P&G adapts approach

21 June 2012

CINCINNATI: Procter & Gamble, the FMCG giant, plans to pursue a more "balanced" growth strategy, reflecting the increasingly challenging trading conditions now observable in many markets.

Speaking at a conference, Bob McDonald, the firm's chief executive, reported that it was attempting to implement a change in strategic approach that would enable it to "win" with shoppers and investors.

"We are making the necessary adjustments to our growth strategy to increase focus on our core business and to achieve more balanced growth across geographies, product categories and the top and bottom lines," he said.

As a result of the current adverse consumer climate, P&G has recently downgraded its organic sales forecast for the next quarter to growth of 2–3%, versus the previously forecast 4–5%.

Moreover, the organisation reported in its last quarterly earnings call that market share levels had fallen in 55% of the categories and countries where it trades.

"We have seen sequential deterioration in the rates of market growth in both the US and Europe, and there has been a slowdown in the rate of market growth in China," said McDonald.

The company is currently in the midst of a $10bn cost-cutting initiative, and intends to prioritise its 40 largest markets, 20 leading innovations, and ten best-performing emerging markets.

“The top 40 focus is an important step toward achieving more balanced growth across developed and developing markets," said McDonald. "It will focus us on many of the US businesses and will help restart growth in the US."

"But it's not just about the US. Many of the top 40 businesses are in China, which is our second largest and most profitable market, and there are businesses within the top 40 in Russia and also in Brazil."

Procter & Gamble previously admitted it may have "overextended itself" in its programme of geographic expansion, especially in the face of slowing spending in mature markets and rising commodity costs.

McDonald added that fast-growth economies, now delivering around 60% of sales, were seeing a slowdown in growth. P&G has also been required to implement mandated price cuts in Venezuela, and faced import restrictions in Argentina.

"We will not back off developing market investments or back out of businesses where we have recently entered," he said. "We expect, absent a significant market slowdown, to continue delivering double-digit growth. We will continue to expand our developing-market portfolio, but we will do it on a more balanced pace."

Data sourced from Procter & gamble, Wall Street Journal, Financial Times, Reuters; additional content by Warc staff