P&G adapts in emerging markets

10 January 2011

BEIJING: Procter & Gamble, the FMCG manufacturer, is enhancing its focus on creating products specifically for emerging market consumers with limited discretionary expenditure.

While the US firm has long sought to attract relatively affluent shoppers via "mass prestige" ranges like Crest and Olay and "super-premium" brands such as SK-II, it is now targeting the "$2 (€1.54; £1.29) a day" demographic.

In a bid to understand the unique needs of this audience, P&G adopted the tried-and-tested technique of visiting customers at home, observing how daily routines unfold in nations including Brazil, China and India.

The issues that must be addressed frequently move past financial restrictions, covering everything from a lack of privacy to the absence of regular running water.

However, P&G also discovered many common aspirations beyond these challenging circumstances.

"It's a myth to say poor people only want function. They care about beauty. Just like us," Cindy Graulty, principal R&D scientist at Procter & Gamble, told Fortune.

Although the demand for skincare brands is obvious given individuals often spend a lot of time outside, non-essential items such as hair dye proved a surprise hit.

"It's a paradigm shift," said Graulty. "We say, 'Why would they buy that? It's not like food, clothing, and shelter.' But to get a good job, to be presentable, they have to have beauty."

P&G is thus developing affordable hair colorants requiring small amounts of water, and similarly introduced a shower gel yielding foam rather than lather, making it easier to wash off.

The formula for the latter product actually utilised intellectual property first deployed in hair dye, demonstrating the advantages which result from adapting existing assets.

"We just have so much stuff," Graulty added. "Our job is finding the right match."

Such ambitions are in keeping with the multinational's corporate mantra of "touching and improving" lives, fuelling "purpose-inspired growth".

"It's almost like you don't even have to pay us to do this," Graulty suggested.

At present, P&G's per capita sales stand at $1 in Sub-Saharan Africa and Indonesia, and are more modest still in India.

China delivers $3 a year, rising to $20 in Mexico, $41 in Germany, $66 in the UK and $96 in the US.

"Our innovation strategy is not just diluting the top-tier product for the lower-end consumer," said Robert McDonald, P&G's ceo. "The move of the center of gravity is critical."

"You have to discretely innovate for every one of those consumers on that economic curve, and if you don't do that, you'll fail."

In an effort to strengthen its position, P&G recently invested $70m in the Beijing Innovation Center, part of a broader plan to spend $1bn in China during the next five years.

This unit is charged with generating bespoke goods aimed at China and Asia, and contains a mock-up of a typical Chinese household, allowing it to research popular habits on-site, and modify samples immediately.

"Now we can do end-to-end product innovation," said Bruce Brown, Procter & Gamble's chief technology officer.

Procter has also been rolling out major brands in countries like Brazil, having proved somewhat slow to make a mark in several vital fast-growth economies.

"We're late to those markets," said McDonald. "As a result, we've got to do things smarter."

Data sourced from Fortune; additional content by Warc staff