P&G eyes growth goals through many extensions of its existing brands in various markets, without acquisitions, says CEO; strategy risky as P&G would need massive boost in sales to achieve 4% sales growth forecast
June 10, 2011
– Procter & Gamble Co.’s (P&G) has shifted its growth strategy to focus on pushing sales of its own brands in various markets, rather than through acquisitions, reported Bloomberg Businessweek on June 9.
Any acquisition opportunities that come along would be “serendipitous” and would have to be measured against the potential benefits of organic growth alternatives, said Bob McDonald, who has been P&G’s CEO for two years.
The strategy has risks due to P&G’s sheer size. To achieve analysts’ projections of 4% growth, the Cincinnati, Ohio-based company would have to boost its sales by more than the total revenue of rival Church & Dwight Co. Inc., Bloomberg Businessweek reported.
Another issue is that to continue expanding further into foreign markets -- from which P&G already derives 60% of its sales -- means lower margins, as returns are fatter when doing business in the U.S.
McDonald says that generating an additional US$60 billion in sales annually could be accomplished by pushing consumption of P&G’s products in China, India, Indonesia and sub-Sahara to the level P&G has already attained in Mexico, reported Bloomberg Businessweek.
By 2015, P&G will have increased its customer count to 5 billion, up from 4.2 billion last year, forecasts McDonald. The consumer products company offers half its 38 product categories in many of its top 50 markets worldwide.
To help reach the company’s goals, McDonald is increasingly using technology to collect and analyze P&G’s extensive consumer research and sales data for its products. IT systems have been developed in cooperation with Cisco Systems Inc., SAP AG and others, Bloomberg Businessweek reported.
P&G also will maintain its annual research budget at nearly $2 billion so that it can continue to develop products that give it a competitive edge, said McDonald, noting that P&G’s market shares have grown in the U.S. and Western Europe while private-label’s share is trending down in Europe and flat to down in the U.S.
The company also is not afraid to go “far afield” to “continue learning and to try new things,” he said, referring to P&G’s expansion into two franchise businesses in the U.S. built around top-selling P&G products. Mr. Clean Car Washes and Tide Dry Cleaners will have 15 and 7 outlets, respectively, by August, reported Bloomberg Businessweek.
The primary source of this article is Bloomberg Businessweek, New York, New York, on June 9, 2011.