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  • 1. 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 12 PCO 007 B.NIVEDHA 12 PCO 013 M.NIVEDHA 12 PCO 014 K.SUDHA 12 PCO 017 R.SURYA 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 1
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  • 3. ACKNOWLEDGEMENT We express our deep sense of gratitude and sincere thanks to all whomotivated us in various ways in the preparation of this project. It is our honour to convey our heartfelt thanks to SEETHALAKSHMIRAMASWAMI COLLEGE (AUTONOMOUS) for having introduced project workin the syllabus which helped to acquire wide experience and knowledge. We expressour grateful thanks to DR.(MS) KANAKA BHASHYAM, M.A., M.Phil., PGDJ., Ph.D., theprincipal 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 havingencouraged us to complete this project successfully. We wish to acknowledge our indebtedness and deep sense of gratitude toDR.R.LALITHA,M.Com.,M.Phil.,PGDCA.,Ph.D.,M.A(YHE) andDR.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 fortheir co-operation and support. We could be failing our duty if we do not thank GOD, the ALMIGHTY who isthe author of all our inspiration and enthusiasm to complete our study successfully. 3
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  • 5. CONTENTCHAPTER PARTICULARS PAGE NO. I. INTRODUCTION 6 II. COMPANY PROFILE 17 III. ANALYSIS OF P& G ON 35 VARIOUS HEADS IV. SUSTAINABILITY 96 V. RECOMMENDATION AND 102 SUGGESTION 5
  • 6. CHAPTER – IINTRODUCTION 6
  • 7. Meaning of FMCG FMCG stands for Fast Moving Consumer Goods. It is also referred to on occasionas CPG, an abbreviation of Consumer Packaged Goods. They are described as being reasonably low cost items that are supplied and sold in avery short time period - often these types of products have a short shelf life, hence having ashort sale time. FMCGs 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 ashort period of time is vital to make worthwhile. FMCGs can be split into highly perishable and non-highly perishable goods. Highlyperishable goods include meats, vegetables, fruit, and bakery items - anything that has areasonably short shelf life. In contrast, products such as wine, beer and spirits, canned foodsand toiletries have a longer shelf life and do not perish quickly. Nonetheless, these productsare in high demand and as a result product turnover is high; they do not spend long on thesupermarket 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 7
  • 8. FMCG CATEGORY AND PRODUCTSCategory ProductsHousehold care 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 polishFood 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; 8
  • 9. SWOT analysis of FMCGStrengths: Low operational costs Presence of established distribution networks in both urban and rural areas Presence of well-known brands in FMCG sectorWeaknesses: • 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 spendingThreats: • Removal of import restrictions resulting in replacing of domestic brands • Slowdown in rural demand • Tax and regulatory structure 9
  • 10. TOP 10 FMCG COMPANIES IN INDIAFMCG (Fast Moving Consumer Goods) or Consumer Packaged Goods(CPG) – are products that are sold quickly and at relatively low cost. Below is a Listof Top 10 FMCG Companies in India 2012. 1. ITC (Indian Tobacco Company) Market Capitalization – (Rs. Crore): 151,078 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. 10
  • 11. 2. HINDUSTAN UNILEVER Market Capitalization – (Rs. Crore): 67,858 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 INDIAMarket Capitalization – (Rs.Crore): 39,819 A subsidiary of Nestlé S.A. ofSwitzerland. A largest food andbeverage manufacturer in the worldwith many popular and largest sellingproducts such as MAGGI, NESCAFE,KITKAT and MILKMAID. 4. DABUR INDIA Market Capitalization – (Rs. Crore): 18,632 They has 17 ultra modern manufacturing units around the globe and its products marketed in over 60 countries. 11
  • 12. 5. GODREJ CONSUMER PRODUCTSMarket Capitalization –(Rs.Crore): 13,335 A Household, hair colors, householdinsecticides and Personal Care Products. 6. P&G (Proctor and Gamble India)Market Capitalization – (Rs. Crore): 12,838 Acquisition by Gillette. 12
  • 13. 7. COLGATE-PALMOLIVE Market Capitalization – (Rs.Crore): 12,764 The leading Tooth Paste Brand in India. 8. GSK (Glaxosmithkline Consumer Healthcare)Market Capitalization -(Rs.Crore): 9,842 A pharmaceuticalindustry and over 100,000 employeesWorldwide. 13
  • 14. 9. MARICO Market Capitalization - (Rs.Crore): 9,078 And the company present in more than 25 countries across Asia and the African continent. 10. EMAMIMarket Capitalization - (Rs.Crore): 6,836 And over 20,000 employees. Productsare paper , writing instruments, edible oil andcultivation, bio-diesel, hospitals, contemporaryart, pharmacy, cement, real estate and retail. 14
  • 15. BENEFITS OF FMCG COMPANIESCumulative Profits For a retailers bottom line, the key benefit of CPGs/FMCGs is the cumulative profitthey provide. CPGs/FMCGs have a low profit margin, which means that a small percentageof each each unit sale represents profit. However, CPGs/FMCGs also sell in very highquantities. This means that those small profits add up and can form a significant portion of aretailers total profits for a fiscal period. This profit serves any number of financial purposesin the business.Cross Merchandising Opportunities Retailers thrive when customers buy multiple items on each visit. CPGs/FMCGsprovide opportunities for cross merchandising, which occurs when a business places twoproducts from different categories close to one another in a strategic arrangement. Forexample, an electronics retailer may sell remote controls that have high profit margins butdont fall into the CPG/FMCG category. A shelf of batteries (which are CPGs/FMCGs) nextto those remotes provides a chance to boost sales and earn profit on two items whencustomers choose to buy the batteries they will need to operate their new remotes at the sametime.Brand Appeal When a retailer offers CPGs/FMCGs, it can rely on the brand appeal that theygenerate to drive sales. Most CPGs/FMCGs come from brands that advertise heavily. Thismeans that when customers see CPGs/FMCGs on store shelves they have pre-existingemotional relationships with those brands, which may not be true of the other items that theretailer sells. Seeing recognizable brands may build trust between the customer and retailer orlead to an additional purchase based on brand awareness, with no special effort from theretailer.Diversification Selling CPGs/FMCGs spreads a retailers revenue sources over a broader spectrum ofgoods. The profits can help offset slow sales for other products during seasonal dips indemand or periods of reduced consumer confidence. In the category of CPGs/FMCGs,retailers can choose from among an almost unlimited range of product types includingpharmaceuticals, food items, beverages, household products and disposable items. The rangeis so broad that some retailers, such as grocery stores and convenience markets, stay inbusiness selling them exclusively. 15
  • 16. 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. 16
  • 17. CHAPTER – II COMPANY PROFILE 17
  • 18. 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 fartherwest. Despite their intentions, however, both men ended their travels when they arrived atthe Queen City of the West – William, to care for his ailing wife Martha, who soon died, andJames, to seek medical attention for himself. William Procter quickly established himself as a candle maker. James Gambleapprenticed himself to a soap maker. The two might never have met had they not marriedsisters, Olivia and Elizabeth Norris, whose father convinced his new sons-in-law to becomebusiness partners. In 1837, as a result of Alexander Norris‘ suggestion, a bold new enterprisewas born: Procter & Gamble.1837 — 1890 The Partnership Years.1837 was a difficult time to start a business. AlthoughCincinnati was a bustling marketplace, the U.S. was gripped by financial panic. Hundreds ofbanks were closing across the country. There was widespread concern that the United Stateswas bankrupt. Yet, William and James launched their new enterprise, more concerned abouthow to compete with the 14 other soap and candle makers in their city than with the financialpanic shaking their country. Their calm in the midst of that economic storm reflected their forward-lookingapproach to the business – an approach that became the hallmark of Procter & Gamble. Inthe 1850s, for example, despite rumours of an impending civil war in the U.S., they built anew plant to sustain their growing business. Later, they pioneered one of the nation‘s firstprofit-sharing programs and were amo.ng the first in American industry to invest in aresearch laboratory. By 1890, the fledgling partnership between Procter and Gamble hadgrown into a multi-million dollar corporation. Nevertheless, P&G still had its eyes on thefuture.1837 On April 12, 1837, William Procter and James Gamble start making and selling theirsoap 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 ofProcter & Gamble. Wharf hands used the symbol to distinguish boxes of Star Candles. Bythe 1860s, the Moon and Stars appears on all Company products and correspondence. Once a 18
  • 19. staple of the Company‘s product line, candles decline in popularity with the invention of theelectric 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. TheCompany now employs 80 people. During the Civil War, Procter & Gamble is awarded several contracts to supply soapand candles to the Union armies. These orders keep the factory busy day and night, buildingthe Company‘s reputation as soldiers return home with their P&Gproducts.1879 James Norris Gamble, son of the founder and a trainedchemist, develops an inexpensive white soap equal to high-quality,imported castiles. Inspiration for the soap‘s name – Ivory – came toHarley Procter, the founder‘s son, as he read the words ―out of ivorypalaces‖ in the Bible one Sunday in church. The name seems aperfect match for the white soap‘s purity, mildness and long-lastingqualities. 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 differenttypes 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, theCompany 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 onplans for another. The research labs were as busy as the plants. Innovative new products rolled out oneafter another – Ivory Flakes, a soap in flake form for washing clothes and dishes; Chipso, thefirst soap designed for washing machines; Dreft, the first synthetic house-hold detergent; andCrisco, the first all-vegetable shortening that changed the way consumers cooked. Each ofthese new products came from P&G‘s in-depth understanding of consumer needs andpioneering approach to market research. And they were marketed through equally innovativetechniques, including radio ―soap operas,‖ product sampling and promotional premiums. 19
  • 20. 1890-1896 After running the Company as a partnership for 53 years, the partnersincorporate to raise additional capital for expansion. William AlexanderProcter, son of the founder, is named the first president. P&G sets up ananalytical lab at Ivorydale to study and improve the soap-making process. It isone of the earliest product research labs in America. King Camp Gilletteinvents the first safety razor. P&G‘s first color print advertisement – an ad for Ivory – appears inCosmopolitan magazine picturing this ―Ivory Lady.‖1901-1917 American Safety Razor Company formed in Boston, Massachusetts, later becomingthe Gillette Co. William Cooper Procter becomes the head of the Company following thedeath of his father, William Alexander Procter. P&G introduces Crisco, the first all-vegetable shortening. Crisco provides a healthieralternative to cooking with animal fats and is more economical than butter. The Companybuilds its first manufacturing facility outside the United States, in Canada. Employing 75people, the plant produces Ivory soap and Crisco. U.S. Government requests Gillette supplyrazors 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‘sadvertising innovators. A market research department is created to study consumerpreferences and buying habits – one of the first such organizations in industry. In response tothe growing popularity of perfumed beauty soaps, P&G introduces Camay. William CooperProcter 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 marketingorganization based on competing brands managed by dedicated groups of people. Thesystem 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. Thediscovery of detergent technology lays the groundwork for a revolution in cleaningtechnology. `William Cooper Procter dies and a monument is erected at Ivorydale in hishonor. He is the last member of the founding families to run the Company. 20
  • 21. The Company expands its international presenc with the acquisition of the PhilippineManufacturing Company – the Company‘s first operations in the Far East. P&G celebratesits 100th anniversary. Sales reach $230 million. Just five months after the introduction oftelevision in the U.S., P&G airs its first TV commercial (for Ivory Soap) during the firsttelevised major league baseball game.1943-1946 The Company creates its first division – the Drug Products Division – to sell itsgrowing line of toilet goods. Tide, ―the washing miracle,‖ is introduced. Tide incorporates anew formula that cleans better than anything currently on the market. Its superiorperformance at a reasonable price makes Tide the country‘s leading laundry product by1950.1947 — 1952 P&G‘s detergent technology leads to the development of a wide range of productssuch as granulated and liquid detergents, shampoos, toothpastes and household cleaningproducts that provide growth opportunities in the 1950s and beyond. Neil H. McElroyassumes leadership of P&G. P&G establishes an Overseas Division to manage theCompany‘s growing international business1950-1955 The first subsidiary on the South American continent is established in Venezuela. Anew research facility, Miami Valley Laboratories, opens in Cincinnati. MVL is theCompany‘s first facility dedicated solely to upstream research The Company begins operations in continental Europe by leasing a small plant inMarseilles, France, from the Fournier-Ferrier Company, a detergent manufacturer. Crest, thefirst toothpaste with fluoride clinically proven to fight cavities, is introduced. P&Gannounces plans to form individual operating divisions to better manage its growing lines ofproducts. This divisionalization also creates separate line and staff organizations.1956 The new General Office building opens, signifying P&G‘s continuing commitment todowntown Cincinnati. P&G announces plans to form individual operating divisions to bettermanage its growing lines of products. This divisionalization also creates separate line andstaff organizations. The new General Office building opens, signifying P&G‘s continuingcommitment to downtown Cincinnati1957 P&G enters the consumer paper products business with the acquisition of CharminPaper Mills, a regional manufacturer of toilet tissue, towels and napkins. Howard J. Morgens 21
  • 22. takes over Company leadership when Neil McElroy leaves to serve as the U.S. Secretary ofDefense.1960 Crest sales skyrocket when The American Dental Association recognizes thetoothpaste as ―an effective decay-preventive dentifrice.‖ P&G GmbH opens its first office inFrankfurt, Germany, with 15 employees. Three years later, Germany‘s first plant in Wormsbegins production of Fairy cleaning powder and Dash laundry detergent.1961 Although Pampers‘ first test market in Peoria, Illinois, isunsuccessful, it leads to an improved Pampers product at a lower cost thateventually replaces cloth diapers as the preferred way to diaper babies.1963-1968 P&G enters the coffee business with the acquisition of Folger‘sCoffee. 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 thedryer. It quickly becomes the second largest selling fabric softener after Downy. The Company begins manufacturing and selling P&G products in Japan through theacquisition 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 $10billion. John G. Smale becomes head of Procter & Gamble.1982-1984 P&G increases its prescription and over-the-counter health care business with theacquisition of Norwich Eaton Pharmaceuticals. The Company introduces a superior feminineprotection product, Always/Whisper, which becomes the leading world brand in its categoryby 1985. Gillette acquires Oral B, founded in 1950. Liquid Tide is introduced. This representsthe results of global research with surfactants developed in Japan, fragrance in Europe andpackaging from the United States. 22
  • 23. 1985 The Company significantly expands its over-the-counter and personal health carebusiness worldwide with the acquisition of Richardson- Vicks, owners of Vicks respiratorycare and Oil of Olay product lines. P&G opens the General Offices Tower building, theexpansion 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 theEuropean personal care category, with the acquisition of the Blendax line of products,including Blend-a-med and Blendax toothpastes. P&G announces several major organizationchanges with the creation of category management and a product supply system whichintegrates purchasing, manufacturing, engineering and distribution.1988-1989 The Company announces a joint venture to manufacture products in China. This is theCompany‘s first operation in the largest consumer market in the world. Refill packs areintroduced in Germany for liquid products like Lenor fabric softener. Germany‘s retailgrocers name Lenor‘s refill pouch the invention of the year. The Company enters the cosmetics and fragrances category with the acquisition ofNoxell and its Cover Girl and Noxzema products.1990 Edwin L. Artzt is named to lead the Company. The Company expands its presence inthe male personal care market with the acquisition of Shulton‘s Old Spice product line. Mostof 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 brandsin 20 different countries during the year. 23
  • 24. 1991 The acquisitions of Max Factor and Betrix increase the Company‘s worldwidepresence in the cosmetics and fragrances category. P&G opens its first operation in EasternEurope with the acquisition of Rakona in Czechoslovakia. New businesses in other EasternEuropean countries – Hungary, Poland and Russia – follow throughout the year.1992 P&G receives the World Environment CenterGold Medal for International CorporateEnvironmental Achievement. Pantene Pro-V isintroduced. Originally a small part of the 1985Richardson-Vicks acquisition, Pantene becomes thefastest growing shampoo in the world.1993 Company sales exceed $30 billion. For thefirst time in Company history, more than 50% of sales come from outside the U.S. The JapanHeadquarters and Technical Center opens on Rokko Island in Kobe City, Japan. The complexconsolidates headquarters and product development operations.1994-1995 P&G enters the European tissue and towel market with the acquisition of the German-based company, VP Schickedanz. John E. Pepper becomes P&G‘s ninth Chairman and ChiefExecutive, 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 saltysnacks and crackers. Olestra, marketed under the brand name Olean, is a calorie-free fatreplacer that provides the full taste of fat without the added fat calories. The Companycontinues to expand its global reach with acquisitions of the U.S. baby wipes brand BabyFresh – complementing the Company‘s global diaper business and its strong EuropeanPampers Baby Wipes business1996-1998 Gillette acquires Duracell, originally founded in the early 1920s. The Companyexpands its feminine protection expertise into a new global market with the acquisition ofTambrands. Tampax Tampon is the market leader worldwide. 24
  • 25. P&G announces Organization 2005, a new global organizational design to driveinnovative ideas to world markets faster. Mach 3 razor is introduced. P&G provides afoundation for future growth by investing in new breakthrough products. Febreze, Dryel andSwiffer 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. Lafleybecomes President and Chief Executive. Reflect.com, P&G‘s initial Internet brand, islaunched. 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 fromBristol-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 Vice-Chairman of the Board.2003-2004 FDA approves switching Prilosec, a treatment for frequent heartburn, from aprescription to an over-thecounter (OTC) product. P&G‗s Childrens Safe Drinking WaterProgram 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&Gs first pharmaceutical brand to reach thisimportant milestone.2005 P&G and Gillette merge into one company and add five more billion dollar brands toour product portfolio, including Gillette and Braun‗s shaving and grooming products, theOral-B dental care line and Duracell batteries. 25
  • 26. Purpose, Values & PrinciplesFoundation 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 elementshave 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 moreconsumers‘ lives in small but meaningful ways each day. It inspires P&G people to make apositive contribution every day. P&G Values reflect the behaviours that shape the tone of how they work with eachother and with their partners.PURPOSEP&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‘sconsumers. 26
  • 27. VALUESIntegrityThey 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, recognizingrisks.LeadershipEveryone should have responsibility in their area, with a deep commitment to deliveringleadership 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 organizationalbarriers.OwnershipThe company accept personal accountability to meet their business needs, improve theirsystems and it will improve their effectiveness.Each one act like owners, treating the Company‘s assets as their own and behaving with theCompany‘s long-term success in mind.Passion for WinningThey are determined to be the best at doing what matters most. 27
  • 28. They have a healthy dissatisfaction with the status quo.They have a compelling desire to improve and to win in the marketplace.OwnershipP&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.PRINCIPLESP&G Show Respect for All IndividualsThey 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 InseparableThey believe that doing what is right for the business with integrity will lead to mutualsuccess for both the Company and the individual. their quest for mutual success ties ustogether.They encourage stock ownership and ownership behaviour.P&G Strategically Focused in Their WorkThey 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. 28
  • 29. Innovation Is the Cornerstone of P&G SuccessThey 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 MasteryThey believe it is the responsibility of all individuals to continually develop themselves andothers.They encourage and expect outstanding technical mastery and executional excellence.P&G Seek to Be the BestThey 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 FocusedThey 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 theirsuppliers.They incorporate sustainability into products, packaging and operations.Mutual Interdependency Is a Way of LifeIt work together with confidence and trust across business units, functions, categories andgeographies.They take pride in results from reapplying others‘ ideas. 29
  • 30. P&G INDIA BRANDS 30
  • 31. 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 tobring the compact detergent technology, theenzyme technology for safe and superior stain-removing power and the smart eyes technologyinto India, with an aim of becoming Indias beststain removal detergent. Ariel contains safeingredients for all fabrics under recommendedusage conditions for laundry. The Ariel productrange in India includes different variants to meet your specific needs like ArielOxyBlu, 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. 31
  • 32. Gillette Gillette® has been at the heart of men‘s grooming for over 100 years. Each day, morethan 600 million men around the world trust theirfaces and skin to Gillette‘s innovative razors andshaving products designed for the unique needsof men – helping them to look, feel and be theirbest every day. The razor range in India includesGillette Vector, Gillette Mach3, Gillette Mach3Turbo, Gillette Guard and Gillette Mach3 TurboSensitive and Gillette Fusion. The Shave Carerange includes Gillette Fusion HydraGel, Gillette Series Sensitive Skin Foam, Gillette SeriesAfter Shave & Gillette Classic Shave Foam Sensitive Skin. The Gillette Skincare regimen is a no-fuss and efficient solution in caring for thehealth and appearance of men‘s skin and includes a special range of designed-for-menGillette Skincare Foaming Wash, Gillette Skincare Scrub, Gillette Skincare FacialMoisturizer with Aloe Vera, Gillette Skincare Facial Moisturizer with SPF and GilletteSkincare 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 GrahamWulff for his wife Dinah in 1950s to address her frustrationwith the then thick and waxy beauty creams. Today, Olay isone of the most recognizable brands in the world. Yet throughall the changes and innovations, the philosophy upheld byGraham Wulff remains just as relevant as ever: Help womenlook and feel beautiful and Challenge what‘s possible with their skin. 32
  • 33. Oral-B Oral-B continuously strives to work closely with the dental professionals and deliverhigh quality products, which make us leaders* in the $ 4.5 billion toothbrush category,marketing toothbrushes for children & adults, aswell as inter-dental products such as DentalFloss. In India, Oral-B has an innovative rangeof toothbrushes including Cross Action Pro-health 7 Benefits, Cross Action Pro-healthSuperior Clean and Advantage Sensitivetoothbrush. 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 inthree variants suited for individual needs - Pantene Nourished Shine, Pantene Hair FallControl & Pantene Smooth & Silky. Enriched with thegoodness of pro-vitamins and three essential aminos,Pantene restores your hair with its lost beauty whilemaking your hair ten times stronger. 33
  • 34. 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 ofrespiratory health and through that dedication has developed a widerange of therapeutic products that offer effective relief for all themajor signs and symptoms of the common cold, flu and sinus painand pressure. The Vicks product range in India includes Vicks Coughdrops, Vicks Vaporub, Vicks Inhaler, Vicks Vapocool, and VicksAction 500 Extra.Whisper Whisper understands that were each very different, and offers a wide range ofsanitary napkins to suit every girl or womans needs. With the right menstrual pad, you couldtake 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
  • 35. CHAPTER – IIIANALYSIS OF P&G ON VARIOUS HEADS 35
  • 36. SWOT ANALYSISFINANCIAL ANALYSIS MARKET ANALYSISTECHNICAL ANALYSIS 36
  • 37. 37
  • 38. PROCTER & GAMBLE SWOT ANALYSIS ―SWOT is an acronym for the internal Strengths and Weaknesses of a firm and theenvironmental Opportunities and Threats facing that firm. SWOT analysis is a widely usedtechnique through which managers create a quick overview of a company‘s strategicsituation. The technique is based on the assumption that an effective strategy derives from asound ―fit‖ between a firm‘s internal resources (strengths and weaknesses) and its externalsituation (opportunities and threats). A good fit maximizes a firm‘s strengths andopportunities and minimizes its weaknesses and threats. Accurately applied, this simpleassumption has powerful implications for the design of a successful strategy.‖Procter & Gamble P&G is the worlds largest consumer goods company that markets more than 300brands in over180 countries. The company is engaged in producing beauty, health, fabric,home, baby, family and personal care products. The companys product portfolio alsoincludes pet health products and snacks. The companys leading market position along withits strong brand portfolio provides it with a significant competitive advantage. However,slowdown in global economic condition is making it increasingly difficult for brandedproduct manufacturers like P&G to maintain their sales volume and revenue growth. 38
  • 39. 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
  • 40.  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 & Gs long-term goals  Company is constantly trying to pursue growth overseas. 40
  • 41. Threats  There is a cut throat competition in the fast moving consumers 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 & Gs 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. 42
  • 43. STRATEGY They are focused on strategies that the right for the long- term health of the Companyand 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 inwhich they compete,Deliver earnings per share (EPS) growth of high single digits to low double digits, andGenerate free cash flow productivity of 90% or greater.In order to achieve these targets, they are prioritizing the strategies and resources that willmake 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 costfocused 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 offiscal 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 thansales growth while still increasing consumer reach and effectiveness, saving approximately$1 billion over the five year period. 43
  • 44. Procter and Gamble: Still a Champion Blue-Chip Procter and Gamble (NYSE: PG) is a worldwide consumer products company, andone of the largest companies in the world. The company has grown its dividend for well over50 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 whencalled the stock fairly valued and a ―hold‖, but the company seems to have a diminished moatand lackluster growth prospects. Over the long-run, earnings will begin inching up and therate of return will be positive, but they don‘t view the current valuation as appropriate for thestock performance with a margin of safety. They would desire a 10% pullback or more toinvest.Overview Founded in 1837, Procter and Gamble (symbol: PG) is now one of the largestcompanies in the world. They sell their products in over 180 countries and currently have amarket capitalization of over $180 billion. The company is known as one of the most solidblue chip dividend stocks with the history of more than five decades of consecutive annualdividend 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 bringsin 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, whichincludes brands like Braun, Fusion, and Gillette. 44
  • 45. Health Care Procter and Gamble offers a number of feminine care, oral care, and symptom-careproducts, including Oral-B, Vicks, and Always. The company generates 15% of sales and17% of earnings from this segment.Fabric/Home Care The company has a variety of brands like Duracell batteries, Tide detergent, andFebreeze 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 generates19% 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% comefrom Western Europe, 18% come from Asia, 14% come from Africa, the Middle East, andCentral/Eastern Europe, and 10% come from Latin America. 45
  • 46. RATIOSPrice to Earnings: 22Price to Free Cash Flow: 22Price to Book: 3Return on Equity: 17% REVENUE CHART Sales grew at an annualized rate of 5.7% over this period, but over a more recentperiod, sales growth has been flat. The company has restated numbers which are not shownhere, 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 thelarge Folgers coffee brand to Smuckers, rather than focusing on growth. Still, investors arebroadly and correctly unimpressed by Procter and Gamble‘s performance over this period. 46
  • 47. 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 combinedwith 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 ofunder 60%. The dividend has grown by a rate of 11% annually, and the most recent increasewas 7%. 47
  • 48. Approximate historical dividend yield at beginning of each year: Year YieldCurrent 3.28%2012 3.1%2011 3.0%2010 2.9%2009 1.8%2008 2.5%2007 1.9%2006 1.9% 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 3years, the company spent over $17 billion on share repurchases and over $17 billion ondividends. 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 3xs. However, over 80% of the existing shareholder equity consists of goodwill. Much of PG‘sgrowth 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 highinterest coverage ratio, and good investment grades. The only real downside to the balancesheet is the large quantity of goodwill, but overall, it‘s in good shape. 48
  • 49. INVESTMENT THESIS Procter and Gamble is the largest company in the world at what it does, and has 25billion-dollar brands. The company‘s goals, as stated in their most recent annual report, werefor an organic sales growth rate of 1-2% above global market growth rates, earnings growthin 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% compoundannual sales growth in Brazil, 25% compound annual sales growth in Russia, 27% compoundannual sales growth in India, and 17% compound annual sales growth in China, over the last10-year period. For example, if a company can achieve 2% annual volume growth and 3% pricinggrowth on that volume (basically in line with a standard inflation rate), then the revenuegrowth is around 5%. If a company then buys back 3% of its market cap in stockbuybacks each year and net profit margins remain static, then EPS growth is in the ballparkof 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. Inaddition, if the valuation of the stock is too high, it drives down the dividend yield andreduces the number of shares that the company can repurchase, which in turn reduces the EPSgrowth rate. That‘s something that not everyone realizes: that for a company that doesbuybacks, a high stock valuation results in a measurable reduction in EPS growth comparedto if the stock valuation were low. Slow and profitable growth works great when thevaluation is low enough to provide double-digit returns. For Procter and Gamble, they announced earlier in 2012 a plan to save $10 billion inoperations by the end of 2016. Specifically, they call for $6 billion in savings on cost ofgoods (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 insavings from marketing, or around $200 million per year. To do this and keep the top line intact means that these savings can go towardsdividends, buybacks, or strengthening the balance sheet. 49
  • 50. RISKS Procter and Gamble faces commodity cost risk and global currency risk. Morespecifically, they operate in a highly competitive industry, and if consumers are looking toreduce spending, they can switch and have switched to private label products. Plus, otherbranded 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, andcontinue to grow global volume, then their earnings growth rate won‘t match their target rateof high single digits or better per year. 50
  • 51. THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts in Millions Except Per Share Amounts) Consolidated Earnings Information Three Months Ended March Nine Months Ended March 31 31 2012 2011 % CHG 2012 2011 % CHGNET SALES $ 20,194 $ 19,893 2 % $ 63,468 $ 60,653 5 %Cost of products sold 10,237 9,789 5 % 31,894 29,327 9 %Selling, general & administrative 6,636 6,399 4 % 19,769 19,010 4 %expenseGoodwill & indefinite lived 22 0 - 1,576 0 -intangible impairment chargesOPERATING INCOME 3,299 3,705 (11) % 10,229 12,316 (17) %Total interest expense 179 202 (11) % 587 619 (5) %Other non-operating 67 104 (36) % 238 171 39 %income/(expense),EARNINGS FROMCONTINUING OPERATIONS 3,187 3,607 (12) % 9,880 11,868 (17) %BEFORE INCOME TAXESIncome taxes on continuing 754 748 1 % 2,776 2,638 5 %operationsNET EARNINGS FROM 2,433 2,859 (15) % 7,104 9,230 (23) %CONTINUING OPERATIONSNET EARNINGS FROMDISCONTINUED 34 47 (28) % 133 158OPERATIONSNet earnings 2,467 2,906 (15) % 7,237 9,388 (23) %Less: net earnings attributable to 56 33 70 % 112 101 11 %non controlling interestsNET EARNINGSATTRIBUTABLE TO 2,411 2,873 (16) % 7,125 9,287 (23) %PROCTER & GAMBLEEffective tax rate 23.7 % 20.7 % 28.1 % 22.2 % 51
  • 52. BASIC NET EARNINGS PERCOMMON SHARE (1):Earnings from continuing $ 0.84 $ 0.99 (15) % $ 2.47 $ 3.18 (22) %operationsEarnings from discontinued $ 0.01 $ 0.02 (50) % $ 0.05 $ 0.06 (17) %operationsBASIC NET EARNINGS PER $ 0.85 $ 1.01 (16) % $ 2.52 $ 3.24 (22) %COMMON SHAREDILUTED NET EARNINGSPER COMMON SHARE (1):Earnings from continuing $ 0.81 $ 0.94 (14) % $ 2.37 $ 3.04 (22) %operationsEarnings from discontinued $ 0.01 $ 0.02 (50) % $ 0.05 $ 0.05 0 %operationsDILUTED NET EARNINGS $ 0.82 $ 0.96 (15) % $ 2.42 $ 3.09 (22) %PER COMMON SHAREDIVIDENDS PER COMMON $ 0.5250 $ 0.4818 9 % $ 1.5750 $ 1.4454 9 %SHAREAverage diluted shares 2,937.8 2,999.3 2,944.9 3,008.6outstanding 52
  • 53. COMPARISONS AS A % OF Basis Pt Basis PtNET SALES Chg ChgGross margin 49.3 % 50.8 % (150) 49.7 % 51.6 % (190)Selling, general & administrative 32.9 % 32.2 % 70 31.1 % 31.3 % (20)expenseGoodwill & indefinite livedintangible 0.1 % 0.0 % 10 2.5 % 0.0 % 250Impairment chargesOperating margin 16.3 % 18.6 % (230) 16.1 % 20.3 % (420)Earnings from continuingoperations before income 15.8 % 18.1 % (230) 15.6 % 19.6 % (400)TaxesNet earnings 12.0 % 14.4 % (240) 11.2 % 15.2 % (400)NET EARNINGS 11.9 % 14.4 % (250) 11.2 % 15.3 % (410)ATTRIBUTABLE TOPROCTER & GAMBLE 53
  • 54. THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts in Millions) Consolidated Cash Flows Information Nine Months Ended March 31 2012 2011Cash and cash equivalents, $ 2,768 $ 2,879beginning of periodOperating activitiesNet earnings 7,237 9,388Depreciation and amortization 2,427 2,103Share-based compensation 277 295expenseDeferred income taxes (5) 186Gain on sale of businesses (201) (70)Goodwill and indefinite lived 1,576 0intangibles impairment chargesChanges in:Accounts receivable (347) (495)Inventories (287) (817)Accounts payable, accrued and (1,558) (223)other liabilitiesOther operating assets & 131 (831)liabilitiesOther 61 (84)TOTAL OPERATING 9,311 9,452ACTIVITIES 54
  • 55. INVESTINGACTIVITIESCapital expenditures (2,663) (2,066)Proceeds from asset sales 290 89Acquisitions, net of cash (4) (489)acquiredChange in investments 90 97TOTAL INVESTING (2,287) (2,369)ACTIVITIESFINANCINGACTIVITIESDividends to shareholders (4,521) (4,237)Change in short-term debt (122) (420)Additions to long-term debt 3,985 1,536Reductions of long-term debt (2,514) (188)Treasury stock purchases (4,023) (4,536)Impact of stock options and 1,439 691otherTOTAL FINANCING (5,756) (7,154)ACTIVITIESEffect of exchange rate changes (45) 138on cash and cash equivalentsChange in cash and cash 1,223 67equivalentsCASH EQUIVALENTS $ 3,991 $ 2,946 55
  • 56. THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts in Millions) Consolidated Balance Sheet Information March 31, June 30, 2012 2011Cash and cash equivalents $ 3,991 $ 2,768Accounts receivable 6,200 6,275Total inventories 7,239 7,379Other 5,678 5,548TOTAL CURRENT ASSETS 23,108 21,970Net property, plant and equipment 20,384 21,293Net goodwill and other intangible 86,262 90,182assetsOther non-current assets 4,851 4,909TOTAL ASSETS $ 134,605 $ 138,354Accounts payable $ 6,684 $ 8,022Accrued and other liabilities 8,449 9,290Debt due within one year 11,771 9,981TOTAL CURRENT LIABILITIES 26,904 27,293Long-term debt 21,341 22,033Other 20,451 21,027TOTAL LIABILITIES 68,696 70,353 56
  • 57. THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts in Millions) Consolidated Earnings Information Three Months Ended March 31, 2012 Earnings from % Net Earnings % % Change Continuing Change Attributable Change Versus Operations Versus to Net Sales Versus Year Ago Before Income Year Procter & Year Ago Taxes Ago GambleBeauty $ 4,844 1 % $ 710 1 % $ 523 3 %Grooming 1,962 0 % 530 -9 % 398 -4 %Health Care 3,018 2 % 638 -3 % 411 -4 %Fabric Care and 6,595 1 % 1,161 -7 % 716 -9 %Home CareBaby Care and 4,153 5 % 903 9 % 573 9 %Family CareCorporate (378) N/A (755) N/A (210) N/ATOTAL 20,194 2 % 3,187 -12 % 2,411 -16 %COMPANY 57
  • 58. Nine Months Ended March 31, 2012 Earnings from % Net Earnings % % Change Continuing Change Attributable Change Net Sales Versus Operations Versus to Versus Year Ago Before Income Year Procter & Year Taxes Ago Gamble AgoBeauty $ 15,512 4 % $ 2,652 -6 % $ 2,008 -7 %Grooming 6,332 4 % 1,861 2 % 1,401 2 %Health Care 9,492 4 % 2,222 2 % 1,490 3 %Fabric Care and 20,703 4 % 3,643 -7 % 2,280 -10 %Home CareBaby Care and 12,394 7 % 2,511 5 % 1,583 6 %Family CareCorporate (965) N/A (3,009) N/A (1,637) N/ATOTAL 63,468 5 % 9,880 -17 % 7,125 -23 %COMPANY 58
  • 59. Three Months Ended March 31, 2012 (Percent Change vs. Year Ago) * Volume Volume With Without Acquisitions Acquisitions/ Foreign Net Sales / Divestitures Divestitures Exchange Price Mix/Other GrowthBeauty 1 % 1 % -1 % 5 % -4 % 1 %Grooming 1 % 1 % -2 % 3 % -2 % 0 %Health Care 0 % -1 % -1 % 3 % 0 % 2 %Fabric Care and -3 % -3 % -1 % 7 % -2 % 1 %Home CareBaby Care and 3 % 3 % -1 % 5 % -2 % 5 %Family CareTotal Company 0 % 0 % -1 % 5 % -2 % 2 % 59
  • 60. Nine Months Ended March 31, 2012 (Percent Change vs. Year Ago) * Volume Volume With Without Acquisitions Acquisitions/ Foreign Net Sales / Divestitures Divestitures Exchange Price Mix/Other GrowthBeauty 2 % 3 % 2 % 3 % -3 % 4 %Grooming 1 % 1 % 2 % 2 % -1 % 4 %Health Care 1 % 1 % 1 % 3 % -1 % 4 %Fabric Care and -1 % -1 % 1 % 6 % -2 % 4 %Home CareBaby Care and 2 % 2 % 1 % 4 % 0 % 7 %Family CareTotal Company 1 % 1 % 1 % 4 % -1 % 5 % 60
  • 61. SHORT-TERM (OPERATING) ACTIVITY RATIOSRATIOS (SUMMARY)Procter & Gamble Co., Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007 Turnover Ratios Inventory turnover 12.45 11.19 12.36 11.49 9.92 11.22 Receivables turnover 13.79 13.16 14.80 13.54 12.35 11.54 Payables turnover 10.57 10.29 10.89 13.22 12.33 13.39 Working capital 17.19 14.66 17.67 11.73 9.94 9.88 turnover Average No. of Days Average inventory 29 33 30 32 37 33 processing period Add: Average 26 28 25 27 30 32 receivable collection period Operating cycle 56 60 54 59 66 64 Less: Average payables 35 35 34 28 30 27 payment period Cash conversion 21 25 21 31 37 37 cycle 61
  • 62. INVENTORY TURNOVER Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007 Selected Financial Data (USD $ in millions) Net sales 83,680 82,559 78,938 79,029 83,503 76,476 Inventories 6,721 7,379 6,384 6,880 8,416 6,819 Inventory Turnover, Comparison to Industry Procter & Gamble 12.45 11.19 12.36 11.49 9.92 11.22 Co. Industry, Consumer – 11.02 10.51 10.01 10.56 – GoodsInventory turnover = Net sales / Inventories = 83,680 / 6,721 = 12.45 Ratio Description The companyInventory An activity ratio calculated as Procter & Gamble Co.s inventory turnoverturnover revenue divided by inventory. deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level. 62
  • 63. RECEIVEBLE TURNOVER Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007Selected Financial Data (USD $ in millions)Net sales 83,680 82,559 78,938 79,029 83,503 76,476Accounts 6,068 6,275 5,335 5,836 6,761 6,629receivableReceivables Turnover, Comparison to IndustryProcter & 13.79 13.16 14.80 13.54 12.35 11.54GambleCo.1Industry, – 12.21 11.17 12.64 12.03 –ConsumerGoods Receivable turnover = Net Sales / Accounts receivable = 83,680 / 6,068 = 13.79 Ratio Description The company Receivables An activity ratio equal to revenue Procter & Gamble Co.s receivables turnover turnover divided by receivables. deteriorated from 2010 to 2011 but then slightly improved from 2011 to 2012. 63
  • 64. PAYABLE TURNOVER Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007Selected Financial Data (USD $ in millions)Net sales 83,680 82,559 78,938 79,029 83,503 76,476Accounts payable 7,920 8,022 7,251 5,980 6,775 5,710Payables Turnover, Comparison to IndustryProcter & Gamble Co. 10.57 10.29 10.89 13.22 12.33 13.39Industry, Consumer – 13.32 11.93 15.94 13.46 –Goods Payable turnover = Net sales / Accounts payable = 83,680 / 7,920 = 10.57 Ratio Description The company Payables An activity ratio calculated as Procter & Gamble Co.s payables turnover turnover revenue divided by payables. declined from 2010 to 2011 but then slightly increased from 2011 to 2012. 64
  • 65. WORKING CAPITAL TURNOVER Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007 Selected Financial Data (USD $ in millions) Net sales 83,680 82,559 78,938 79,029 83,503 76,476 Working capital 4,869 5,632 4,468 6,736 8,402 7,738 Working Capital Turnover, Comparison to Industry Procter & Gamble Co. 17.19 14.66 17.67 11.73 9.94 9.88 Industry, Consumer – 10.25 9.92 8.60 9.66 – Goods Working capital turnover = Net sales / working capital = 83,680 / 4,869 = 17.19 Ratio Description The companyWorking capital An activity ratio calculated as Procter & Gamble Co.s working capitalturnover revenue divided by working turnover deteriorated from 2010 to 2011 but capital. then improved from 2011 to 2012 not reaching 2010 level. 65
  • 66. AVERAGE INVENTORY PROCESSING PERIODNo. Of days Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007Selected Financial DataInventory turnover 12.45 11.19 12.36 11.49 9.92 11.22Average Inventory Processing Period (no. of days), Comparison to IndustryProcter & Gamble Co. 29 33 30 32 37 33Industry, Consumer – 33 35 36 35 –GoodsAverage inventory processing period = 365 / Inventory turnover = 365 / 12.45 = 29 Ratio Description The companyAverage An activity ratio equal to the Procter & Gamble Co.s average inventoryinventory number of days in the period processing period deteriorated from 2010 to 2011processing divided by inventory turnover but then improved from 2011 to 2012 exceedingperiod over the period. 2010 level. 66
  • 67. AVERAGE RECEIVEBLE COLLECTION PERIOD No. Of days Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 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. 26 28 25 27 30 32 Industry, Consumer – 30 33 29 30 – Goods Average receivable collection period = 365 / receivable turnover = 365 / 13.79 = 26 Ratio Description The companyAverage An activity ratio equal to the Procter & Gamble Co.s average receivablereceivable number of days in the period collection period deteriorated from 2010 to 2011collection divided by receivables turnover. but then slightly improved from 2011 to 2012.period 67
  • 68. OPERATING CYCLE Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007 Selected Financial Data Average inventory 29 33 30 32 37 33 processing period Average receivable 26 28 25 27 30 32 collection period Operating Cycle, Comparison to Industry Procter & Gamble 56 60 54 59 66 64 Co. Industry, Consumer – 63 67 65 65 – Goods Operating cycle = Average inventory processing period + Average receivable collection period = 29 + 26 = 56 Ratio Description The companyOperating Equal to average inventory Procter & Gamble Co.s operating cyclecycle processing period plus average deteriorated from 2010 to 2011 but then receivables collection period. improved from 2011 to 2012 not reaching 2010 level. 68
  • 69. AVERAGE PAYABLES PAYMENT PERIOD No. Of days Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 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 & 35 35 34 28 30 27 Gamble Co. Industry, – 27 31 23 27 – Consumer Goods Average payable payment period = 365 / payable turnover = 365 / 10.57 = 35 Ratio Description The companyAverage An estimate of the average number of days Procter & Gamble Co.s averagepayables it takes a company to pay its suppliers; payables payment period increasedpayment equal to the number of days in the period from 2010 to 2011 but then slightlyperiod divided by payables turnover ratio for the declined from 2011 to 2012. period. 69
  • 70. CASH CONVERSION CYCLE No. Of days Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007 Selected Financial Data Average inventory 29 33 30 32 37 33 processing period Average receivable 26 28 25 27 30 32 collection period Average payables 35 35 34 28 30 27 payment period Cash Conversion Cycle, Comparison to Industry Procter & Gamble Co. 21 25 21 31 37 37 Industry, Consumer – 36 37 42 38 – Goods Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period = 29 + 26 – 35 = 21 Ratio Description The companyCash A financial metric that measures the length of Procter & Gamble Co.s cashconversion time required for a company to convert cash conversion cycle deteriorated fromcycle invested in its operations to cash received as a 2010 to 2011 but then improved result of its operations; equal to average from 2011 to 2012 not reaching inventory processing period plus average 2010 level. receivables collection period minus average payables payment period. 70
  • 71. LONG-TERM (INVESTMENT) ACTIVITY RATIOSRATIOS (SUMMARY)Procter & Gamble Co., Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007Net fixed 4.11 3.88 4.10 4.06 4.05 3.91assetturnoverTotal asset 0.63 0.60 0.62 0.59 0.58 0.55turnoverEquity 1.32 1.22 1.29 1.25 1.20 1.15turnover 71
  • 72. NET FIXED ASSET TURNOVER Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007 Selected Financial Data (USD $ in millions) Net sales 83,680 82,559 78,938 79,029 83,503 76,476 Net property, 20,377 21,293 19,244 19,462 20,640 19,540 plant and equipment Net Fixed Asset Turnover, Comparison to Industry Procter & 4.11 3.88 4.10 4.06 4.05 3.91 Gamble Co. Industry, – 3.67 3.47 3.62 4.10 – Consumer GoodsNet fixed asset turnover = Net sales / Net property, plant and equipment = 83,680 / 20,377 = 4.11 Ratio Description The company Net fixed asset An activity ratio calculated as total Procter & Gamble Co.s net fixed turnover revenue divided by net fixed assets. asset turnover deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level. 72
  • 73. TOTAL ASSET TURNOVER Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007 Selected Financial Data (USD $ in millions) Net sales 83,680 82,559 78,938 79,029 83,503 76,476 Total assets 132,244 138,354 128,172 134,833 143,992 138,014 Total Asset Turnover, Comparison to Industry Procter & Gamble 0.63 0.60 0.62 0.59 0.58 0.55 Co. Industry, Consumer – 0.77 0.75 0.81 0.88 – GoodsTotal asset turnover = Net sales / Total asset = 83,680 / 132,244 = 0.63 Ratio Description The company Total asset An activity ratio calculated as total Procter & Gamble Co.s total asset turnover revenue divided by total assets. turnover deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level. 73
  • 74. EQUITY TURNOVER Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007Selected Financial Data (USD $ in millions)Net sales 83,680 82,559 78,938 79,029 83,503 76,476Shareholders equity 63,439 67,640 61,115 63,099 69,494 66,760attributable to parentEquity Turnover, Comparison to IndustryProcter & Gamble Co. 1.32 1.22 1.29 1.25 1.20 1.15Industry, Consumer – 2.19 2.11 2.25 2.39 –GoodsEquity turnover = Net sales / Shareholders’ equity attributable to parent = 83,680 / 63,439 = 1.32 Ratio Description The companyEquity turnover An activity ratio calculated as total Procter & Gamble Co.s equity revenue divided by shareholders turnover deteriorated from 2010 to equity. 2011 but then improved from 2011 to 2012 exceeding 2010 level. 74
  • 75. LIQUIDITY ANALYSISProcter & Gamble Co. (PG) Ratios (Summary) Current Ratio Quick Ratio Cash RatioRatios (Summary)Procter & Gamble Co., liquidity ratios Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007Current ratio 0.88 0.80 0.77 0.71 0.79 0.78Quick ratio 0.42 0.33 0.34 0.34 0.33 0.40Cash ratio 0.18 0.10 0.12 0.15 0.11 0.18 75
  • 76. CURRENT RATIO Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007 Selected Financial Data (USD $ in millions) Current assets 21,910 21,970 18,782 21,905 24,515 24,031 Current liabilities 24,907 27,293 24,282 30,901 30,958 30,717 Current Ratio, Comparison to Industry Procter & 0.88 0.80 0.77 0.71 0.79 0.78 Gamble Co. Industry, – 1.10 1.20 1.10 1.07 – Consumer GoodsCurrent ratio = Current assets / current liabilities = 21,910 / 24,907 = 0.88 Ratio Description The company Current ratio A liquidity ratio calculated as Procter & Gamble Co.s current current assets divided by ratio improved from 2010 to current liabilities. 2011 and from 2011 to 2012. 76
  • 77. QUICK RATIO Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007Selected Financial Data (USD $ in millions)Cash and cash 4,436 2,768 2,879 4,781 3,313 5,354equivalentsInvestment – – – – 228 202securitiesAccounts 6,068 6,275 5,335 5,836 6,761 6,629receivableTotal quick assets 10,504 9,043 8,214 10,617 10,302 12,185Current liabilities 24,907 27,293 24,282 30,901 30,958 30,717Quick Ratio, Comparison to IndustryProcter & Gamble 0.42 0.33 0.34 0.34 0.33 0.40Co.Industry, – 0.75 0.82 0.70 0.69 –Consumer GoodsQuick ratio = total quick assets / current liabilities = 10,504 / 24,907 = 0.42 Ratio Description The companyQuick ratio A liquidity ratio calculated as (cash Procter & Gamble Co.s quick ratio plus short-term marketable deteriorated from 2010 to 2011 but investments plus receivables) divided then improved from 2011 to 2012 by current liabilities. exceeding 2010 level. 77
  • 78. CASH RATIO Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007Selected Financial Data (USD $ in millions)Cash and cash 4,436 2,768 2,879 4,781 3,313 5,354equivalentsInvestment – – – – 228 202securitiesTotal cash 4,436 2,768 2,879 4,781 3,541 5,556assetsCurrent 24,907 27,293 24,282 30,901 30,958 30,717liabilitiesCash Ratio, Comparison to IndustryProcter & 0.18 0.10 0.12 0.15 0.11 0.18Gamble Co.Industry, – 0.33 0.35 0.28 0.23 –ConsumerGoodsCash ratio = Total cash assets / Current liabilities = 4,436 / 24,907 = 0.18 Ratio Description The companyCash ratio A liquidity ratio calculated as (cash Procter & Gamble Co.s cash ratio plus short-term marketable deteriorated from 2010 to 2011 but then investments) divided by current improved from 2011 to 2012 exceeding liabilities. 2010 level. 78
  • 79. LONG-TERM DEBT AND SOLVENCY ANALYSISProcter & Gamble Co. (PG) | Ratios (Summary) Debt to Equity Debt to Capital Interest CoverageRatios (Summary)Procter & Gamble Co., debt and solvency ratios Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007Debt to equity 0.47 0.47 0.49 0.59 0.53 0.53Debt to capital 0.32 0.32 0.33 0.37 0.35 0.35Interest 19.69 19.43 18.91 13.86 11.96 12.28coverage 79
  • 80. DEBT TO EQUITY Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007Selected Financial Data (USD $ in millions)Debt due within 8,698 9,981 8,472 16,320 13,084 12,039one yearLong-term debt 21,080 22,033 21,360 20,652 23,581 23,375Total debt 29,778 32,014 29,832 36,972 36,665 35,414Shareholders 63,439 67,640 61,115 63,099 69,494 66,760equity attributableto parentDebt to Equity, Comparison to IndustryProcter & Gamble 0.47 0.47 0.49 0.59 0.53 0.53Co.Industry, – 1.01 0.97 0.97 0.87 –Consumer GoodsDebt to equity = Total debt / Shareholders’ equity attributable to parent = 29,778 / 63,439 = 0.47 Ratio Description The companyDebt-to-equity ratio A solvency ratio calculated as Procter & Gamble Co.s debt- total debt divided by total to-equity ratio improved from shareholders equity. 2010 to 2011 and from 2011 to 2012. 80
  • 81. DEBT TO CAPITAL Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007 Selected Financial Data (USD $ in millions) Debt due within one 8,698 9,981 8,472 16,320 13,084 12,039 year Long-term debt 21,080 22,033 21,360 20,652 23,581 23,375 Total debt 29,778 32,014 29,832 36,972 36,665 35,414 Shareholders equity 63,439 67,640 61,115 63,099 69,494 66,760 attributable to parent Total capital 93,217 99,654 90,947 100,071 106,159 102,174 Debt to Capital, Comparison to Industry Procter & Gamble Co. 0.32 0.32 0.33 0.37 0.35 0.35 Industry, Consumer – 0.50 0.49 0.49 0.47 – GoodsDebt to capital = Total debt / Total capital = 29,776 / 93,217 = 0.32 Ratio Description The company Debt-to-capital A solvency ratio calculated as total debt Procter & Gamble Co.s debt- ratio divided by total debt plus shareholders to-capital ratio improved from equity. 2010 to 2011 and from 2011 to 2012. 81
  • 82. INTEREST COVERAGE Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2012 2011 2010 2009 2008 2007 Selected Financial Data (USD $ in millions) Net earnings attributable to 10,756 11,797 12,736 13,436 12,075 10,340 Procter & Gamble Add: Net earnings 148 130 110 – – – attributable to noncontrolling interests Add: Interest expense 769 831 946 1,358 1,467 1,304 Add: Income tax expense 3,468 3,392 4,101 4,032 4,003 4,370 (benefit) Earnings before interest 15,141 16,150 17,893 18,826 17,545 16,014 and tax (EBIT) Interest Coverage, Comparison to Industry Procter & Gamble Co. 19.69 19.43 18.91 13.86 11.96 12.28 Industry, Consumer Goods – 14.76 12.20 10.17 20.33 –Interest coverage = EBIT / Interest expense = 15,141 / 769 = 19.69 Ratio Description The company Interest A solvency ratio calculated as Procter & Gamble Co.s interest coverage ratio EBIT divided by interest coverage ratio improved from 2010 to payments. 2011 and from 2011 to 2012. 82
  • 83. 83
  • 84. MARKET ANALYSISPorter five forces competitive analysis for P&GThreat 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. 84
  • 85. 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. 85
  • 86. Main competitors:  HUL  KIMBERLY CLARK LIVER PVT. LTD.  JOHNSON AND JOHNSON COMPETITORS ON THE BASIS OF PRODUCT PRODUCT NAME COMPETITORS NAME Vicks Amirtanjan Bam, Zandu Bam, Cold Snap, Pharma’o cold Pantene Sunsilk, Clinic Plus Ariel Surf Excel, Rin Whisper Kotex, Stayfree Pamper Huggies, Snuggy Baby Diapers 86
  • 87. STRENGTH IN STRUCTURE Global Business Units (GBUs) Focus on consumers, brands and competitors inIndia. They are responsible for the innovation profitability from theirbusinesses.Market Development Organizations (MDOs) are charged with knowingconsumers and retailers in each market.Global Business Services (GBS) utilizes P&G talent and expert partners toprovide best-in-class business support services at the lowest costs.Lean Corporate Functions ensure ongoing functional innovation and capabilityimprovement. 87
  • 88. Business level  Efforts to build competitive advantage  Collaborative partnership and strategic alliance  Distribution channelFunctional level strategy  Human Resources Strategy  R&D Technology Strategy  Marketing and Sales Strategy VALUE CHAIN ANALYSIS 88
  • 89. Analysis of Primary activity P&G developed extensile economies from its scale of operations infinance, logistics, marketing, Research, new product development, technologyinnovation and other function.Inbound and Outbound Logistics P&G‘s goal has been to create adaptive, reactive supply networksthat will link together sales and supply processes, inside and outside theorganization, to improve product availability.OperationsP&G organized into 3 business units  Beauty  Health and well-being  Household careThe operation group consists of market development organization and globalbusiness servicesSales 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. 89
  • 90. Analysis and Support ActivityFirm Infrastructure: Integrity Passion for Winning Leadership Trust OwnershipProduct R&D P&G has strong commitment to find the best researchers, and retain them withcultural design to reward success, stimulate learning, challenges compliancy andnurture 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 LearningTop 40 Businesses: They define their core business as the top 40 country/category combinations, 20 inHousehold Care and 20 in Beauty & Grooming, which generate the highest level of annualsales and profit.Top 10 Developing Markets: Maintaining the strong growth momentum they have established in developingmarkets is critical to delivering their near- and long-term growth objectives. They arefocusing resources first on the markets that offer the greatest growth opportunity. They willassess the potential for further portfolio expansions beyond the top 10 developing marketsbased on the top- and bottom-line growth progress of the core business. 90
  • 91. 91
  • 92. 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 maywin a quarter here and there, but innovation wins decades. There are manyexamples to prove this. Take their Laundry business in the U.K., for instance. In thelate 1970s, there were competing hard just to defend and maintain our 35% marketshare leadership position. They stepped up their innovation efforts. In the three decades since, theyhave introduced a series of game-changing innovations such as Daz automaticdetergent, concentrated liquid detergent, and most recently, Liquitabs. They nowenjoy 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 out-innovated us. They stepped up their innovation game once again and delivered astring of product breakthroughs including Crest White strips, Crest Pro-Health, andCrest 3D White. P&G’s leadership of the U.S. Dentifrice category, which is nowenabling us to expand these innovative products around the world. The investment continues to pay off. P&G currently have the strongestinnovation and global expansion program in P&G history. They are globalizingproducts such as Gillette Fusion ProGlide, Crest 3D White, Laundry additives, and thePampers thinness and absorbency upgrade. P&G also expanding successfulmarketing innovation such as the SHIKSHA education program in India, in whichP&G contributes a brick to build a school for each pack of product purchased, orthe Pampers “One Pack Equals One Vaccine” campaign with its focus on eradicatingmaternal and neonatal tetanus. The Old Spice “Smell like a Man, Man” campaign generated consumerexcitement and demand that catapulted the brand to market leadership. P&G’s 92
  • 93. global sponsorship of the Olympic Games provides an outstanding platform forintegrated, multi-branded commercial innovation. Today, an Innovation Council made up of three members from P&G and threemembers from Accenture meets regularly to understand the business needs andexplore how new virtual reality technologies can help. Both Accenture and P&Gharvest and share innovative ideas from within the team and across their respectiveorganizations. P&G ultimately governs the program, and projects are prioritized onthe technology readiness and business impact.Top 20 Innovations: Their 20 most important innovations offer significantly higher growthpotential than the balance of the innovation portfolio. Therefore, the growth of theCompany 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. Toconsistently win with consumers around the world across price tiers and preferences,and to consistently win versus our best competitors, each P&G product categorymust have a full portfolio of innovation. The innovation portfolios must include a mixof commercial programs, incremental product improvements and discontinuousinnovations. They have made the creation of more discontinuous innovation a toppriority, dedicating R&D resources and funding to develop new innovations aimed atchanging the game in existing product categories and creating new ones. 93
  • 94. Core StrengthsP&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. Theyinteract with more than five million consumers each year in nearly 100 countries. Theyconduct over 15,000 research studies every year, and invest more than $350 million annuallyin consumer understanding. The insights they gain help us identify opportunities forinnovation and better serve and communicate with our consumers.Innovation P&G is widely recognized as the industry‘s global innovation leader. Nearly allorganic 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 productinnovation coming from P&G today includes at least one major component from an externalpartner. Their contributions have consistently helped us earn honours from the Symphony IRINew 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‘s2011 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. 94
  • 95. CHAPTER – IVSUSTAINABILITY 95
  • 96. Sustainability changes that matters P&G does this through the products and services it offers, manufacturing in anenvironmentally responsible manner, and through its social responsibility programs thatimprove lives for those in need around the world. Sustainability broadly at P&G to include both environmental sustainability and socialresponsibility.ENVIRONMENTAL SUSTAINABILITYA long-term environmental sustainability vision that includes:Powering our plants with 100% renewable energyUsing 100% renewable or recycled materials for all products and packagingHaving zero consumer and manufacturing waste go to landfillsDesigning 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 haveset strategies in Products and Operations that help us deliver against our vision. To ensure weare holding ourselves accountable, we have two sets of goals, for 2012 and 2020, withinProducts and Operations. 96
  • 97. 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 andsoliciting input from hundreds of P&G employees at all levels and functions. Our completevisionary end-points are outlined below. These end-points are long-term in nature becausesome of them will take decades to come to fruition.Using 100% renewable or recycled materials for all products and packagingHaving zero consumer waste go to landfillsDesigning products to delight consumers while maximizing the conservation of resourcesPowering our plants with 100% renewable energyEmitting no fossil-based CO2 or toxic emissionsDelivering effluent water quality that is as good as or better than influent water quality withno contribution to water scarcityHaving zero manufacturing waste go to landfills 97
  • 98. 2020 Sustainability Goals In order to ensure we are making progress toward our long-term environmentalsustainability vision, we have set the following goals for 2020 to hold ourselves accountable.Replace Petroleum-Based 25%*Materials with SustainablySourced RenewableMaterialsCold Water Washing 70% of total washing machine loadsPackaging Reduction 20% (per consumer use)*Consumer Solid Waste Pilot studies in both developed and developing markets to understand how to eliminate landfilled/dumped consumer solid waste*vs. 2010 baselineRenewable Energy Powering our 30%PlantsManufacturing Waste to Landfill < 0.5% (disposed)Truck Transportation Reduction 20% (km/unit of volume)**vs. 2010 baseline 98
  • 99. SOCIAL RESPONSIBILITY P&G‘s focus on purpose-inspired growth drives us to not only serve our consumerswith superior product propositions, but also truly touch and improve the lives of moreconsumers, 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 needaround the world. The programs enable children to get off to a healthy start, receive access toeducation and build skills for life. Since 2007, P&G has improved the lives of over 315 million children. In India, ourCorporate Social Responsibility initiatives ‘Shiksha’ and the‘Parivartan - Whisper SchoolProgram’ are helping children from lesser-privileged backgrounds, by giving them access tohealth and education. SOCIAL RESPONSIBILITY PROGRAMS IN INDIAShiksha (Education): Padhega India. Badhega India. P&G‘s flagship Corporate Social Responsibility Program Shiksha is an integral partof our global philanthropy program - Live, Learn & Thrive. Now in its 8th year, Shiksha hastill date helped 280,000 underprivileged children access their right to education. The programhas built & supported over 140 schools across India, in partnership with NGOs like RoundTable India (RTI), Save the Children (STC), Army Wives Welfare Association (AWWA) andNavy Wives Welfare Association (NWWA), amongst others. 99
  • 100. Shiksha began with P&G India‘s research which revealed education as the one causethat 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 enableconsumers to contribute towards the cause of education of under-privileged children throughsimple brand choices. Since its inception, Shiksha has made a cumulative donation of over Rs. 22 crorestowards helping children on the path to better education. This is a result of the support fromour consumers who participated in the Shikshamovement by buying P&G brands for onequarter 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 workingtowards this vision in partnership with NGOs like Save the Children India, Army WivesWelfare Association (AWWA), Navy Wives Welfare Association (NWWA) and RoundTable 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 andsupporting schools across India, NGO Save the Children laying emphasis on the girl child viasupporting the government‘s Kasturba Gandhi Balika Vidhyalays, and the NGOs AWWAand NWWA serving the unique educational needs of differently-abled children of naval andarmy officer‘s families.Shiksha Schools Shiksha aims to build the educational future of India ‘Brick – by – Brick’ byaddressing the need for better educational infrastructure and building the tangible asset ofschools. Shiksha’s interventions span across health and hygiene facilities at schools such asclean drinking water and separate toilets for boys and girls, advanced educational aids such aslibraries and computer centres, as well as basic infrastructure needs such as classrooms. 100
  • 101. CHAPTER – VRECOMMENDATION & SUGGESTION 101
  • 102. RECOMMENDED OR SUGGESTED STRATEGIES The practice of incomplete market coverage should not be followed because youcannot hijack other company customers and new customers as well. All these scenariosrequire following strategies:MARKET DEVELOPMENT STRATEGY: P&G is emphasizing on urban areas while it has neglected the suburban areas, whichis also a big market for soaps like safeguard. For this purpose, they should efficiently utilizetheir Marketing Information System to collect information about the demand and attitudes ofthe people in these areas. By using this strategy, safeguard can fetch the customers ofcompetitors and will be successful in building new customers.PRODUCT DEVELOPMENT STRATEGY: It describes to develop new products or modify the existing products with respect tosize, colour, packaging, etc. Safeguard is a well-perceived product among the customers, andat this moment, it is available in two sizes; 75gm and 125gm, which cannot satisfy thedemand of every segment. While the products of the competitors are available in multiple sizes which provideabundant choices for purchases to customers for example Lifebuoy Gold has 140gm and95gm and Medicare has80gm soap available in the market. This provides an opportunity to the customer to have multiple choices. It can be athreat for the market share of safeguard. On the other hand, in case of safeguard the choice tocustomer is very limited. This is what they have analyzed through market survey. Therefore, it is necessary that safeguard should be available in maximum possiblesizes to meet the selection criteria of the customer. As far as launching of new product isconcerned, it is not necessary for P&G at this moment, but in future, they will require takingthis step as well because they have some other soap like ivory, and zest which are veryfamous in international market.MARKET PENETRATION STRATEGY: It describes that a company tries to sell more of its product by introducing newsupplementary uses. Safeguard is that product, which contains such chemicals useful forbeauty 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 introducesafeguard into different pack sizes especially for capturing the female customers. 102
  • 103. BIBLIOGRAPHYWWW.PG.COMWWW.WIKIPEDIA.COMWWW.FMCG.COMWWW.PG.COM/EN_IN/ 103
  • 104. 104