P&G champions Chinese growth

19 October 2010

BEIJING: Procter & Gamble, the FMCG giant, is seeking to increase its presence in China, a move the company believes will have knock-on benefits for the US.

Writing in the Cincinnati Enquirer, Bob McDonald, P&G's chief executive, argued America stands to gain from China's rapid financial expansion, an issue often overlooked by policy-makers and investors.

"China and the US, more than any other economies in the world, are mutually and positively interdependent," he said. "We should embrace our mutual interests and invest in opportunities for shared growth.

"The fact is this: American job growth is increasingly linked to China's economic growth. We should be encouraged by this linkage."

China has 1.3bn shoppers and domestic demand for goods and services is rising rapidly.

US exports to the country have risen 36% during 2010.

However, McDonald suggested China's enhanced status offers advantages beyond such a simple metric.

"In many ways, we are a quintessential American company whose brands - Tide, Pampers, Crest and others - have been touching and improving the lives of American consumers for generations," he stated.

"Our China and other international businesses support many high-skilled P&G jobs in the US – in engineering, R&D, marketing, finance and logistics."

In all, 20% of P&G's 40,000 US employees sustain activities in more than 180 overseas markets, including 40% of the 15,000 workforce at the firm's Ohio headquarters.

"The simple fact is that success in fast-developing markets like China leads to secure, high-wage jobs here at home," McDonald stated.

Having started promoting element of its portfolio in China 22 years ago, P&G has since spent $1bn in the Asian nation, boosting staffing levels to 7,000 people.

"Today, P&G is the largest consumer products company there, with about $5 billion in annual sales and a strong record of profit growth," McDonald said.

Although certain tasks can be fulfilled centrally, establishing a meaningful domestic presence is equally vital.

"We need to be close to the consumers we serve, reduce transportation costs, and ensure our products are affordable at the local level," McDonald asserted.

"This means we need to be on the ground investing in research and development, manufacturing, sales and distribution, and other capabilities."

While Chinese customers are traditionally regarded as comparatively frugal measured against their American and European peers, McDonald posited this situation shows signs of changing.

"Individual American companies can also play a role," he continued. "P&G, for example, can help stimulate domestic consumption in China by providing brands that improve Chinese consumers' lives.

"As we expand our business and enter new product categories, we help grow the Chinese economy in ways that are beneficial for the US as well as for China."

The main challenges facing multinationals in China include counterfeiting and finding suitable partners, but adapting to the unique on-the-ground conditions typically yields favourable returns.

"We've found that engagement with our Chinese counterparts has generally resulted in fair treatment and positive results," McDonald added.

"We are committed to being and growing in China for generations to come."

Data sourced from Cincinnati Enquirer; additional content by Warc staff