DM Product

The Procter & Gamble Company
Company Profile
Publication Date: 30 Jun 2011
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The Procter & Gamble Company Datamonitor
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TABLE OF CONTENTS
TABLE OF CONTENTS
Company Overview..............................................................................................4 Key Facts...............................................................................................................4 Business Description...........................................................................................5 History...................................................................................................................6 Key Employees...................................................................................................10 Key Employee Biographies................................................................................12 Major Products and Services............................................................................18 Revenue Analysis...............................................................................................21 SWOT Analysis...................................................................................................23 Top Competitors.................................................................................................30 Company View.....................................................................................................31 Locations and Subsidiaries...............................................................................39
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Company Overview
COMPANY OVERVIEW
The Procter & Gamble Company (P&G or the company) is one of the world's largest consumer goods companies. It markets branded products in the beauty, health, fabric, home, baby, family, and personal care product categories. The company operates in the Americas, Europe and Asia. It is headquartered in Cincinnati, Ohio, and employs about 127,000 people. The company recorded revenues of $78,938 million during the financial year ended June 2010 (FY2010), an increase of 2.9% over 2009. The operating profit of the company was $16,021 million in FY2010, an increase of 4.2% over 2009. The net profit was $12,736 million in FY2010, a decrease of 5.2% over 2009.
KEY FACTS
Head Office The Procter & Gamble Company One Procter & Gamble Plaza Cincinnati Ohio 45202 USA 1 513 983 1100 1 513 983 9369 http://www.pg.com
Phone Fax Web Address
Revenue / turnover 78,938.0 (USD Mn) Financial Year End Employees New York Ticker June 127,000 PG
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Business Description
BUSINESS DESCRIPTION
The Procter & Gamble Company (P&G or the company) is a global manufacturer and marketer of branded consumer products. The company markets its products in over 180 countries spanning Americas, Europe, the Middle East and Africa (EMEA), and Asian region. The companys reportable segments are classified into six divisions, namely: beauty, grooming, health care, snacks and pet care, fabric care and home care, and baby care and family care. Additionally, the company's organizational structure is comprised of four divisions; Global Business Units (GBUs), Global Operations, Global Business Services (GBS) and Corporate Functions (CF). GBUs of P&G mainly focus on consumers, brands and innovations around the world. It is further organized into three sub-units; Beauty, Health and Well-Being, and Household Care. The Beauty GBU includes the beauty and the grooming businesses. The beauty business is comprised of cosmetics, deodorants, prestige fragrances, hair care, personal cleansing and skin care.The grooming business includes blades and razors, face and shave products, beauty electronics, and small home appliances. The Health and Well-Being GBU includes the health care, and the snacks and pet care businesses. The health care business includes feminine care, oral care and personal health care. The snacks and pet care business includes pet food and snacks. The Household Care GBU includes the fabric care and home care, and the baby care and family care businesses. The fabric care and home care business includes air care, batteries, dish care, fabric care and surface care. The baby care and family care business includes baby wipes, bath tissue, diapers, facial tissue and paper towels. Global Operations is comprised of P&G's Market Development Organization (MDO). MDO is responsible for developing go-to-market plans at the local level. The MDO includes dedicated retail customer, trade channel and country-specific teams. It is organized along five geographic units: North America, Western Europe, Central & Eastern Europe/Middle East/Africa (CEEMEA), Latin America and Asia which comprises Japan, Greater China and ASEAN/Australia/India/ Korea (AAIK). GBS provides technology, processes and standard data tools to enable the GBUs and the MDO to better understand the business and better serve consumers and customers. CF provides the company-level strategy and portfolio analysis, corporate accounting, treasury, external relations, governance, human resources and legal, as well as other centralized functional support.
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History
HISTORY
William Procter and James Gamble established The Procter & Gamble Company (P&G or the company) in 1837 as a soap and candle company in Cincinnati, Ohio. By 1890, P&G was selling more than 30 different types of soap, including Ivory. In 1915, P&G built a manufacturing facility in Canada, its first outside the US. During 1917-1918, the company established the chemicals division to formalize research procedures and develop new products. P&G discontinued candle manufacturing in the 1920s. P&G created a market research department in 1924 to study consumer preferences and purchasing habits. Two years later, the company introduced Camay in response to the growing popularity of perfumed beauty soaps. P&G established its first overseas subsidiary with the purchase of Thomas Hedley & Sons Company, the UK, in 1930.The company introduced Dreft, the first synthetic detergent developed for household use, in 1933. In the following year, P&G entered the hair care business with Drene, the first detergent-based shampoo. The company expanded its international presence with the acquisition of the Philippine Manufacturing Company, the company's first operations in the Far East. P&G created its first division, the drug products division, to sell its growing line of toilet goods in 1943. Tide was introduced in 1946. In the same year, P&G's health and personal care business grew with the introduction of Prell shampoo. Two years later, the company established an overseas division to manage its growing international business. In 1948, P&G began operating in Mexico, its first subsidiary in Latin America. The company began operations in Europe by leasing a small plant in France from the Fournier-Ferrier Company, a detergent manufacturer in 1954. P&G entered the consumer paper products business with the acquisition of Charmin Paper Mills, a manufacturer of toilet tissue, towels and napkins in 1957. It entered the coffee business with the acquisition of Folgers Coffee in 1963. Manufacturing and sales of the company's products in Japan began through the acquisition of the Nippon Sunhome Company in 1973. The new company was called Procter & Gamble Sunhome Company. The company introduced feminine protection product, Always/Whisper, in 1983. In the following year, liquid Tide was launched. P&G expanded its over-the-counter and personal health care business with the acquisition of Richardson-Vicks, owners of Vicks respiratory care and Oil of Olay product lines in 1985. P&G increased its presence in the European personal care category with the acquisition of the Blendax line of products, including Blend-a-Med and Blendax toothpastes. In 1988, P&G announced a joint venture to manufacture products in China, which marked the company's foray into the largest consumer market in the world. In the following year, the company entered the cosmetics and fragrances category with the acquisition of Noxell and its CoverGirl, Noxzema, and Clarion products. P&G also expanded its presence in the male personal care market with the acquisition of Shulton's Old Spice product line in 1990.
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History
The company entered the European tissue and towel market with the acquisition of the Germany-based company, Schickedanz in 1994. In the same year, P&G added Giorgio Beverly Hills to its fine fragrance business and also re-entered the South African market following the lifting of US sanctions against investment in South Africa. In the following year, P&G started managing its business through four geographic regions; North America, Latin America, Asia, and Europe/Middle East/Africa. The company entered the global pet health and nutrition business by acquiring Lams Company, a leader in premium pet foods in 1999. In the following year, P&G gained Food and Drug Administration (FDA) approval for Actonel (risedronate sodium tablets) for the prevention and treatment of postmenopausal osteoporosis (PMO) and glucocorticoid-induced osteoporosis (GIO).The acquisition of Clairol from Bristol-Myers Squibb, in 2001, provided the company with a number of established hair color and hair care brands. In 2003, P&G acquired controlling interest in a leading professional hair care company, Wella. It added dental floss to its product portfolio by purchasing the Glide floss business from W L Gore & Associates, later in 2003. The company announced its agreement to acquire the commercial business of Grupo Vita in Spain in 2004. This provided P&G with strong commercial capabilities in Spain. In the same year, P&G finalized the sale of its juice drink brands, Sunny Delight and Punica, to JW Childs Associates, a private equity company. In early 2005, the company entered into an agreement to acquire the Gillette Company, a leader in male grooming products. The proposed merger with the Gillette Company was later cleared by the European Commission and was finalized later the same year. Duracell, part of P&G, acquired Garrity Industries, a private US based manufacturer and marketer of lighting products in 2006. During the same year, Duracell launched new rechargeable cells designed to meet the growing demands of high-drain devices like digital cameras. The company opened its largest Gillette blades and razors operations facility in Poland in 2006. In 2007, P&G reorganized its operations internally, in which the Gillette Blade and Razor and Braun businesses became part of P&G Beauty and Health, and the Duracell battery business joined P&G Household Care. In the same year, the company acquired HDS Cosmetics Lab from North Castle Partners, a private equity firm. HDS Cosmetics Lab manufactures and markets Doctor's Dermatologic Formula (DDF) skin care products. During the same year, Dunkin' Brands and P&G signed an agreement to launch Dunkin' Donuts coffee at retail. P&G Coffee was responsible for distributing Dunkin' Donuts packaged coffee to grocery stores, mass merchandisers, club stores and other consumer retail channels across the US. Further, the company divested its Western European tissue/towel business to SCA, a global consumer goods and paper company. Later in the year, P&G realigned its business units into three global business units (GBUs): Beauty Care, Global Health & Well Being, and Household Care. In 2007, Inverness Medical Innovations and P&G announced the completion of the 50/50 joint venture for the development, manufacturing, marketing and sale of existing and to-be-developed consumer diagnostic products, outside the cardiology, diabetes and oral care fields. Inverness contributed its related consumer diagnostic assets, other than its manufacturing and core intellectual property
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History
assets, to the joint venture, and P&G acquired its interest in the joint venture for a cash payment of approximately $325 million. In the same year, P&G filed a patent lawsuit against Kraft Foods, manufacturer of the Maxwell House Coffee brand. The lawsuit alleged that the new plastic container for Maxwell House coffee directly infringes key P&G patents on Folgers Coffee. Later in the year, Koninklijke Philips Electronics (Philips) filed a lawsuit against P&G, alleging that P&G's advertisement for its Pulsonic line of electric shavers is false and misleading. In the same month, P&G filed a lawsuit against Fruit of the Earth for the infringement of various patents of its Olay Regenerist trade dress. In 2008, P&G filed a lawsuit against Blue Cross Laboratories of California, for the infringement of its Herbal Essences trade dress. In the same year, Hindustan Unilever Limited filed a suit against P&G in the Calcutta High Court for the alleged infringement of trademark of its product Sunlight by Tide of P&G. Also in 2008, P&G and Palomar Medical Technologies (Palomar), entered into a non exclusive License Agreement to exploit home use light based hair removal devices for women. This new agreement will replace the Development and License Agreement entered into by Palomar and the Gillette Company, a wholly owned subsidiary of P&G, way back in 2003. Further, P&G acquired Frederic Fekkai & Co, which includes high-end hair care products and salons. Towards the end of 2008, P&G completed the sale of its Folgers coffee business to the JM Smucker Company. In 2009, P&G reached a settlement with Kraft Foods regarding P&G patents to plastic packaging for roast and ground coffee. The settlement covered pending cases related to this matter between P&G and Kraft Foods. The financial terms and the details of this settlement were not disclosed. During the same year, P&G and Fruit of the Earth reached a settlement in the lawsuit P&G filed in December 2007 against Fruit of the Earth for trade dress and patent infringement on its Olay Regenerist brand. Fruit of the Earth recognized the validity of P&G's rights in the Olay Regenerist Trade Dress and certain of P&G's patent rights identified in the lawsuit. Fruit of the Earth also agreed to revise its product offerings. The remaining terms of the agreement were not disclosed. Later in the year, P&G, won a patent infringement lawsuit filed against Teva Pharmaceuticals for osteoporosis therapy, Actonel. Also in the year, the company acquired the high-end male grooming brand, Zirh. Further in 2009, P&G sold its global pharmaceuticals business to Warner Chilcott, a leading specialty pharmaceutical company, for an up-front cash payment of $3.1 billion. The company, in 2009, voluntarily recalled three lots of its Vicks Sinex nasal spray in the US, Germany and the UK. In the following month, P&G voluntarily recalled its Vicks DayQuil Cold & Flu 24-Count LiquiCaps Bonus Pack in the US. In March 2010, in response to a recommendation from the Food & Drug Administration (FDA) to the food industry, P&G voluntarily recalled its Pringles Restaurant Cravers Cheeseburger potato crisps and Pringles Family Faves Taco Night potato crisps to protect consumers from potential Salmonella exposure.
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History
P&G launched a new online shopping site, eStore, for the US consumers in May 2010. During the same month, the company entered into an agreement to acquire Natura Pet Products, a privately-held pet food business. In June 2010, the company voluntarily recalled a small percentage of 1-liter bottles of Scope Original Mint and Scope Peppermint mouthwash with malfunctioning child-resistant caps in the US and Canada. During the same month, P&G recalled its 4-Hour Decongestant Nasal Spray distributed in the US. Furthermore, the company recalled specific lots of its Iams canned cat food in North America. P&G completed the acquisition of the Ambi Pur Brand from Sara Lee Corporation in July 2010. In August 2010, the company announced the introduction of a new line-up of one-click faucet mount filtration systems. During the same month, the company entered into a co-promotion agreement with Somaxon Pharmaceuticals for Silenor (doxepin) drug, new approved drug for insomnia treatment. The company announced a Joint Development Agreement (JDA) with Pursuit Dynamics in November 2010 for developing specific applications using the PDX reactor technology in a wide range of production processes at P&G. In the following month, Palomar Medical Technologies announced the amendment to its non-exclusive license agreement with P&G. Under the amended license agreement, P&G and Palomar agreed to reduce pre-commercial launch calendar quarterly payments from $1.25 million to $1 million for the quarter ending December 2010 and thereafter to $2 million per year for an agreed period, after which the payments return to $1.25 million per calendar quarter if no product has been launched. High Ridge Brands, a portfolio company of Brynwood Partners, acquired Zest brand from P&G in January 2011. High Ridge Brands purchased the rights to the Zest brand in the US, Canada and the Caribbean markets. Also in the month, P&G announced the expansion of its renewable energy portfolio by unveiling a wind turbine at pet care plant in Coevorden, Netherlands and extending its commitment to solar energy with the installation of solar panels at its beauty and grooming plant in Cologne, Germany. In February 2011, the company entered into a research partnership with the Institute for Systems Biology, to characterize the systems biology of various skin conditions including skin aging. In the following month, Procter & Gamble Professional launched the P&G ProLine Floor Care System, a complete product lineup of floor care solutions. In March 2011, P&G opened its new Box Elder, Utah Family Care plant. Diamond Foods and P&G signed a definitive agreement to merge the P&Gs Pringles business into Diamond Foods, in April 2011. The company made a voluntary recall of 12 shades of Clairol Natural Instincts in the US, Canada and Puerto Rico, in April 2011. In the following month, P&G filed a lawsuit against Vi-Jon, a private-label manufacturer and distributor of mouthwash, in the US District Court for the Southern District of Ohio. The lawsuit alleges that Vi-Jon was violating P&G's intellectual property by manufacturing and selling its private label mouthwash product to retailers.
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Key Employees
KEY EMPLOYEES
Name
Robert A. McDonald Angela F. Braly Kenneth I. Chenault Scott D. Cook Susan Desmond-Hellmann W. James McNerney Johnathan A. Rodgers Margaret C. Whitman Mary Agnes Wilderotter Patricia A. Woertz Ernesto Zedillo Werner Geissler E. Dimitri Panayotopoulos Edward D. Shirley Robert A. Steele Jon R. Moeller Bruce Brown Charles V. Bergh Steven D. Bishop Giovanni Ciserani
Job Title
Chairman, President and Chief Executive Officer Director Director Director Director Director Director Director Director Director Director Vice Chairman, Global Operations Vice Chairman, Global Household Care
Board
Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Senior Management Senior Management
Compensation
13115228 USD 82261 USD 251256 USD 258446 USD
259334 USD 245158 USD
247800 USD 270808 USD 258714 USD 5679308 USD 6343477 USD 5011454 USD 4690344 USD 3257561 USD
Vice Chairman, Global Beauty and Senior Management Grooming Vice Chairman, Health Care Strategy Chief Financial Officer Chief Technology Officer Group President, Global Male Grooming, Beauty and Grooming Group President, Global Feminine Care Group President, Western Europe and Global Discounter and Pharmaceutical Channels Group President, Global Female Beauty Senior Management Senior Management Senior Management Senior Management Senior Management Senior Management
Virginia Drosos David S. Taylor Jorge S. Mesquita Charles E. Pierce
Senior Management
Group President, Global Home Care Senior Management Group President, Global Fabric Care Senior Management Group President, Global Oral Care Senior Management Senior Management
Mary Lynn Ferguson-McHugh Group President, Global Family Care
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Key Employees
Name
Deborah A. Henretta Laurent L. Philippe
Job Title
Group President, Asia Group President, CEEMEA and Global High Frequency Store Channel President , Global Female Beauty, Beauty and Grooming Global Product Supply Officer Global Human Resources Officer
Board
Senior Management Senior Management
Compensation
Colleen E. Jay R. Keith Harrison Moheet Nagrath Filippo Passerini
Senior Management Senior Management Senior Management
President, Global Business Services Senior Management and Chief Information Officer
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Key Employee Biographies
KEY EMPLOYEE BIOGRAPHIES

Robert A. McDonald
Board: Executive Board Job Title: Chairman, President and Chief Executive Officer Since: 2010 Age: 57 Mr. McDonald is the Chairman, President and Chief Executive Officer at P&G. He is also a Director of Xerox Corporation. Mr. McDonald has nearly 30 years of brand-building, market development, global business unit and global operations leadership experience across P&G.
Angela F. Braly
Board: Non Executive Board Job Title: Director Since: 2009 Age: 49 Ms. Braly has been a Director at P&G since 2009. She also serves as the Chairman, President and Chief Executive Officer at Wellpoint.
Kenneth I. Chenault
Board: Non Executive Board Job Title: Director Since: 2008 Age: 59 Mr. Chenault has been a Director at P&G since 2008. He is currently the Chairman and Chief Executive Officer of the American Express Company. Mr. Chenault is also a Director of International Business Machines Corporation.
Scott D. Cook
Board: Non Executive Board Job Title: Director Since: 2000 Age: 58
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Mr. Cook has been a Director at P&G since 2000. He is the Chairman of the Executive Committee at Intuit. Mr. Cook is also a Director at eBay.
Susan Desmond-Hellmann
Board: Non Executive Board Job Title: Director Since: 2010 Age: 53 Ms. Desmond-Hellmann has been a Director at P&G since 2000. She is the Chancellor and Arthur and Toni Rembe Rock Distinguished Professor at University of California.
W. James McNerney
Board: Non Executive Board Job Title: Director Since: 2003 Age: 61 Mr. McNerney has been a Director at P&G since 2003. He is the Chairman, President and Chief Executive Officer of the Boeing Company. Mr. McNerney also serves on the board of International Business Machines Corporation
Johnathan A. Rodgers
Board: Non Executive Board Job Title: Director Since: 2001 Age: 64 Mr. Rodgers has been a Director at P&G since 2001. He is the President and Chief Executive Officer of TV One. Mr. Rodgers is also a Director of Nike.
Margaret C. Whitman
Board: Non Executive Board Job Title: Director Since: 2011 Age: 54 Ms. Whitman has been a Director at P&G since 2011. She is the former President and Chief Executive Officer of eBay. Ms. Whitman also serves on the board of Hewlett Packard Company.
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Mary Agnes Wilderotter

Board: Non Executive Board Job Title: Director Since: 2009 Age: 55 Ms. Wilderotter has been a Director at P&G since 2009. She is the Chairman, President and Chief Executive Officer of Frontier Communications Corporation. Ms. Wilderotter is also a Director of Xerox Corporation.
Patricia A. Woertz
Board: Non Executive Board Job Title: Director Since: 2008 Age: 57 Ms. Woertz has been a Director at P&G since 2008. She is the Chairman, Chief Executive Officer and President of Archer Daniels Midland Company.
Ernesto Zedillo
Board: Non Executive Board Job Title: Director Since: 2001 Age: 58 Dr. Zedillo has been a Director at P&G since 2001. He is the former President of Mexico, Director of the Center for the Study of Globalization, and Professor in the field of International Economics and Politics at Yale University. Dr. Zedillo is also a Director of Alcoa and Citigroup.
Werner Geissler
Board: Senior Management Job Title: Vice Chairman, Global Operations Since: 2007 Age: 57 Mr. Geissler has been the Vice Chairman, Global Operations at P&G since 2007. He joined the company in 1979 as Brand Assistant in the Marketing department. During his 30 years with the P&G, Mr. Geissler held positions of increasing responsibility in Brand and General Management.
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E. Dimitri Panayotopoulos
Board: Senior Management Job Title: Vice Chairman, Global Household Care Since: 2007 Age: 58 Mr. Panayotopoulos has been the Vice Chairman, Global Household Care at P&G since 2007. He began his career with P&G in 1977 as a Salesman in the UK. Presently, Mr. Panayotopoulos also serves as a member of various school Boards in Switzerland, Germany and Hong Kong.
Edward D. Shirley
Board: Senior Management Job Title: Vice Chairman, Global Beauty and Grooming Since: 2008 Age: 53 Mr. Shirley has been the Vice Chairman, Global Beauty and Grooming at P&G since 2008. He joined the company with the acquisition of Gillette. Prior to the acquisition, Mr. Shirley led Gillettes International Commercial Operations.
Robert A. Steele
Board: Senior Management Job Title: Vice Chairman, Health Care Strategy Since: 2011 Age: 55 Mr. Steele has been the Vice Chairman, Health Care Strategy at P&G since 2011. He joined P&G in 1976 as a Sales Representative. Presently, Mr. Steele serves on the Boards of the Kellogg Company, the United Negro College Fund and the St. Josephs Home for Handicapped Children.
Jon R. Moeller
Board: Senior Management Job Title: Chief Financial Officer Since: 2009 Age: 46 Mr. Moeller has been the Chief Financial Officer at P&G since 2009. He joined P&G in 1988 as Cost analyst Food products after completing his MBA from Cornell University.
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Bruce Brown
Board: Senior Management Job Title: Chief Technology Officer Since: 2008 Age: 52 Mr. Brown has been the Chief Technology Officer at P&G since 2008. He joined the company in 1980 and has nearly has nearly 30 years experience in both developed and developing markets.
Charles V. Bergh
Board: Senior Management Job Title: Group President, Global Male Grooming, Beauty and Grooming Since: 2009 Age: 54 Mr. Bergh has been the Group President, Global Male Grooming, Beauty and Grooming at P&G since 2009. He joined the company in 1983. Presently, Mr. Bergh also serves on the Boards of VF Corporation, United way and Economic Development Board-Singapore.
Steven D. Bishop
Board: Senior Management Job Title: Group President, Global Feminine Care Since: 2010 Age: 45 Mr. Bishop has been the President, Global Feminine Care at P&G since 2009. He joined the company as the Assistant Purchasing Manager, Foods Division in 1986.
Giovanni Ciserani
Board: Senior Management Job Title: Group President, Western Europe and Global Discounter and Pharmaceutical Channels Since: 2010 Age: 49 Mr. Ciserani has been the Group President, Western Europe and Global Discounter and Pharmaceutical Channels at P&G since 2010. He joined the company in 1987. Presently, Mr. Ciserani also serves as the Board member of AIM (Association des Industries de Marque / European Brands Association), ECR Europe (Efficient Consumer Response), and American Chamber of Commerce, Zurich.
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Virginia Drosos
Board: Senior Management Job Title: Group President, Global Female Beauty Since: 2010 Age: 48 Mr. Drosos has been the Group President, Global Female Beauty at P&G since 2010. She joined the company in 1987 and has served at various capacities in the company since then.
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Major Products and Services
MAJOR PRODUCTS AND SERVICES

The Procter & Gamble Company (P&G or the company) is one of the world's largest consumer goods companies. It markets branded products in the beauty, health, fabric, home, baby, family, and personal care product categories. The company's key products include the following: Products: Beauty: Cosmetics Deodorants Hair care Personal cleansing Prestige fragrances Skin care Grooming: Blades and razors Electric hair removal devices Face and shaving products Home appliances Health Care: Feminine care Oral care Personal health care Pharmaceuticals Snacks and pet care: Snacks Pet food Fabric Care and home care: Air care Batteries Dish care Fabric care Surface care
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Baby Care and Family care: Baby wipes Bath tissue Diapers Facial tissue Paper towels Brands: Beauty: Head & Shoulders Olay Pantene Wella Grooming: Braun Fusion Gillette Mach3 Health Care: Actonel Always Crest Oral-B Snacks and pet care: Iams Pringles Fabric Care and home care: Ariel Dawn Downy Duracell Gain Tide Baby Care and Family care:
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Bounty Charmin Pampers
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Revenue Analysis
REVENUE ANALYSIS
The company recorded revenues of $78,938 million during the financial year ended June 2010 (FY2010), an increase of 2.9% over 2009. For FY2010, North America, the company's largest geographic market, accounted for 42% of the total revenues. The company is organized into three Global Business Units (GBUs): Beauty GBU, Health and Well-Being GBU and Household Care GBU.The three GBUs operate under six reportable segments: fabric care and home care (29.6% of the total revenues during FY2010; beauty (24.3%); baby care and family care (18.4%); health care (14.3%); grooming (9.5%); and snacks and pet care (3.9%). Revenues by Division* In FY2010, the fabric care and home care division recorded revenues of $23,805 million in FY2010, an increase of 2.7% over 2009. The beauty division recorded revenues of $19,491 million, an increase of 3% over 2009. The baby care and family care division recorded revenues of $14,736 million in FY2010, an increase of 4.5% over 2009. The health care division recorded revenues of $11,493 million in FY2010, an increase of 1.8% over 2009. The grooming division recorded revenues of $7,631 million in FY2010, an increase of 3% over 2009. The snacks and pet care division recorded revenues of $3,135 million in FY2010, an increase of 0.7% over 2009. *Percentages are calculated including eliminations and are rounded-off. Revenues by Geography** North America, P&G's largest geographical market, accounted for 42% of the total revenues in FY2010. Revenues from North America reached $33,154 million in 2010, an increase of 2.9% over 2009. Western Europe accounted for 21% of the total revenues in FY2010. Revenues from Western Europe reached $16,577 million in 2010, an increase of 2.9% over 2009. Asia accounted for 15% of the total revenues in FY2010. Revenues from Asia reached $11,840.7 million in 2010, an increase of 10.3% over 2009.
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Revenue Analysis
CEEMEA accounted for 13% of the total revenues in FY2010. Revenues from CEEMEA reached $10,261.9 million in 2010, a decrease of 4.4% over 2009. Latin America accounted for 9% of the total revenues in FY2010. Revenues from Latin America reached $7,104.4 million in 2010, an increase of 2.9% over 2009. ** CEEMEA includes Central and Eastern Europe, Middle East and Africa. ***Percentages as reported by the company
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SWOT Analysis
SWOT ANALYSIS
The Procter & Gamble Company (P&G or the company) is one of the world's largest consumer goods companies. With revenues of $78,938 million, P&G is the world's largest consumer products manufacturer, with its products reaching 4.2 billion people worldwide. In addition, P&G has the largest lineup of leading brands in its industry, with 23 brands with over $1 billion in annual sales, and another 20 brands generating about $500 million or more in annual sales. Leading market position and strong brand portfolio provides P&G with significant competitive advantage as well as stabilizes the company's financial growth. However, competitive environment could impact the companys profitability and margins in the future. Strengths Leading market position garnered on a strong brand portfolio Significant R&D and marketing investments Robust cash productivity Opportunities Future growth plans with focus on increasing concentration on its core attractive businesses and enhancing its customer base Increased investment in manufacturing capacity in developing countries Acquisitions to expand portfolio Weaknesses Increasing instances of product recalls
Threats Competitive industry landscape pose challenges for profitability Rising inflation could cause substantial rise in the operating cost Counterfeit goods Volatility in currency exchange rates
Strengths
Leading market position garnered on a strong brand portfolio With revenues of $78,938 million, P&G is the world's largest consumer products manufacturer, with its products reaching 4.2 billion people worldwide. P&G was the 22nd largest company in terms of sales and the 4th largest company in profits among the Fortune 500 list of 2009. The company's market capitalization of roughly $175.2 billion as of March 2011 far exceeds the $46 billion book value of the companys tangible assets, which reflects the higher value placed on the companys brands, the earnings and cash flow. In addition, P&G holds leading global market shares in a variety of categories, including baby care (35%), blades and razors (70%), feminine care (35%), and fabric care (30%). The company's
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SWOT Analysis
leadership position is built on its strong brand portfolio. P&G has the largest lineup of leading brands in its industry, with 23 brands with over $1 billion in annual sales, and another 20 brands generating about $500 million or more in annual sales. The companys brand strength is demonstrated by the fact that its brands are market leaders in 15 of the 21 major consumer categories in which it operates globally. Leading market position based on a strong brand portfolio enables the company to achieve economies of scale in distribution and retain a strong bargaining position with retailers. Furthermore, leading market position provides P&G with significant competitive advantage as well as stabilizes the company's financial growth. Significant R&D and marketing investments Being a consumer products company, P&G relies heavily on innovation and continued marketing investments in order to establish a significant competitive advantage. As a result, the company has made significant investments in R&D and marketing. Over the last decade, P&G has invested nearly $2 billion in consumer and market research (nearly twice that of its closest competitor, Unilever, whose average R&D expense rounds up around $1 billion-$1.2 billion). Virtually, all the organic sales growth delivered by P&G in the past ten years has come from new brands and new or improved product innovation. As part of its R&D efforts, the company interacts with more than five million consumers each year in nearly 60 countries around the world. P&G conducts over 15,000 research studies every year and invests more than $350 million annually in studies focused on consumer understanding. Additionally, P&G also involves external innovation partners to boost its internal innovative capability, an approach it calls 'Connect and Develop.' Currently, more than half of all product innovation coming from P&G includes at least one major component from an external partner. P&Gs continued focus on product innovation has enabled the company to further enhance its market position through additional revenue streams. For instance, IRI Pacesetters study (which tracks and ranks the most successful new consumer products introduced in the US) recognized P&G as the most innovative manufacturer in the consumer packaged goods industry for the last decade. Besides, the companys brands held five of the top 10 most successful non-food innovations as reported by SymphonyIRI in 2009. Furthermore, the study by SymphonyIRI revealed the fact that over the past 14 years, P&G has had 114 top 25 Pacesetters, more than its six largest competitors combined. P&G's strong R&D capabilities and consumer-based innovations are backed by significant marketing investments. The company invests nearly $8 billion in advertising annually, consistently making P&G one of the world's largest advertisers. Strong focus on research and development allows P&G to renew its product line at regular intervals, which boosts customer loyalty and revenue growth. Significant marketing investments to support its brands and a broad product portfolio help P&G to remain at forefront in a competitive market. Robust cash productivity
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SWOT Analysis
P&G's cash productivity, the percentage of earnings converted into cash, has averaged over 100% since 2001, consistently among the very best in the industry. This is primarily due to P&G's strong focus on productivity, working-capital management and cost reduction. For example, P&G is the receivables leader of the industry, operating more efficiently with fewer days of receivables outstanding than any consumer products competitor. Furthermore, P&G is equally rigorous about managing costs. The company has reduced overhead costs as a percentage of sales by more than 300 basis points since 2001. The cash productivity allows P&G to maintain the company's strong credit rating, to pay strong dividends, and to have the flexibility to invest in the business organically or through mergers and acquisitions. Therefore, robust cash productivity ensures that P&G has the flexibility and the resources to invest in growth even in the most challenging environments.
Weaknesses
Increasing instances of product recalls P&G has been registering increasing instance of product recalls recently. For instance, in November 2009, the company voluntarily recalled three lots of its Vicks Sinex nasal spray in the US, Germany and the UK. The recall was a precautionary step after finding the bacteria B. cepacia in a small amount of product made at its plant in Gross Gerau, Germany. In the following month, P&G voluntarily recalled its Vicks DayQuil Cold & Flu 24-Count LiquiCaps Bonus Pack in the US. The product was recalled as it did not contain a child-resistant backing for the blister packs in the box, despite label statements that the product is in child-resistant packaging. Later in March 2010, P&G voluntarily recalled its Pringles Restaurant Cravers Cheeseburger potato crisps and Pringles Family Faves Taco Night potato crisps in response to a recommendation from the Food & Drug Administration (FDA) to the food industry to protect consumers from potential Salmonella exposure. Most recently in June 2010, P&G voluntarily recalled a small percentage of 1-liter bottles of Scope Original Mint and Scope Peppermint mouthwash with malfunctioning child-resistant caps in the US and Canada. During the same month, P&G recalled its 4-Hour Decongestant Nasal Spray distributed in the US. The product was recalled as the product formulation did not meet the expiration dates on the package. Furthermore, the company recalled specific lots of its Iams canned cat food in North America as the diagnostic testing indicated that the product contained insufficient levels of thiamine (Vitamin B1). Recurrent product recalls like these not only negatively affects the brand image of the company but also impacts its financial performance in terms of ad hoc expenses.
Opportunities
Future growth plans with focus on increasing concentration on its core attractive businesses and enhancing its customer base
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SWOT Analysis
In order to grow in a highly competitive environment, P&G is pursuing a clearly drafted strategy with focus on two areas: increasing concentration on its core attractive businesses and enhancing its customer base. The company is sharply focusing on its core attractive businesses (the beauty and health market segments and several household care categories) as these are fast-growing businesses. As per Datamonitor estimates, the global market for personal care products was worth $469,601.1 million in 2009. The market is projected to grow at a compounded annual growth rate (CAGR) of 4% to the value of $565,817.4 million by 2014. In addition, the global household care market was valued by Datamonitor at $175,234.5 million in 2009 and is estimated to grow to the value of $209,514.4 million at a CAGR of 4% during 2009-14 period. In addition, P&G intends to increase its customer base in growth markets. In line with this, the company is targeting developing markets; extending its distribution systems; and expanding its brand and product portfolio. Driven by the increasing disposable incomes and awareness, the importance of emerging markets such as China, India, and Brazil is on the rise. The rising GDP and disposable income and a growing middle class in these countries augur well for the demand of cosmetics and personal care products. For instance, according to the Associated Chambers of Commerce and Industry of India (ASSOCHAM), the Indian FMCG sector is expected to double from $14.7 billion in 2008-09 to $30 billion in 2012. Similarly, the Chinese FMCG market returned to double digit growth rate and recorded 15% growth rate year-on-year in 2010. On an aggregate basis, P&G had a 19% share in developing markets as of 2009 and is growing steadily by about half a share point a year. Furthermore, in order to tap new customers, P&G is also extending its distribution systems. In addition, the company expanded its portfolio both vertically, to serve more consumers at more price points, and horizontally into adjacent categories. For instance, the company expanded its Tide (the leading laundry detergent brand in the US) and Ariel (the leading laundry detergent brand in Western Europe) brands horizontally into the laundry additives segment with the introduction of Tide Stain Release and Ariel Professional. P&G also expanded its portfolio into the value priced segment by introducing a new line of diapers in Germany called Pampers Simply Dry, priced about 15% below the Pampers Baby Dry. The twin focus on deriving growth from emerging markets as well as lucrative product categories will put P&G in a stronger position and will drive the company's profitability in the long term. Increased investment in manufacturing capacity in developing countries P&G is planning increase in its manufacturing capacity in order to expand into categories and countries where it doesn't have a brand presence. The company plans to invest approximately 4% of sales in capital spending, including funding for new manufacturing capacity to support future growth. Over the next five years, P&G will add 20 new manufacturing facilities. Almost all of these facilities are in developing markets, and almost all will be multi-product category facilities. By focusing on developing markets, the company would reduce the cost of serving these markets while also being closer to regions with the greatest long-term growth potential.
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SWOT Analysis
Acquisitions to expand portfolio P&G has made significant acquisitions in the recent past. For instance, in June 2009, the company acquired the Zirh skincare brand. Zirh is a leading super-premium, male grooming brand available in high-end department stores, specialty outlets and online. Zirh enjoys unique positioning as a high-end "male only" brand and has one of the most comprehensive skin and shave care lines in the male grooming market. Later in May 2010, P&G entered into an agreement to acquire Natura Pet Products, a privately-held pet food business. Natura's brands include Innova, Evo, California Natural, Healthwise, Mother Nature and Karma. These brands are sold in a limited number of pet specialty stores and through veterinarians, mainly in the US and Canada. Most recently, in July 2010, the company completed its acquisition of the Ambi Pur Brand from Sara Lee Corporation. Ambi Pur is a leading global air care brand with presence in 80 countries, and also has several toilet care products, with strong presence in Western Europe and Asia. Acquisitions such as these will strengthen P&G's presence across various categories and in turn enhance its topline and bottomline growth.
Threats
Competitive industry landscape pose challenges for profitability P&G's products are sold in a highly competitive global marketplace which is experiencing an increased trade concentration and the growing presence of large-format retailers and discounters. The companys products compete against similar products of many large and small companies, including well-known global competitors like Unilever and Colgate-Palmolive as well as retailers' private-label brands. Traditionally, the company relied on the North American and European markets for majority of its revenues. However, its limited market share in countries like Brazil, India and other African nations posed challenges for the company during recession. The company had to face shift in consumer preference towards relatively inexpensive products in developed markets, a trend more evident in the consumer goods space in which P&G operates. A survey conducted on 834 consumers in 2010 reported that nearly two-thirds of US consumers switched to a cheaper substitute for at least one basic household product, food or beverage. Besides, more than three-quarters said they believe less expensive products were as good as or better than their costly counterparts. Additionally, the company had to face stiff competition from established players like Unilever in emerging markets from where it expected growth potential. The companys twin challenge witnessed during 2008-10 period reflected on its revenues when it posted its first annual sales decline since 2001, a decline of 3.2% to $76,694 million in 2009, and marginal growth of 2.9% to $78,938 million in 2010. P&Gs price reduction strategy to stem market share, in turn, hampered its profitability in an inflationary environment. As per estimates, the company reduced the prices of its several products categories; including reduction in the prices of batteries by 13.3%, conditioners by 6.6%, fabric softeners by 5.8%, shampoos by 5.4%, liquid laundry detergents by 5.1%, and sanitary napkins by 2.7%; for the 12 weeks ending period of July 2010.
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SWOT Analysis
Besides, Wal-Mart implemented a 22% price cut on P&Gs Tide laundry detergents. Subsequently, the company registered 5.2% decline in profits to $12,736 million in 2010, compared to previous fiscal. Overall, the competitive pressure from established players in developing markets and from private labels in developed markets hampered the companys sales and profit growth plans. Similar competitive environment and subsequent efforts of the company to combat competition; such as price reduction, increased advertising expenses, and discount offerings; could have eventual impact on the companys profitability and margins in the future. Rising inflation could cause substantial rise in the operating cost As a diversified consumer products manufacturer, P&G depends heavily on a wide basket of global commodities for manufacturing its goods, the prices for which have risen substantially in recent years. Nearly half of the company's cost of goods is directly related to commodity goods. P&G incurred roughly $2 billion in net commodity and energy costs in FY2009, in addition to the $1 billion in FY2008. This resulted in a gross margin declined by 100 basis points to 49.5% of net sales in 2009. Of the several factors, higher commodity and energy costs negatively impacted gross margin by about 250 basis points. Furthermore, after posting gross margin growth of 250 basis points in FY2010 to 52.0% of net sales, the company reported decline in gross margins in the second quarter of 2011. The increased commodity costs contributed 160 basis points decline to gross margin. The company estimates additional $1 billion expenses in commodities for 2011 fiscal. If input cost inflation persists, the company would have to roll back price reduction initiatives aimed at improving its sales growth and market share. Besides, the increase in commodity prices have negative implications for the operating costs and hence the profitability of the company. Counterfeit goods Trade of counterfeits and pass-offs products is negatively affecting the growth of FMCG companies like P&G. The top two brands within any category be it cosmetics, detergents, or soaps are effected the most by counterfeiting and pass-offs. It is estimated that the loss due to counterfeit products convert into around E6 billion ($8.5 billion). Furthermore, with the advent of digital channels there has been a surge in the sale of counterfeit products and online sales of these products increased by 9% in 2009. In November 2009, the US Immigration and Customs Enforcement (ICE) agents seized more than 17,000 counterfeit items worth an estimated $643,000 from 21 businesses in the Minneapolis-Saint Paul twin cities region in the US and the consignment included 3,524 bottles of perfume. Besides revenue losses, counterfeits and pass-offs also affect the company's brand as they are unsafe. Low quality counterfeits reduce consumer confidence in branded products. Also, what differentiates the offerings of companies such as P&G from its competitors is exclusivity; widespread counterfeits reduce this exclusivity. Counterfeits not only deprive revenues for P&G but also dilute its brand image. Volatility in currency exchange rates
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SWOT Analysis
Currency exchange rate volatility places tremendous pressure on P&G's operations which span across 180 countries. Although P&G is based in the US, it earns revenues, pay expenses, own assets and incur liabilities in countries using currencies other than the US dollar. As a result, increases or decreases in the value of the US dollar against other major currencies will affect the company's net operating revenues, operating income and the value of balance sheet items denominated in foreign currencies. The unfavorable impact of currency fluctuations decreased revenues by about one percentage points, or approximately $789.4 million in 2010. The unfavorable impact was primarily due to a stronger US dollar compared to most foreign currencies. In addition, unexpected and dramatic devaluations of currencies in developing or emerging markets, such as the recent devaluation of the Venezuelan Bolivar, could negatively affect the value of the company's earnings from, and of the assets located in, the said markets.
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Top Competitors
TOP COMPETITORS
The following companies are the major competitors of The Procter & Gamble Company
Avon Products, Inc. Colgate-Palmolive Company Henkel KGaA Kimberly-Clark Corporation Unilever Reckitt Benckiser PLC Energizer Holdings L'Oreal S.A.
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Company View
COMPANY VIEW
A statement by Robert A. McDonald, Chairman, President and Chief Executive Officer at P&G is given below. The statement has been taken from the company's 2010 annual report. P&Gs Purpose-to touch and improve lives, now and for generations to come-is inspiring and pervasive. Our Purpose is tightly and deliberately linked to our business and financial goals: P&Gs Purpose inspires our strategic choices; it leads us to bigger and better innovation; it drives brilliant execution; and it compels us to make a difference in areas such as sustainability and social responsibility not merely to be a good citizen, but more importantly, to create future opportunities to touch and improve lives-and, in so doing, to keep our Company growing. Last year, we updated P&Gs growth strategy to connect it explicitly to our Companys Purpose. We focused on three specific choices: to grow P&Gs core brands and categories with an unrelenting focus on innovation; to build our business with unserved and underserved consumers; and to continue to grow and develop faster-growing, higher-margin businesses with global leadership potential. These strategic choices are unified by one simple, over-arching growth strategy: to touch and improve the lives of MORE CONSUMERS in MORE PARTS OF THE WORLD, MORE COMPLETELY. Weve made this the centerpiece of our leadership agenda because we believe a Purpose-inspired growth strategy is intrinsically rewarding and motivating. It unleashes creativity, commitment and peak performance in P&G people. It attracts talent and partners. It builds goodwill with external stakeholders. We are executing across all three dimensions of this growth strategy on all of our businesses around the world. The Companys performance in the 2010 fiscal year, and the strength with which we have entered the 2011 fiscal year, demonstrate that our Purpose-inspired growth strategy is working. Substantial Progress toward Growth Goals We also renewed our growth goals last year. Our fundamental objective is the creation of value for shareholders at industry leadership levels on a consistent basis. More specifically, our goal is to deliver total shareholder return that consistently ranks P&G among the top-third of our peers-the best performing consumer products companies in the world. In addition, we measure our progress through a combination of consumer and financial goals. We made substantial progress in fiscal 2010: Organic sales grew 3%, in line with Company expectations. Core earnings per share grew 6%, roughly double our going-in objective for the year.
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Company View
Adjusted free cash flow was 125% of net earnings, well above our target level. We also made substantial progress toward profitable share growth, a key priority. A year ago, our global market share was down about half a point versus prior-year levels; today, as I write this, our global market share is up nearly half a point and accelerating. Last year, we were building market share in businesses accounting for only about 33% of sales; today, we are building share in brands and countries accounting for about 66% of sales and P&Gs market share is growing in 14 of our top 17 countries. In addition, we reached an additional 200 million consumers, bringing the total served to 4.2 billion-on track toward our goal of reaching 5 billion consumers by fiscal 2015. Average per capita spending on P&G products increased in 70% of our top countries, up from 60% in fiscal 2009. And, global household penetration-the percentage of households using at least one P&G products-increased nearly two percentage points, to 61%. On the strength of these results, we paid approximately $5.5 billion in dividends and returned $6 billion to shareholders through the repurchase of P&G stock. Based on our current market capitalization, dividends and share repurchases provide shareholders with an effective cash yield of more than 6%, with additional potential for capital appreciation. In April, we increased our quarterly dividend by 9.5%, making this the 120th consecutive year that P&G has paid a dividend and the 54th consecutive year that the dividend has increased. Over those 54 years, the dividend has increased at an annual compound average rate of approximately 9.5%. This is encouraging performance, inspired by the Purpose that motivates our people and partners and driven primarily by our strong, multiyear innovation program. We are innovating to win in every P&G category, we are investing behind these innovations to build profitable market share and we are continually increasing productivity that funds our investments in future growth. This investment allows us to continually replenish our multiyear innovation pipeline. Innovating to Win Innovation has been-and will continue to be-at the heart of our success. In fiscal 2010, for the fourth consecutive year, we invested nearly $2 billion in Research & Development. In fact, we invest about 50% more than our closest competitor and more than most of our closest competitors combined. This leadership level of investment is multiplied by our global network of external innovation partners, which leads to an effective investment in innovation that far exceeds the reported spending. One measure of the strength of our innovation program is the SymphonyIRI Group New Product Pacesetters report-the annual list of the biggest innovations in our industry as measured by sales. Over the past 15 years, 125 P&G innovations have earned a spot on the Top 25 Pacesetters list-more than our six largest competitors combined. Based on this track record, SymphonyIRI recognized P&G as the most innovative manufacturer in the consumer packaged goods industry for the last decade-presenting the Company with its
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Company View
Outstanding Achievement in Innovation award. In 2009, P&G launched 5 of the top 10 most successful non-food innovations as judged by SymphonyIRI: Tide Total Care, Gillette Venus Embrace, Bounty Extra Soft, Always Infinity and Secret Flawless. Our innovation program is guided by the Company's Purpose-inspired growth strategy: We are touching and improving MORE CONSUMERS lives by innovating and expanding vertically, up and down value tiers. We are touching and improving lives in MORE PARTS OF THE WORLD by innovating and expanding geographically, into new white spaces where we havent been competing. We are touching and improving consumers lives MORE COMPLETELY by innovating to improve existing products, by creating or entering adjacent categories and by driving regimen use that broadens our product portfolios. We have a strong multiyear pipeline that will continue to drive growth in the future. The impact of this innovation program is already evident. We have featured six examples in the editorial section that follows this letter, but I want to share perspective here as well to give you a sense of both the strength and breadth of innovation coming from P&G. Ill highlight just three representative businesses to illustrate. Male Grooming Fusion has now grown share for 18 consecutive quarters, and we recently launched Gillette Fusion ProGlide. Consumer testing shows that men prefer the Fusion ProGlide family at a ratio of up to 2-to-1 over Gillette Fusion. In the middle tier, we recently launched a new Mach3 razor specifically designed to better meet the needs of emerging-market consumers. As a result, Mach3 shares are at record levels in Argentina, Brazil and India. In February, we launched a complete line of Gillette male grooming solutions in Brazil, and are now expanding in several Latin American countries. In March, we introduced a scientific face care regimen under the Gillette name in China. In June, we introduced Gillette Fusion ProSeries in North America. Fabric Care Were expanding our portfolio horizontally with Tide Stain Release and Ariel Professional in laundry additives, and Bounce Dryer Bar in the fabric enhancer category. We are also expanding vertically and into geographic white space. In Western Europe, we are innovating in the premium tier with Ariel Excel Gel, a new-to-the-world gel that is consumer preferred by a margin of 2 to 1. In Japan, our newest laundry brand, Sarasa, is priced at a 15% premium versus the category average and is designed for consumers who want a laundry detergent that cleans well, but also provides natural and gentle benefits. We introduced Ace in Colombia during the September quarter and Tide Naturals in India during the December quarter. Tide Naturals is priced 30% lower than regular Tide, enabling us to reach a much
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Company View
broader spectrum of Indian households. Ace is a mid-tier laundry brand that complements Ariels stain removal equity and Bolds softness equity. Ace has become P&Gs 23rd billion-dollar brand. Oral Care Oral-B toothpaste and toothbrush shares in Brazil continue to exceed expectations. Based on our in-market success, we have initiated the second wave of our toothpaste expansion plan which will take us beyond the pharmacy channel. The Oral-B toothpaste launch in Belgium and the Netherlands is also going well-with Oral-B toothpaste approaching double-digit shares and driving P&G to overall Oral Care market share leadership in both countries since being launched in February 2009. Crest Pro-Health is off to a strong start in China, helping to drive Oral Care shipments in China up high single digits in the final quarter of the fiscal year. The Crest Pro-Health formula is being expanded to other markets around the world, as well. In March, we launched Crest 3D White in North America. 3D White is a new regimen comprised of toothpaste, brush, rinse and Professional Effects whitestrips that work in combination to clean, whiten and protect teeth while providing health benefits expected from Crest and Oral-B. Looking Ahead Many of our most significant innovations just launched in North America between March and June 2010. They will have a much bigger impact on fiscal 2011 than they had this past year as we continue to leverage them in North America and to expand them to additional markets. And, of course, we will bring new innovations to market. More specifically: Pampers with Dry Max will expand across Western Europe this year. Gillette Fusion ProGlide will roll out to more than 40 countries over the next two years. The new Pantene formulations will expand globally over the next two years. We are aggressively working to merge the product innovation and geographic expansion plans of Ambi Pur with the Febreze franchise, following the close of the Ambi Pur acquisition in early July. Our air care business now spans 84 countries. Oral Care is introducing a new Crest Clinical line of products to treat two of the most common oral care problems: gingivitis and tooth sensitivity. The Crest Clinical Sensitivity toothpaste provides the maximum strength available over the counter. Crest Clinical will start shipping in North America in August.
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Company View
In total, P&G competes in 38 product categories globally, but we are not present in all these categories in all of our priority markets. For example, as a total Company, we compete in less than 50% of potential country/category combinations in our top 50 markets. This presents a tremendous growth opportunity. Our objective is to fill out our product portfolio in every category and then expand to the most relevant geographic markets. This objective is driving clear, strategic choices about where to innovate and expand to ensure our total-Company lineup is reaching more consumers in more parts of the world, more completely. There are examples in every P&G category. I cite these few just to provide perspective on the strength and breadth of our innovation program. We currently have the strongest multiyear innovation program Ive seen in my 30-year career at P&G. And as strong as the program has been during this past fiscal year, we are equally pleased with the quality of our pipeline going forward. Its full of innovations that are sure to touch and improve the lives of consumers for years to come. Investing to Grow, Changing to Lead We are supporting our innovation program with strong levels of marketing investment. We delivered a 20% increase in consumer impressions-the number of times consumers hear about our brands and new products-this fiscal year, with most of the increase in the second half of the fiscal year behind many of the innovations I just described. This investment is critical. Decades of experience have demonstrated that making people aware of our innovation and motivating them to try our new products is the key to long-term success. When people experience the innovation we bring to market, they are frequently delighted, which in turn drives repurchase and sustainable share growth. This is the foundation of brand building, and P&G is committed to investing sufficiently and consistently to support innovation and build brands that thrive for decades. One of the most important ways we fuel investments in innovation and brand building is through cost savings and productivity improvements. P&G is very disciplined about cash management and cost reduction. We are strengthening this discipline with a culture that continually simplifies the way we work and increases productivity. Simplification is a significant opportunity for us, particularly given the breadth of our business and brand portfolios. For example, we have more than 16,000 product formulas and use more than 4,000 colors in our product labels and plastic packaging. Over the next two years, we expect to reduce the number of formulas and package specifications by 30% and to reduce the number of colors we use by 50-75%. Color simplification alone has the potential to generate up to $50 million in annual savings. We have simplification projects underway throughout the Company, led by line management and managed with the same discipline and integration that we use for global product launches. This will remain an ongoing priority for us. Another good example of how were becoming more productive is the digitization of P&G. With digitization, our goal is to standardize, automate and integrate systems and data so we can create
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Company View
a real-time operating and decision-making environment. We want P&G to be the most technology-enabled company in the world. We are targeting a 20-25% reduction in some spending areas and we are looking for a sevenfold increase in real-time data. By getting the right data to the right decision makers at the right time, we can become increasingly efficient and productive. A good illustration is logistics. We are digitizing our Transportation Management systems, including what we call our Control Tower. Think of this as an air traffic control system for ground transportation. The real-time information this system provides allows us to coordinate scheduling and truck movement for all inbound and outbound transportation. So far, were on track to reduce the number of deadhead legs-or, empty truck shipments-by more than 15%. We currently have control tower approaches in place covering about one-quarter of our business in both developing and developed markets. We think increasing the capacity utilization of trucks can save more than $200 million annually. Another way we are increasing productivity is by turning the Companys size into scale and our scale into growth. To do this, we are increasingly competing as one Company. Our individual categories, brands, countries and functions are all critical and each has unique value to add. But at the total-Company level, we can create scale advantages by allocating resources more strategically and efficiently than any individual business can do on its own. The combination of the individual components is greater together as one Company than the sum of the parts-and we are focused on maximizing this total value. We are working across our businesses and markets to leverage P&G scale. A good example is the global sponsorship agreement we signed in July with the International Olympic Committee (IOC). The partnership gives P&G global sponsorship rights for the next five Olympic Games, from London 2012 through the 2020 Olympic Games, enabling the Company to take the Games to the more than 4 billion consumers worldwide served by P&G brands today. The breadth of P&Gs portfolio and the depth of our reach make this the most far-reaching Olympic partnership. It demonstrates the powerful appeal of our brand portfolio and its tremendous global scale. No other consumer products company could create a comparable partnership with the IOC. As part of this sponsorship, we also announced the global expansion of our Proud Sponsor of Moms campaign. We will build upon the success of our Team USA partnership at the Vancouver 2010 Olympic Winter Games, which resulted in increased favorability ratings for P&G and our brands, greater market share and nearly $100 million in incremental sales. P&G will leverage the IOC partnership to deliver on our growth strategy and to help improve the lives of athletes, moms and their families around the world in several ways: We will continue to support families of Olympians, reapplying on-site activities from the Vancouver 2010 Olympic Winter Games. As part of the Proud Sponsor of Moms campaign, our Thank You, Mom program will continue in conjunction with the IOCs inaugural Youth Olympic Games to be held in Singapore in August 2010,
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Company View
helping 25 moms of Youth Olympians from around the world with their travel and lodging costs so they can be in Singapore with their children as they compete. We will produce a documentary video series called Raising an Olympian, The P&G Momumentary Project to celebrate the dedication and sacrifice of moms, families and their Olympians. The video series will tell the stories of Olympians as seen through the eyes of their moms. It will be shown leading up to and during the London 2012 Olympic Games and will aim to answer the question, What does it take to raise an Olympian? By leveraging P&G scale and competing more effectively as one Company-rather than as individual businesses and brands alone-we are able to touch and improve more lives while creating meaningful competitive advantage. Work to Do While we are encouraged by the Companys recent performance, I dont want to imply that we are satisfied. Our results were ahead of our going-in expectations in nearly every area, but we still have some significant opportunities for improvement. Our results on some big brands and in some big categories have been soft. We are not yet growing share on every business but we have robust innovation and marketing plans in place to accelerate share growth across the portfolio. We also need to continue our disciplined cost reduction and cash management efforts. We need to take even more cost out because there are still more investments we need to put in to keep driving profitable market share growth. If we build on our successes, address our shortfalls and implement our strategy with excellence-which is precisely what we are focused on doing-we will continue to accelerate growth on both the topand bottom-line, and we expect this to be reflected in stronger market share trends. Inspired to Perform As I wrote at the beginning of this letter, we have placed significant emphasis on P&Gs Purpose because we believe it inspires people to perform at their peak. Fulfilling P&Gs Purpose is not merely a noble ideal. It is potentially a game-changing growth strategy because it unleashes creativity and capability. Our purpose as individuals inspires our performance as professionals. The congruence of our Company Purpose and our personal purpose captures our imagination and passion. It focuses us on the consumers we serve and inspires empathy for them that, in turn, leads to insights, big ideas and innovation that drive growth. Simply put: Touching and improving peoples lives motivates peak performance. I believe that to my core.
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Company View
Everywhere I travel, P&G people and our partners tell me they are inspired by what we can accomplish together. They tell me that they are inspired by the thought of what we can accomplish if we can infuse the work of our entire organization-all 127,000 of us-with the meaning that comes from our Purpose. Were inspired by the thought of serving five billion people by the middle of this decade, and perhaps touching and improving the lives of nearly every person on the planet in our lifetimes. Were inspired to create new innovations, ideas, services and products that improve peoples lives in ways weve not yet foreseen. It is all this, taken together, that drives my confidence in P&Gs future. We have all the elements of a high-performing organization in place at P&G: passionate leaders at every level and in every part of our business; sound strategies that continue to provide abundant opportunities to grow; robust systems that enable us to operate with discipline and to collaborate inside and outside the Company; and a culture that enables, demands and rewards high performance. These pillars stand on a foundation of technical competence and the bedrock strength of our Purpose, Values and Principles that constitute the core of P&G. I am honored to stand alongside Purpose-inspired leaders in every part of our organization who ensure that P&G touches and improves lives every day. It is a privilege to work with such outstanding people and I thank them for all they are doing to touch and improve lives and to grow our business.
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Locations and Subsidiaries
LOCATIONS AND SUBSIDIARIES

Head Office
The Procter & Gamble Company One Procter & Gamble Plaza Cincinnati Ohio 45202 USA P:1 513 983 1100 F:1 513 983 9369 http://www.pg.com
Other Locations and Subsidiaries

P&G Guangzhou 27-33/F Centre Plaza 161 Lin He Xi Heng Road Guangzhou 510620 CHN Procter & Gamble Japan K.K. 17 Koyo-cho Naka 1-chome Higashinada-ku Kobe Hyogo 658 0032 JPN Procter & Gamble UK The Heights Brooklands Weybridge KT16 0XP GBR P&G (Singapore) 238A Thomson Road 21-01/10 Novena Square Tower A Singapore 307684 SGP
P&G France 163 quai Aulagnier 92600 Asnieres-sur-Seine FRA
P&G Australia Pty. Ltd. Level 4 1 Innovation Road Macquairie Park North Ryde Sydney NSW 2113 AUS Procter & Gamble Oy Lars Sonckin kaari 10 02601 Espoo FIN
Procter & Gamble Nordic Inc. Hangovagen 20 10254 Stockholm SWE
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Locations and Subsidiaries
P&G Srl via Cesare Pavese 385 00144 Rome ITA
P&G Espana S.A. Av. de Bruselas 24. 28108 Alcobendas Madrid ESP
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