The Procter & Gamble Company (P&G) boasts boatloads of top household brands. The world's largest maker of consumer packaged goods divides its business into two global units: Beauty and Grooming and Household Care. The company also makes pet food and water filters. About two dozen of P&G's brands are billion-dollar sellers, including Always, Braun, Crest, Fusion, Gillette, Head & Shoulders, Mach3, Olay, Oral-B, Pantene, and Wella in the beauty, grooming, health care, and snacks & pet care segments, as well as Bounty, Charmin, Dawn, Downy, Duracell, Gain, Iams, Pampers, and Tide in the fabric & home care and baby & family care segments. P&G's hundreds of brands are available in more than 180 countries.
Few people worldwide go a day without using at least one product made by P&G. With P&G's product depth and breadth has come a consistent tweaking of its products portfolio in its effort to regularly pump out profits and to consistently return a dividend to its shareholders. The company also pares down its workforce when needed to account for slowing sales and the rising costs of commodities. In early 2012, P&G announced plans to shed some 5,700 jobs -- about 10% of its nonmanufacturing workforce -- by mid-2013. For the effort, the manufacturer and marketer hopes to realize $10 billion in savings by mid-2016.
In recent years, the company has been turning to its highest revenue generators for the most growth potential. It's here where P&G has been focused on product development. Along with continuing to grow its core brands and categories through innovation, P&G is looking to build its business by going after unserved and underserved consumers. The consumer products firm is following a purpose-driven business strategy: more consumers, more parts of the world, more completely. In addition, P&G -- for a fourth consecutive year -- invested about $2 billion in research and development in fiscal 2011. As part of its strategy, it's also focused on expanding high-margin businesses that are fast-growing and have potential for being global leaders.
P&G is making select acquisitions to serve its strategy. To boost its largest business segment, the consumer products giant in 2010 bought Sara Lee's European air-freshener business Ambi Pur for €320 million ($470 million). Ambi Pur products include plug-in and stand-by air fresheners, aerosol sprays, and toilet cleaners. With Ambi Pur's presence in more than 80 countries, the deal helps P&G extend its global presence.
Also in 2010, P&G acquired Natura Pet Products, a California-based maker of holistic and natural pet foods. Natura's brand portfolio includes Evo, Healthwise, Innova, and Karma. Its pet foods are primarily sold through specialty pet stores and veterinarians in the US and Canada. The addition of Natura strengthens P&G's lineup of holistic and natural pet food products, as well as complements its Iams and Eukanuba brands.
Even though P&G holds market-leading positions for several product categories, the company is not resting on its laurels while it longs for a full economic turnaround. It is focusing greater resources on its roughly 40 best-selling brands -- defined by the company as those that generate more than $500 million annually and represent some 85% of sales -- while shedding others.
Looking to divest its snacks business, the company in early 2012 announced that it would sell its Pringles canned-chip business to Kellogg in a $2.7 billion all-cash deal after plans to sell it to Diamond Foods fell through under the weight of an internal accounting scandal that led to the dismissal of Diamond CEO Michael Mendes.
Other brands that it has chopped include: Max Factor, which P&G stopped selling in the US in 2010 to free up space on store shelves for more popular brands, such as CoverGirl; Noxzema, which P&G sold to Alberto-Culver in 2008 (but retained the business in portions of Western Europe); and Infusium 23 hair care, which it sold to Helen of Troy. P&G also kicked its coffee habit in 2008 by selling its Folgers business to The J. M. Smucker Company in an all-stock transaction valued at more than $3 billion. The deal involved P&G's entire coffee business, including Folgers and Millstone, as well as its licensing agreement with Dunkin' Donuts to distribute that company's coffee.
Further paring down its brand portfolio and signaling its increased interest in developing markets, P&G sold most of its 60-year-old Zest soap brand in early 2011 to High Ridge Brands, a portfolio company of private equity firm Brynwood Partners. The deal included the rights to sell Zest bar soap and body wash in the US, Canada, and the Caribbean. P&G retained the rights to sell Zest in the Philippines, the Middle East, and Latin America -- areas of the world the company is counting on for future growth.
Indeed, those areas, as well as Central and Eastern Europe, Africa, Greater China, India, and Australasia, comprise P&G's developing markets segment. By focusing on these markets, P&G hopes to offset the economic slowdown in North America, where the firm generated 41% of its 2011 sales. At the end of 2011 P&G sold its PUR water purification products business to household appliance maker Helen of Troy Limited for an undisclosed price.
P&G hasn't always been on top. The behemoth reached its lofty spot as the world's largest consumer products company in 2005 through one of its boldest moves -- buying The Gillette Company for about $57 billion. Overnight, the ambitious deal gave P&G the ticket to leapfrog over former #1 supplier Unilever. (Unilever's initial effort to jump back on top came in 2008, when Paul Polman, an executive for Nestle USA, became Unilever's CEO. Polman had spent 26 years at P&G.)
P&G's purchase of Gillette added well-known complementary brands to its already vast portfolio, such as Gillette razors and blades, Duracell batteries, Oral-B oral care items, and Braun appliances. Because some of the two companies' brands competed (such as P&G's Old Spice and Crest vs. Gillette's Right Guard and Oral-B), P&G divested certain assets to satisfy antitrust regulators. (It sold its SpinBrush business to Church & Dwight for $75 million and its 33-year-old Sure brand in 2006 to Najafi Companies' Innovative Brands. Gillette also sold its Right Guard, Soft & Dri, and Dry Idea brands to Henkel's Dial Corporation.)
Since the über acquisition, P&G has seen the marriage of the two giants as offering it increased bargaining power against the likes of Wal-Mart (which consistently accounts for about 15% of P&G's annual sales) in the US and Aldi in Europe, as those two companies delve deeper into private labeling and cost-conscious positioning. The P&G-Gillette entity also flexes more muscle in media spending negotiations.
P&G's integration of behemoth Gillette was swift for its size. Having accelerated the process, P&G in 2007 folded a few of its businesses (for example, biggies Gillette and Braun) into existing global business units. The primary objective of the reorganization was to sharpen P&G's focus as a nimble manufacturing and marketing machine. Having inked several of the industry's largest acquisitions and having nearly doubled its size since 2000, P&G used its 2007 reorganization to help it maintain its ability to react quickly and strategically in its industries. And although Gillette will still retain its headquarters for now, this ultimate move dissolved iconic Gillette as its own entity.
A successor -- Robert McDonald -- for the company's longtime top executive Alan G. Lafley took over in 2010 when Lafley retired. In recent years under Lafley's leadership, P&G has been focused on expanding its beauty business to improve its worldwide market share. To fortify itself as a leader in the shaving industry, the firm in 2009 purchased The Art of Shaving, a high-end brand of men's shaving and skin care products. The Art of Shaving, which markets its items through about 40 standalone stores and such upscale retailers as Nordstrom and Neiman Marcus, pairs well with P&G's acquisition of Gillette. P&G also purchased Zirh men's skincare and shaving products, which retail for about $15 apiece online and in Bloomingdale's, Sephora, and Macy's stores.
While not as formidable as some, P&G has been working to clean up in the commercial side of the industry. To establish itself in the commercial cleaning niche, the company operates the P&G Pro Line Lodging Program, an in-room cleaning and on-premise laundry (OPL) and daily-cleaner service. (P&G's Pro Line cleaning products -- that are strategically part of the services -- include several of its brands: Comet, Downy, Febreze, Mr. Clean Magic Eraser, Spic and Span, Swiffer Dusters, and Tide.) In 2009 P&G's franchising subsidiary opened a dozen Mr. Clean Car Wash and Oil Change locations (formerly Carnett's Car Washes) in Atlanta.
P&G has partnered with pharmaceutical firms for years, as well, to extend its reach into that industry and tap into its lucrative niches. In early 2011 P&G announced plans to form a joint venture with Teva Pharmaceutical Industries to peddle over-the-counter (OTC) drugs outside North America. The venture, which will be 51%-owned by P&G, pairs the firm's branding and retailing prowess with Teva's manufacturing and distribution capabilities; Teva is a leading maker of generic drugs. P&G and Teva anticipate their alliance will generate up to $4 billion in sales by 2015 or later. In the past, P&G partnered with Novartis to give Enablex, a Swiss pill used to treat overactive bladder, a deeper and broader reach into the US. It also operates joint venture SPD Swiss Precision Diagnostics with Inverness Medical Innovations to market at-home diagnostic products (including pregnancy tests and fertility monitors under the Clearblue, PERSONA, and Accu-Clear names). Additionally, P&G works with therapeutic drug development firm Curis to research and develop potential hair growth treatments leveraging Curis' Hedgehog agonist technology.
After hiring Goldman Sachs to explore strategic options for its pharmaceutical business (about $2 billion in sales), P&G in 2009 sold its prescription drug unit to drug maker Warner Chilcott for about $3 billion. In 2010, the company also sold the Japan rights of its risedronate osteoporosis drug (sold under the Actonel and Benet names) to Tokyo-based seasonings producer Ajinomoto for about $210 million. P&G, which has struggled for years to gain traction in pharmaceuticals, opted to focus on consumer health care. Indeed, P&G has proven that it's a player as a partner and supplier within the pharmaceutical and OTC realm. On the heels of its successful launch of Prilosec as an OTC acid-reflux medication, P&G hooked up with Watson Pharmaceuticals to develop the Intrinsa patch. What Viagra has done for men and Pfizer, P&G hopes Intrinsa will eventually do for both women's sex drives and its ever-important bottom line. However, in 2004 the FDA delayed the debut of Intrinsa by demanding that P&G collect additional safety data regarding the risk of heart attack in post-menopausal women already taking estrogen hormone therapy. P&G withdrew its Intrinsa application and is making plans to submit a new one to the FDA.
The company has logged some less-than-successful business adventures over the years. As such, P&G lost its patience with olestra ("fake fat") branded as Olean when it repeatedly failed to deliver profits. It sold its olestra production plant in 2002, but P&G retains the rights to the Olean brand and technology. Another business that P&G eventually dropped was Reflect.com, the online retailer of customized beauty products. After investing some $60 million in the e-tailer, P&G shut the service down in 2005. P&G said it would use techniques it learned at Reflect.com for its Olay and CoverGirl brands.
In 2010 CBS canceled P&G's last on-air soap opera, As The World Turns (ATWT) after 54 years on television. The final episode of ATWT aired on September 17, 2010. Previously, through its partnership with CBS, P&G produced Guiding Light (which began as a radio program in 1937) until September 2009. Television soap operas, which are relatively expensive to produce, are a dying breed as viewership declines and networks favor cheaper game, reality, and TV talk shows. Both ATWT and Guiding Light were made by P&G subsidiary TeleNext Media, which was set up in 1933 to produce programming to promote its soap and laundry detergents.