Financial times 3.08.10
Procter & Gamble, already the world's largest consumer goods company, says it is making progress towards its ambitious goal of adding another one billion consumers to its global business by 2015, driven largely by growth in emerging markets. Bob McDonald, chief executive, told Wall Street analysts on Tuesday that the company had added another 200 million people to its reach during its recently completed 2009-2010 fiscal year, bringing the grand total up to 4.2 billion.
P&G products now reach nearly 61 per cent of the world’s households, up two percentage points on the previous year, and on track for its 2015 goal of 70 per cent global household penetration.
Much of this is due to emerging markets. In P&G’s most recent fourth quarter, organic volume sales - meaning the number of units shipped, excluding forex and merger activity - increased by 8 per cent during the quarter, as P&G stepped up advertising and introduced new products. But that was driven by 12 per cent growth in emerging markets, versus 5 per cent growth in its developed markets.
That included low double-digit organic volume sales growth in China, high single-digit growth in Latin America, and high double-digit growth in southeast Asia and Korea and in its CEEMEA region - Central and Eastern Europe, Middle East and Africa.
“We’re certainly seeing greater strength in developing than in the developed markets,” McDonald said, with a degree of understatement.
Jon Moeller, CFO, noted that the gap between volume sales growth in the developing and the developed markets during the past year had widened dramatically during the year, from a 1 percentage point gap in the first quarter to a 7-point gap in the fourth.
P&G attributes the sales growth to both more robust economic recovery in emerging markets, and to P&G’s drive to introduce new products and to expand existing categories into those markets.
“The biggest opportunity we have is to get all of our categories into all of our countries around the world,” McDonald said, noting that P&G was currently in around 16 product categories in China, but had 36 product categories in the US. “We have work to do to simply get the categories we are in into all markets,” he said.
During the just finished fiscal year, the company introduced a new, lower cost version of its Tide detergent in India, called Tide Naturals, that is priced 30 per cent below the regular Tide product, aimed at lower-income households. It also launched a mid-priced version of its Mach3 men’s triple-blade razor aimed at increasingly affluent middle class customers in Asia and Latin America, and a new men’s skin-care product in China.
Other efforts have included expanding its Latin American Ace brand detergent to Colombia, and further expansion of distribution of its Oral-B tooth care brand in Brazil, where it was introduced earlier in the year in pharmacies. P&G claimed that the effort has helped it regain its position as the leading oral-care brand manufacturer in Latin America.
P&G said it has also stepped up efforts “to dramatically increase” its presence in East Africa. It also highlighted its “10,000 Villages” programme with the Chinese government, which is aimed at creating distribution networks for household products in rural areas. The project, McDonald said, allows P&G to “expand the distribution of our products into rural areas of china to reach more Chinese consumers and to create economies where economies never existed”.
