10.29.13
3. Procter & Gamble
www.pg.com
Corporate Sales: $84.2 billion
Beauty Sales: $20 billion
A.G. Lafley (L) took the reins at P&G for a second time, when Bob McDonald announced his sudden retirement. |
Major Products: Beauty Care, Hair Care and Color; Prestige (Fragrances, Prestige Skin Care); and Salon Professional. By category, per above, “leadership” brands include: Cover Girl, Max Factor, Olay, Old Spice, Safeguard and Secret; Head & Shoulders, Herbal Essences, Nice ’n Easy, Pantene and Rejoice; Gucci, Hugo Boss, SK-II; and Wella. Head & Shoulders, Olay, Pantene, SK-II and Wella belong to P&G’s impressive Billion Dollar Brands portfolio. Additional brands include: Dolce & Gabbana, Secret, Camay, Ivory, Aussie, Fekkai, Nioxin, Pert, Rejoice, Sebastian, Vidal Sassoon, Clairol Professional, Natural Instincts, Anna Sui, Christina Aguilera, Stella McCartney, Dunhill, Escada, Lacoste, Naomi Campbell.
New Products: CoverGirl + Olay Concealer Balm, CoverGirl Clump Crusher Extensions Mascara, Cover Girl Outlast Stay Brilliant Nail Color, SK-II Cellumination Essence Ex, Rejoice Eva, Herbal Essences Hydralicious collection, Wellaflex, Hugo Boss Bottled Night, Gucci Guilty Black, Vidal Sassoon hair care.
Comments: Despite a year of teetering sales, vocal criticism from activist investor Bill Ackman, and a management coup that brought back its former CEO, Procter & Gamble still managed to squeak out a corporate 1% rise in net sales of$84.2 billion, on a 2% increase in unit volume, due mostly to price increases.
Beauty net sales, which accounted for 24% of the consumer goods giant’s FY2013 total net sales, decreased 2% to $20 billion on unit volume that was in line with the prior year period. Price increases contributed 2% to net sales growth. Unfavorable geographic mix reduced net sales by 1% due to disproportionate growth in developing regions, which have lower than segment average selling prices. Global market share of the Beauty segment decreased 0.5 points.
In late May, A.G. Lafley was brought back to serve as president and chief executive officer at P&G, stepping in quickly as Bob McDonald suddenly announced his retirement from the company after 33 years. Lafley was also elected to the Board of Directors as chairman. He first joined P&G in 1977 and served as president and CEO from 2000 to 2009. Almost immediately upon being reinstated, Lafley reorganized the company’s executive teams, grouping its global business units (GBU) into four industry-based sectors as part of a plan to improve business performance, as well as re-focus on its all-important U.S. market. The businesses in each sector are focused on common consumer benefits, share common technologies, and face common competitors. Therefore, whereas P&G formerly grouped together Beauty and Grooming(which boosted its overall Beauty numbers in our annual Top 20 Reports of the past few years), this year, Grooming is a separate GBU, and the analysis used here, reflects only Beauty, which consists of Beauty Care, Hair Care and Color, Prestige and Salon Professional.
Commenting on the restructuring, Lafley said: “These changes build on the productivity and organization design work led by Bob McDonald, and will help us get closer to consumers and become more agile with customers.” Beauty net sales had declined under McDonald.
Top executives quickly focused on the underperformance of key brands Olay and Pantene, stressing the necessity for further innovation, both with these products and with those in the mid-tier section, served well by competitors L’Oréal and Unilever. Olay Fresh Effects was introduced for younger consumers, while Pantone’s Expert Collection was geared to a more prestige audience. P&G says the Expert Collection Age Defy Advanced Thickening Treatment, which launched at the start of 2013, has already become the No. 1 treatment in the hair care salon segment.
Under McDonald, the company had set out a cost-cutting plan, aimed at axing $10 billion by 2016. In efforts to capitalize on key areas of business, McDonald had also moved much of P&G’s personal care headquarters to Singapore. He had also set forth a plan by which P&G would focus on its 40 largest businesses, which account for more than 50% of sales; 20 top innovations, and 10 most important developing markets.
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P&G hit a home run when it combined two of its winning products: Head & Shoulders and Old Spice. |
In January, following about a dozen years at P&G, Donald J. Loftus retired and was succeeded by Dennis Curran as president and chief executive officer of P&G Prestige, North America.
P&G’s Olay brand continues its enviable status as the top facial skin care brand in the world with approximately 10% global market share. P&G also claims the title of global market leader in the hair care and color market with over 20% global market share behind its Pantene and Head & Shoulders brands. In Prestige Fragrance, P&G says it is the global market leader due primarily to Dolce & Gabbana, Gucci and Hugo Boss fragrance brands.
Prior to P&G’s CEO change, there was talk that P&G’s marginal slide was perhaps due to a lack of a balance in focusing on the various marketplaces. In general, at P&G, Developed Markets (North America, Western Europe, Japan) accounted for 61% of total sales, with Developing Markets (Asia, excluding Japan; Central and Eastern Europe, Middle East & Africa; Latin America) contributing the remainder.
In Hair Care and Color, as well as in Beauty Care, volume was in line with the prior year. Global market share of the hair care and color category was down more than half a point.
Beauty Care saw a low single-digit volume increase in personal cleansing and a mid-single-digit increase in deodorants, driven by innovation and market growth in developing regions; however, there was a mid-single-digit decline in facial skin care, where global market share decreased about a point.
Volume in Salon Professional—also in line with the prior year— saw mid-single-digit growth in developing markets behind new innovations, offset by a low single-digit decline in developed regions from market contraction.
Volume in Prestige stayed on track due to minor brand divestitures and market contraction in Western Europe, offset by innovation and market growth in developing markets.
Several innovative ventures combined P&G iconic beauty brands. For instance, CoverGirl + Olay Concealer Balm united leading makeup and skin care brands for the double duty products consumers crave. Head & Shoulders joined with Old Spice for a particularly smart play in the men’s market, in which P&G announced Los Angeles Angels’ pitcher C.J. Wilson as a spokesperson in a campaign called the “Season of the Whiff.”
To bolster its position in Prestige Fragrance, P&G took on two new big-name brands within a few days of each other, announcinga beauty licensing deal with Stella McCartney (who had formerly been with L’Oréal), and an agreement to develop and market a men’s and women’s fragrance business for Alexander McQueen.
When it comes to ingredients, P&G is eliminating anything questionable. Just last month, P&G announced that they had reached a milestone in removing DEP as an ingredient in their products; 70% of P&G Beauty products are now phthalate-free, which should reach 100% by 2014. All triclosan will also be eliminated by then as well.
All in all, it appears that the company is on track for a quick turnaround, as evidenced with results from the fourth quarter. Lafley said, “The company met its objectives for the fourth quarter and fiscal year, and we will build on these results in fiscal 2014.”
