P&G adapts approach in emerging markets

16 December 2009

CINCINNATI: Procter & Gamble, the FMCG giant, is taking a diversified approach to marketing in developing nations.

As previously reported, the company has outlined an intention of increasing its customer base by 1 billion people over the next five years, with a particular focus on emerging countries.

This equates to 548,000 new consumers buying products from across its portfolio every day, as the 172-year-old organisation seeks to improve its position both during and after the downturn.

Its returns from these markets have roughly doubled every four years in the recent past, and Bob McDonald, P&G's ceo, has argued the growth opportunities are “absolutely amazing.”

More specifically, the world's biggest advertiser is aiming to boost the amount spent per person on its goods, a total that is currently at its highest in the US, at $110 (€76; £67) a year.

The global average is $12, with the typical shopper in Mexico directing $20 to Procter's brands every 12 months, a total that falls to under $3 in China, and less than $1 in India.

To achieve its objectives, the Cincinnati-based firm has adapted its marketing strategy in countries where disposable income is at a premium.

For example, as many young children do not wear nappies, it sends teams out to hospitals and mobile medical centres to show how they are used, and the benefits they offer.

Moreover, as this type of item is comparatively expensive, and as the members of some families all sleep in a single bed, it is suggesting they only be worn at certain times.

Werner Geissler, Procter & Gamble's vice chairman for global operations, said “it's an educational effort showing the importance of a good night's sleep to the family.”

“What we want them to do is use one diaper per night. And, if they can afford it, we are promoting use of diapers for outings, like when a family visits friends,” he added.

Further such initiatives have included an information programme regarding feminine hygiene, tied to its Always brand, and targeted at schools.

The over-arching theme of communications is that using pads can make periods less of a cause of anxiety and discomfort, and thus help girls perform better in their studies.

Moreover, the “Live your Life” platform in Nigeria featured an essay competition, where contributors wrote about their first period, with the best entry receiving a scholarship from P&G.

Such an approach helps build popular understanding of its goods, but is also a result of the fact that the competitive landscape in developing economies is different than elsewhere.

“When two or three companies come in offering these products, it builds awareness of them,” said Geissler.

“Across emerging markets, we can take market share without having to do battle with Unilever.”

However, as Unilever and Colgate Palmolive currently derive more than 40% of their revenues from the areas P&G is now focusing on, this situation could change.

William Schmitz, a Deutsche Bank analyst, predicted “it will be a knife fight, it will be brutal. It will be fought in shampoo, detergent, deodorant, and Unilever and Colgate won't roll over.”

In initial evidence of this, P&G has reduced the size of its various offerings to drive down price, with some lines of shampoo now of an equivalent cost to that of an egg.

Ali Dibadj, an analyst at Sanford Bernstein, also warned “distribution in emerging markets is extraordinarily expensive, and it is fraught with missteps. You are taking things down to the village level."

Data sourced from New York Times; additional content by Warc staff