio
Operating cycle
Description
Equal to average inventory processing period plus average receivables collection period.
The company
Procter & Gamble Co.'s operating cycle deteriorated from 2010 to 2011 but then improved from 2011 to 2012 not reaching 2010 level.
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AVERAGE PAYABLES PAYMENT PERIOD
No. Of days
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data
Payables turnover 10.57 10.29 10.89 13.22 12.33 13.39
Average Payables Payment Period (no. of days), Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 35 – 35 34 28 30 27 –
27
31
23
27
Average payable payment period = 365 / payable turnover = 365 / 10.57 = 35
Ratio
Description
The company
Average payables payment period
An estimate of the average number of days it takes a company to pay its suppliers; equal to the number of days in the period divided by payables turnover ratio for the period.
Procter & Gamble Co.'s average payables payment period increased from 2010 to 2011 but then slightly declined from 2011 to 2012.
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CASH CONVERSION CYCLE
No. Of days
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data
Average inventory processing period Average receivable collection period Average payables payment period 29 33 30 32 37 33
26
28
25
27
30
32
35
35
34
28
30
27
Cash Conversion Cycle, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 21 – 25 36 21 37 31 42 37 38 37 –
Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period = 29 + 26 – 35 = 21
Ratio
Description
The company
Procter & Gamble Co.'s cash conversion cycle deteriorated from 2010 to 2011 but then improved from 2011 to 2012 not reaching 2010 level.
A financial metric that measures the length of Cash conversion time required for a company to convert cash invested in its operations to cash received as a cycle result of its operations; equal to average inventory processing period plus average receivables collection period minus average payables payment period.
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LONG-TERM (INVESTMENT) ACTIVITY RATIOS
RATIOS (SUMMARY)
Procter & Gamble Co.,
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Net fixed asset turnover Total asset turnover
4.11
3.88
4.10
4.06
4.05
3.91
0.63
0.60
0.62
0.59
0.58
0.55
Equity turnover
1.32
1.22
1.29
1.25
1.20
1.15
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NET FIXED ASSET TURNOVER
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data (USD $ in millions)
Net sales Net property, plant and equipment 83,680 20,377 82,559 21,293 78,938 19,244 79,029 19,462 83,503 20,640 76,476 19,540
Net Fixed Asset Turnover, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 4.11 – 3.88 4.10 4.06 4.05 3.91 –
3.67
3.47
3.62
4.10
Net fixed asset turnover = Net sales / Net property, plant and equipment = 83,680 / 20,377 = 4.11
Ratio
Net fixed asset turnover
Description
An activity ratio calculated as total revenue divided by net fixed assets.
The company
Procter & Gamble Co.'s net fixed asset turnover deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.
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TOTAL ASSET TURNOVER
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data (USD $ in millions)
Net sales Total assets 83,680 132,244 82,559 138,354 78,938 128,172 79,029 134,833 83,503 143,992 76,476 138,014
Total Asset Turnover, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 0.63 – 0.60 0.62 0.59 0.58 0.55 –
0.77
0.75
0.81
0.88
Total asset turnover = Net sales / Total asset = 83,680 / 132,244 = 0.63
Ratio
Total asset turnover
Description
An activity ratio calculated as total revenue divided by total assets.
The company
Procter & Gamble Co.'s total asset turnover deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.
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EQUITY TURNOVER
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data (USD $ in millions)
Net sales Shareholders' equity attributable to parent 83,680 63,439 82,559 67,640 78,938 61,115 79,029 63,099 83,503 69,494 76,476 66,760
Equity Turnover, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 1.32 – 1.22 2.19 1.29 2.11 1.25 2.25 1.20 2.39 1.15 –
Equity turnover = Net sales / Shareholders’ equity attributable to parent = 83,680 / 63,439 = 1.32
Ratio
Equity turnover
Description
An activity ratio calculated as total revenue divided by shareholders' equity.
The company
Procter & Gamble Co.'s equity turnover deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.
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LIQUIDITY ANALYSIS Procter & Gamble Co. (PG)
Ratios (Summary) Current Ratio Quick Ratio Cash Ratio
Ratios (Summary)
Procter & Gamble Co., liquidity ratios
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Current ratio
0.88
0.80
0.77
0.71
0.79
0.78
Quick ratio
0.42
0.33
0.34
0.34
0.33
0.40
Cash ratio
0.18
0.10
0.12
0.15
0.11
0.18
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CURRENT RATIO
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data (USD $ in millions)
Current assets Current liabilities 21,910 24,907 21,970 27,293 18,782 24,282 21,905 30,901 24,515 30,958 24,031 30,717
Current Ratio, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 0.88 – 0.80 0.77 0.71 0.79 0.78 –
1.10
1.20
1.10
1.07
Current ratio = Current assets / current liabilities = 21,910 / 24,907 = 0.88
Ratio
Current ratio
Description
A liquidity ratio calculated as current assets divided by current liabilities.
The company
Procter & Gamble Co.'s current ratio improved from 2010 to 2011 and from 2011 to 2012.
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QUICK RATIO
Jun 30, 2012 Jun 30, 2011 Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007
Selected Financial Data (USD $ in millions)
Cash and cash equivalents Investment securities Accounts receivable Total quick assets Current liabilities 4,436 – 2,768 – 2,879 – 4,781 – 3,313 5,354
228
202
6,068
6,275
5,335
5,836
6,761
6,629
10,504 24,907
9,043 27,293
8,214 24,282
10,617 30,901
10,302 30,958
12,185 30,717
Quick Ratio, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 0.42 – 0.33 0.34 0.34 0.33 0.40 –
0.75
0.82
0.70
0.69
Quick ratio = total quick assets / current liabilities = 10,504 / 24,907 = 0.42
Ratio
Quick ratio
Description
A liquidity ratio calculated as (cash plus short-term marketable investments plus receivables) divided by current liabilities.
The company
Procter & Gamble Co.'s quick ratio deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.
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CASH RATIO
Jun 30, 2012 Jun 30, 2011 Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007
Selected Financial Data (USD $ in millions)
Cash and cash equivalents Investment securities Total cash assets Current liabilities 4,436 – 4,436 24,907 2,768 – 2,768 27,293 2,879 – 2,879 24,282 4,781 – 4,781 30,901 3,313 228 3,541 30,958 5,354 202 5,556 30,717
Cash Ratio, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 0.18 – 0.10 0.12 0.15 0.11 0.18 –
0.33
0.35
0.28
0.23
Cash ratio = Total cash assets / Current liabilities = 4,436 / 24,907 = 0.18
Ratio
Cash ratio
Description
A liquidity ratio calculated as (cash plus short-term marketable investments) divided by current liabilities.
The company
Procter & Gamble Co.'s cash ratio deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.
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LONG-TERM DEBT AND SOLVENCY ANALYSIS Procter & Gamble Co. (PG) |
Ratios (Summary) Debt to Equity Debt to Capital Interest Coverage
Ratios (Summary)
Procter & Gamble Co., debt and solvency ratios
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Debt to equity
0.47
0.47
0.49
0.59
0.53
0.53
Debt to capital
0.32
0.32
0.33
0.37
0.35
0.35
Interest coverage
19.69
19.43
18.91
13.86
11.96
12.28
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DEBT TO EQUITY
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data (USD $ in millions)
Debt due within one year Long-term debt Total debt Shareholders' equity attributable to parent 8,698 21,080 29,778 63,439 9,981 22,033 32,014 67,640 8,472 21,360 29,832 61,115 16,320 20,652 36,972 63,099 13,084 23,581 36,665 69,494 12,039 23,375 35,414 66,760
Debt to Equity, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 0.47 – 0.47 0.49 0.59 0.53 0.53 –
1.01
0.97
0.97
0.87
Debt to equity = Total debt / Shareholders’ equity attributable to parent = 29,778 / 63,439 = 0.47
Ratio
Description
The company
Debt-to-equity ratio
A solvency ratio calculated as total debt divided by total shareholders' equity.
Procter & Gamble Co.'s debtto-equity ratio improved from 2010 to 2011 and from 2011 to 2012.
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DEBT TO CAPITAL
Jun 30, 2012 Jun 30, 2011 Jun 30, 2010 Jun 30, 2009 Jun 30, 2008 Jun 30, 2007
Selected Financial Data (USD $ in millions)
Debt due within one year Long-term debt Total debt Shareholders' equity attributable to parent Total capital 8,698 9,981 8,472 16,320 13,084 12,039
21,080 29,778 63,439
22,033 32,014 67,640
21,360 29,832 61,115
20,652 36,972 63,099
23,581 36,665 69,494
23,375 35,414 66,760
93,217
99,654
90,947
100,071
106,159
102,174
Debt to Capital, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 0.32 – 0.32 0.50 0.33 0.49 0.37 0.49 0.35 0.47 0.35 –
Debt to capital = Total debt / Total capital = 29,776 / 93,217 = 0.32
Ratio
Description
The company
Debt-to-capital ratio
A solvency ratio calculated as total debt divided by total debt plus shareholders' equity.
Procter & Gamble Co.'s debtto-capital ratio improved from 2010 to 2011 and from 2011 to 2012.
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INTEREST COVERAGE
Jun 30, 2012
Jun 30, 2011
Jun 30, 2010
Jun 30, 2009
Jun 30, 2008
Jun 30, 2007
Selected Financial Data (USD $ in millions)
Net earnings attributable to Procter & Gamble Add: Net earnings attributable to noncontrolling interests Add: Interest expense Add: Income tax expense (benefit) Earnings before interest and tax (EBIT) 10,756 11,797 12,736 13,436 12,075 10,340
148
130
110
–
–
–
769 3,468
831 3,392
946 4,101
1,358 4,032
1,467 4,003
1,304 4,370
15,141
16,150
17,893
18,826
17,545
16,014
Interest Coverage, Comparison to Industry
Procter & Gamble Co. Industry, Consumer Goods 19.69 – 19.43 14.76 18.91 12.20 13.86 10.17 11.96 20.33 12.28 –
Interest coverage = EBIT / Interest expense = 15,141 / 769 = 19.69 Ratio
Interest coverage ratio
Description
A solvency ratio calculated as EBIT divided by interest payments.
The company
Procter & Gamble Co.'s interest coverage ratio improved from 2010 to 2011 and from 2011 to 2012.
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MARKET ANALYSIS
Porter five forces competitive analysis for P&G
Threat of New Entrants P&G possess a significant amount of market share around the world. To compete P&G, A competitor must have a large sum of capital for heavy marketing and R&D. Firms That Specialize in nice market could possibly become a threat to P&G corresponding business segment.
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Power of Buyers: P&G is heavily dependent on wall mart and its affiliates for generating a major part of its revenue. High dependence upon Wal-Mart could reduce the bargaining power of P&G.
Power of Suppliers Supplier of P&G need key customer for profitable revenue generation and will have little bargaining power. Rising interest rate and declining availability of credit ultimately should not affect P&G’s relationship with its suppliers.
Threat of Substitutes
There are substantial no of substitutes for all of P&G‘s product offerings, creating an intense competitive environment. In order to differentiate itself P&G must continue to provide new and innovative products to the customer.
Intensity of Rivalry P&G has several strong competitors in different markets like AMWAY corporation, Colgate-Palmolive Company, Johnson & Johnson, Revlon, HUL among big and medium size competitors. Switching cost in this industry is quite low.
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Main competitors:
HUL KIMBERLY CLARK LIVER PVT. LTD. JOHNSON AND JOHNSON
COMPETITORS ON THE BASIS OF PRODUCT
PRODUCT NAME
Vicks
COMPETITORS NAME
Amirtanjan Bam, Zandu Bam, Cold Snap, Pharma’o cold Sunsilk, Clinic Plus
Pantene
Ariel
Surf Excel, Rin
Whisper
Kotex, Stayfree
Pamper
Huggies, Snuggy Baby Diapers
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STRENGTH IN STRUCTURE
Global Business Units (GBUs) Focus on consumers, brands and competitors in India. They are responsible for the innovation profitability from their businesses. Market Development Organizations (MDOs) are charged with knowing consumers and retailers in each market. Global Business Services (GBS) utilizes P&G talent and expert partners to provide best-in-class business support services at the lowest costs. Lean Corporate Functions ensure ongoing functional innovation and capability improvement.
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Business level
Efforts to build competitive advantage Collaborative partnership and strategic alliance Distribution channel
Functional level strategy
Human Resources Strategy R&D Technology Strategy Marketing and Sales Strategy
VALUE CHAIN ANALYSIS
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Analysis of Primary activity
P&G developed extensile economies from its scale of operations in finance, logistics, marketing, Research, new product development, technology innovation and other function.
Inbound and Outbound Logistics
P&G‘s goal has been to create adaptive, reactive supply networks that will link together sales and supply processes, inside and outside the organization, to improve product availability.
Operations
P&G organized into 3 business units Beauty Health and well-being Household care The operation group consists of market development organization and global business services
Sales and Marketing
The company markets more than 300 brands over 180 countries 23 of these brands are categorized by P&G as billion dollar brands. Majority of sales now coming from promotional events, pull systems of efficient distributors of consumer and industrial product.
Services
P&G emphasis on its principal business call of providing its customers with right products at right place all the time.
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Analysis and Support Activity
Firm Infrastructure:
Integrity Passion for Winning Leadership Trust Ownership
Product R&D
P&G has strong commitment to find the best researchers, and retain them with cultural design to reward success, stimulate learning, challenges compliancy and nurture innovation.
Human resources Strategy
Hire the best Challenges of P&G people from day1 Business and functional leaders activity recruiters, Teach and Coach Plan careers Never Stop Learning
Top 40 Businesses: They define their core business as the top 40 country/category combinations, 20 in Household Care and 20 in Beauty & Grooming, which generate the highest level of annual sales and profit. Top 10 Developing Markets: Maintaining the strong growth momentum they have established in developing markets is critical to delivering their near- and long-term growth objectives. They are focusing resources first on the markets that offer the greatest growth opportunity. They will assess the potential for further portfolio expansions beyond the top 10 developing markets based on the top- and bottom-line growth progress of the core business.
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TECHNICAL ANALYSIS
Innovation Wins Decades Innovation is the driving force behind their strategy, as it always has been at P&G. Their experience has proven that price promotion may win a quarter here and there, but innovation wins decades. There are many examples to prove this. Take their Laundry business in the U.K., for instance. In the late 1970s, there were competing hard just to defend and maintain our 35% market share leadership position. They stepped up their innovation efforts. In the three decades since, they have introduced a series of game-changing innovations such as Daz automatic detergent, concentrated liquid detergent, and most recently, Liquitabs. They now enjoy around a 50% share. P&G seen the same dynamic in Oral Care. In the 1990s, P&G lost their historical lead versus their top competitor because they simply outinnovated us. They stepped up their innovation game once again and delivered a string of product breakthroughs including Crest White strips, Crest Pro-Health, and Crest 3D White. P&G’s leadership of the U.S. Dentifrice category, which is now enabling us to expand these innovative products around the world. The investment continues to pay off. P&G currently have the strongest innovation and global expansion program in P&G history. They are globalizing products such as Gillette Fusion ProGlide, Crest 3D White, Laundry additives, and the Pampers thinness and absorbency upgrade. P&G also expanding successful marketing innovation such as the SHIKSHA education program in India, in which P&G contributes a brick to build a school for each pack of product purchased , or the Pampers “One Pack Equals One Vaccine” campaign with its focus on eradicating maternal and neonatal tetanus. The Old Spice “Smell like a Man, Man” campaign generated consumer excitement and demand that catapulted the brand to market leadership. P&G’s
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global sponsorship of the Olympic Games provides an outstanding platform for integrated, multi-branded commercial innovation. Today, an Innovation Council made up of three members from P&G and three members from Accenture meets regularly to understand the business needs and explore how new virtual reality technologies can help. Both Accenture and P&G harvest and share innovative ideas from within the team and across their respective organizations. P&G ultimately governs the program, and projects are prioritized on the technology readiness and business impact.
Top 20 Innovations:
Their 20 most important innovations offer significantly higher growth potential than the balance of the innovation portfolio. Therefore, the growth of the Company depends substantially on the success of their biggest innovations.
STRENGTHENING OUR UPSTREAM INNOVATION PROGRAM AND PIPELINE
Innovation has always been — and continues to be — P&G’s lifeblood. To consistently win with consumers around the world across price tiers and preferences, and to consistently win versus our best competitors, each P&G product category must have a full portfolio of innovation. The innovation portfolios must include a mix of commercial programs, incremental product improvements and discontinuous innovations. They have made the creation of more discontinuous innovation a top priority, dedicating R&D resources and funding to develop new innovations aimed at changing the game in existing product categories and creating new ones.
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Core Strengths
P&G focuses on five core strengths required to win in the consumer products industry. They are designed to lead in each of these areas.
Consumer Understanding No company in the world has invested more in market research than P&G. They interact with more than five million consumers each year in nearly 100 countries. They conduct over 15,000 research studies every year, and invest more than $350 million annually in consumer understanding. The insights they gain help us identify opportunities for innovation and better serve and communicate with our consumers. Innovation P&G is widely recognized as the industry‘s global innovation leader. Nearly all organic sales growth over the past decade has come from new brands or improved products. They collaborate with a global network of research partners, and more than half of all product innovation coming from P&G today includes at least one major component from an external partner. Their contributions have consistently helped us earn honours from the Symphony IRI New Product Pacesetters Report—the annual list of the biggest innovations in our industry. Over the past 16 years, P&G has had 132 products on the top 25 Pacesetters list— more than our six largest competitors combined. P&G earned 5th place among Fortune‘s 2011 list of the World‘s Most Admired Companies. And as of April 2011, P&G has won 22 ―Product of the Year‖ recognitions, as voted on by consumers in the US, UK, France, Holland, Italy, Spain, and South Africa.
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CHAPTER – IV
SUSTAINABILITY
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Sustainability changes that matters
P&G does this through the products and services it offers, manufacturing in an environmentally responsible manner, and through its social responsibility programs that improve lives for those in need around the world. Sustainability broadly at P&G to include both environmental sustainability and social responsibility.
ENVIRONMENTAL SUSTAINABILITY A long-term environmental sustainability vision that includes:
Powering our plants with 100% renewable energy Using 100% renewable or recycled materials for all products and packaging Having zero consumer and manufacturing waste go to landfills Designing products that delight consumers while maximizing our conservation of resources This vision is stretching, and we believe it will take us decades to achieve. We have set strategies in Products and Operations that help us deliver against our vision. To ensure we are holding ourselves accountable, we have two sets of goals, for 2012 and 2020, within Products and Operations.
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Long-Term Environmental Vision and 2020 Goals
P&G announced a long-term environmental sustainability vision in September 2010. We developed this vision over the course of a year, partnering with external experts and soliciting input from hundreds of P&G employees at all levels and functions. Our complete visionary end-points are outlined below. These end-points are long-term in nature because some of them will take decades to come to fruition.
Using 100% renewable or recycled materials for all products and packaging Having zero consumer waste go to landfills Designing products to delight consumers while maximizing the conservation of resources
Powering our plants with 100% renewable energy Emitting no fossil-based CO2 or toxic emissions Delivering effluent water quality that is as good as or better than influent water quality with no contribution to water scarcity Having zero manufacturing waste go to landfills
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2020 Sustainability Goals
In order to ensure we are making progress toward our long-term environmental sustainability vision, we have set the following goals for 2020 to hold ourselves accountable.
Replace Petroleum-Based Materials with Sustainably Sourced Renewable Materials Cold Water Washing Packaging Reduction Consumer Solid Waste
25%*
70% of total washing machine loads 20% (per consumer use)* Pilot studies in both developed and developing markets to understand how to eliminate landfilled/dumped consumer solid waste
*vs. 2010 baseline
Renewable Energy Powering our Plants Manufacturing Waste to Landfill Truck Transportation Reduction *vs. 2010 baseline
30%
< 0.5% (disposed) 20% (km/unit of volume)*
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SOCIAL RESPONSIBILITY
P&G‘s focus on purpose-inspired growth drives us to not only serve our consumers with superior product propositions, but also truly touch and improve the lives of more consumers, more completely by contributing towards the communities we operate in. Live, Learn and Thrive is P&G‘s global corporate cause, focusing on helping children in need around the world. The programs enable children to get off to a healthy start, receive access to education and build skills for life. Since 2007, P&G has improved the lives of over 315 million children. In India, our Corporate Social Responsibility initiatives ‘Shiksha’ and the‘Parivartan - Whisper School Program’ are helping children from lesser-privileged backgrounds, by giving them access to health and education.
SOCIAL RESPONSIBILITY PROGRAMS IN INDIA
Shiksha (Education): Padhega India. Badhega India.
P&G‘s flagship Corporate Social Responsibility Program Shiksha is an integral part of our global philanthropy program - Live, Learn & Thrive. Now in its 8th year, Shiksha has till date helped 280,000 underprivileged children access their right to education. The program has built & supported over 140 schools across India, in partnership with NGOs like Round Table India (RTI), Save the Children (STC), Army Wives Welfare Association (AWWA) and Navy Wives Welfare Association (NWWA), amongst others.
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Shiksha began with P&G India‘s research which revealed education as the one cause that consumers are most concerned about and are looking for a simple way to contribute to. With this insight and founded on P&G‘s purpose, Shiksha was launched in 2005 to enable consumers to contribute towards the cause of education of under-privileged children through simple brand choices. Since its inception, Shiksha has made a cumulative donation of over Rs. 22 crores towards helping children on the path to better education. This is a result of the support from our consumers who participated in the Shikshamovement by buying P&G brands for one quarter of the year, thus enabling P&G to contribute a part of the sales towards the cause.
Shiksha’s NGO Partners
Shiksha’s vision is to help India get to 100% Shiksha someday, and it is working towards this vision in partnership with NGOs like Save the Children India, Army Wives Welfare Association (AWWA), Navy Wives Welfare Association (NWWA) and Round Table India (RTI), amongst others. Each of Shiksha’s NGO partners focuses on a critical approach towards education, with NGO Round Table India specializing in building educational infrastructure and supporting schools across India, NGO Save the Children laying emphasis on the girl child via supporting the government‘s Kasturba Gandhi Balika Vidhyalays, and the NGOs AWWA and NWWA serving the unique educational needs of differently-abled children of naval and army officer‘s families.
Shiksha Schools
Shiksha aims to build the educational future of India ‘Brick – by – Brick’ by addressing the need for better educational infrastructure and building the tangible asset of schools. Shiksha’s interventions span across health and hygiene facilities at schools such as clean drinking water and separate toilets for boys and girls, advanced educational aids such as libraries and computer centres, as well as basic infrastructure needs such as classrooms.
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CHAPTER – V
RECOMMENDATION & SUGGESTION
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RECOMMENDED OR SUGGESTED STRATEGIES
The practice of incomplete market coverage should not be followed because you cannot hijack other company customers and new customers as well. All these scenarios require following strategies:
MARKET DEVELOPMENT STRATEGY:
P&G is emphasizing on urban areas while it has neglected the suburban areas, which is also a big market for soaps like safeguard. For this purpose, they should efficiently utilize their Marketing Information System to collect information about the demand and attitudes of the people in these areas. By using this strategy, safeguard can fetch the customers of competitors and will be successful in building new customers.
PRODUCT DEVELOPMENT STRATEGY:
It describes to develop new products or modify the existing products with respect to size, colour, packaging, etc. Safeguard is a well-perceived product among the customers, and at this moment, it is available in two sizes; 75gm and 125gm, which cannot satisfy the demand of every segment. While the products of the competitors are available in multiple sizes which provide abundant choices for purchases to customers for example Lifebuoy Gold has 140gm and 95gm and Medicare has80gm soap available in the market. This provides an opportunity to the customer to have multiple choices. It can be a threat for the market share of safeguard. On the other hand, in case of safeguard the choice to customer is very limited. This is what they have analyzed through market survey. Therefore, it is necessary that safeguard should be available in maximum possible sizes to meet the selection criteria of the customer. As far as launching of new product is concerned, it is not necessary for P&G at this moment, but in future, they will require taking this step as well because they have some other soap like ivory, and zest which are very famous in international market.
MARKET PENETRATION STRATEGY:
It describes that a company tries to sell more of its product by introducing new supplementary uses. Safeguard is that product, which contains such chemicals useful for beauty care as well. This characteristic, we have analyzed through its product formula. Therefore, it is more useful to supplement this idea with existing safeguard or introduce safeguard into different pack sizes especially for capturing the female customers.
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BIBLIOGRAPHY
WWW.PG.COM WWW.WIKIPEDIA.COM WWW.FMCG.COM WWW.PG.COM/EN_IN/
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