P & G To Get Ahead By Marketing

But if the advertisements are to be believed, Procter & Gamble has the answer : its Pantene with Elastesse, the revolutionary new hairspray that provides flexible hold without that sticky feeling.

Feel your hair, not your hairspray, the slogan goes. Last week John Peper, Chairman and Chief Executive, used Pantene with Elastesse as an example of the strategies Procter & Gamble will be deploying in an effort to achieve the most aggressive growth targets it has ever set itself.

Although Procter & Gamble has been delivering satisfactory profit growth, its sales, held back by the maturity of its large, US market, have recently been flagging.

 

In the nine months to March, volumes rose by just 2 per cent, and revenues, hit by shifts in exchange rates, were virtually flat.

But in a presentation to Wall Street analysts in New York last week only the second since he took the top job in mid-1995 Pepper set an ambitious goal of doubling last years sales of $35 billion in the next 10 years, and doubling sales again every 10 years after that. Pepper says Procter & Gambles first building block for growth is to increase market share in its top four categories - laundry, hair care, nappies and feminine hygiene.

Over the past two years, these four categories accounted for over two-thirds of our total sales growth - yet we are only scratching the surface, he says.

In each of these four categories, Procter & Gamble is already global market leader.

But market shares differ widely from one country to another, so the company is setting out to close the gap by raising market shares in those countries where they are low to the sort of levels seen in countries where they are high.

The key to increasing market share in these categories, says Pepper, will be product innovation.

The group aims to develop products like Pantene with Elastesee, which it claims work better than those made by other companies, then use its powerful marketing resources to sell them at a premium price.

Procter & Gamble says that if it only gets half-way towards its goal of closing the market share gap in its top four categories, it will earn another $10 billion a year in sales out of its $35 billion-a-year target.

It aims to get another $5 billion by using similar strategies in its other categories, such as Crest toothpaste, where it has slipped badly in product innovation.

Pepper says the companys second big opportunity for growth is in emerging markets such as central and eastern Europe, China, and the southern parts of Latin America.

He says 30 per cent of the consumers available to Procter & Gamble today live in China, and sales there are expected to cross the $1billion threshold this year.

Pepper says emerging markets should provide annual sales of $7 billion - $8 billion towards the companys $35 billion goal.

Ten years ago we were able to reach only 1billion consumers: now we are able to reach 4.5 billion, he says.I think we often dont stop to consider the significance of that.

The third strategy Procter & Gamble aims to purse is to build new global businesses out of company products that now sell mainly in the North American market. The main ones are paper tissue and towels, salty snacks, and healthcare, including pharmaceuticals.

Pepper says the paper tissue and towel market was worth $24 billion a year world-wide, almost equal to laundry products and 2 1/2 times the size of nappies: yet it was still underdeveloped in much of the world.

Similarly, the world market for snacks was $32 billion a year at retail, yet Procter & Gambles share is just 2 per cent.

Combined with an innovation effort to accelerate the introduction of new brands and categories, Pepper says new businesses are expected to contribute an extra $12 billion a year in sales over the next decade, so bringing the total to $35 billion.

Pepper warns that the building block estimates are approximate and depend on many assumptions, none of which would prove precisely correct.

But they do demonstrate the feasibility of what we are setting out to do, We clearly have more opportunities ahead of us than at any moment in this companys history.