KEY POINTS

Procter & Gamble (P&G) held its annual Investor Day in Cincinnati, Ohio, on November 8. Key points from the company’s presentations include:

  • P&G acknowledged that the consumer landscape is changing and said that the company has outlined different measures to withstand competition.
  • The company has strengthened its portfolio through cost reductions and created uniqueness through its “Superiority” strategy.
  • P&G has accelerated its innovation rate through what it calls “lean innovation” and plans to support growth by streamlining its organizational structure.
  • The company is positioning itself as an ethical business by focusing on various areas of citizenship.

On November 8, P&G hosted its Investor Day inCincinnati, Ohio. At the event, the company provided an update on its business results and shared its strategies for driving value creation.

Among the senior managers who presented were David Taylor, President and CEO; Jon Moeller, CFO; Kathleen Fish, Chief Research Development and Innovation Officer; Javier Polit, CIO; Marc Pritchard, Chief Brand Officer; Shailesh Jejurikar, President of Global Fabric and Fabric and Home Care; Jennifer Davis, President of Global Feminine Care; and Alex Keith, President of Global Hair Care and Beauty Sector.

P&G Acknowledges Changing Consumer Landscape

CFO Jon Moeller noted that the market for consumer packaged goodshas grown over the last 10 years along with populations and incomes. He said that whilethe global consumer packaged goods market is worth some$470 billion today, it is forecast to exceed $540 billion by 2022. Moeller added that the world population has grown from 6.1 billion to 7 billion over the past decade, and that it is expected to exceed 7.6 billion by 2028. He also noted that average global per-capita income grew from $5,100 in 2007 to $6,000 in 2018, an increase of about 18%, and that it is forecast to reach $7,400 by 2028. In addition, global GDP will increase from $65 trillion in 2018 to $85 trillion in 2028, Moeller said. He added that the number of middle and upper income households has increased by 65% and is forecast to increase by another 50% by 2028.

Moeller also said that consumer preferences are changing, which has led to disruptive new segments and forms that are growing quickly. He explained that although top brands in most categories are maintaining share, small emerging brands have entered the market, which heightens the need for unique, differentiated offerings and better supply chain execution. Consumers of all ages have evolving needs and desires, Moeller said, noting that they are often willing to pay a premium to provide products to their families that offer natural benefits and sustainable performance.

To avoid falling victim to such disruptive changes in the consumer environment, P&G has adopted strategies to cater to consumers’ evolving needs, provide differentiated offerings and reduce cost to improve supply chain operations, Moeller said.

P&G Reduces Costs to Strengthen Portfolio and Drive Productivity

Moeller also said that P&G has become simpler, more focused and more profitable. He noted that the company has employed a number of strategies to achieve this, including:

  • Reducing manufacturing sites by 20% and manufacturing platforms by 50%.
  • Reducing job roles by 23%. Along with cost reductions, this has resulted in a 50% increase in core profit per employee.
  • Reducing the number of office buildings and research and development centers by 65% and 30%, respectively.
  • Reducing the company’s number of legal entities by 60%.
  • Planning to simplify and strengthen the company’s 10 remaining categories, which will lead to fewer SKUs, more cost-efficient manufacturing platforms and fewer packaging formats.

P&G’s Superiority Strategy

CIO Javier Polit defined “Superiority” as something easy for the consumer to recognize in P&G products, which prompts them to no longer use competing brands. Chief Research Development and Innovation Officer Kathleen Fish added that the superiority concept was manifested in retail execution—or how easily shoppers can shop products in retail stores—as well as in product packaging.

President of Global Fabric and Fabric and Home Care Shailesh Jejurikar stated that, in the Fabric sector, Tide “bag in a box” delivered better packaging that improves safety in shipping and also offers great retail execution, with different product ranges stocked under the same shelf.

President of Global Feminine Care Jennifer Davis stated that, in the Feminine Care sector, Always Discreet offers strong protection and good odor control in a thinner and more discreet design, and that it made women feel good when buying the product. In terms of retail execution, Davis noted that products are put on shelves to allow shoppers to touch and feel them.

Alex Keith, President of Global Hair Care and Beauty Sector, mentioned that Olay Skin Care grew by double digits in P&G’s fiscal 2018 year and that the brand’s packaging has been upgraded toprestige-like quality and attractiveness,with simple and elegant cartons that easily grab consumers’ attention. Regarding retail execution, Keith said that Olay had closed unproductive counters in China and designed shelf architecture in the US to guide shoppers to the brand’s best-selling items and new launches.

Chief Brand Officer Marc Pritchard added that SK-II, which represents the prestige market for P&G, leveraged P&G’s packaging decoration technology, which led to eye-catching limited editions in key consumption periods such as Christmas, Chinese New Year and the cherry blossom season in Japan. In terms of retail execution, Pritchard said that each SK-II high-end retail beauty counter offers a beauty consultant who utilizes a state-of-the-art analysis tool to measure different aspects of shoppers’ skin.

P&G Is Accelerating Its Approach to Ensure Innovation Success

Fish added that P&G leverages a “lean innovation” approach to improve the speed and success of innovation initiatives to create new revenue streams. She stated that the objective of lean innovation is to act with agility to create the future. The first step is for staff to have a sound understanding of a problem that P&G wants to solve for the consumer, Fish said, and the second step is to explore multiple possible solutions to it. The process is lean in the sense that small but dedicated teams are assigned to a problem to ensure that the innovation cycle moves swiftly and that at least 10 prototypes are tested for real-life feasibility.

P&G Is Adopting a Different Organizational Structure

P&G’s existing organizational structure has three dimensions—10 Global Business Units, Corporate Functions, and Sales and Market Operations. President and CEODavid Taylor said that the company will be adopting a new organizational structure that combines all three dimensions into one. The structure will have six sector business units: Fabric and Home Care, Baby and Feminine Care, Family Care and Ventures, Beauty, Grooming, and Health Care. The change will takeeffect July 1, 2019. Taylor said that the goals areto provide simplicity and greater clarity in terms of responsibilities and reporting lines and to strengthenleadership accountability, which together will enableP&G to accelerate growth and value creation.

Under the new organizational structure, the sector business unit CEOs will report directly to Taylor, as will branding functions and legal, HR and finance. Each sector CEO will have more focus on innovation, commercialization and value creation opportunities in P&G’s most important markets, which account for more than 80% of total value creation. Taylor explained that the organizational redesign will enable P&G to better deal with business challenges and leverage growth and value creation opportunities more quickly.

P&G Will Continue to Build Strong Citizenship

Taylor also said that P&G wants to be a force for good and a force for growth. He noted that the company will continue to constructively lead in each of the four areas of citizenship it has defined—community impact, diversity and inclusion, gender equality, and environmental sustainability—and execute within these areas with a strong focus on ethics and corporate responsibility. Taylor added that P&G’s leading brands, given their wide reach, are well positioned to impact these areas in a way that is good for growth.

 


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