P&G targets $3bn sales rise

03 November 2010

CINCINNATI: Procter & Gamble is to delve more deeply into consumer product tie-ins in a bid to triple its exisiting $1bn (€0.71bn; £0.62bn) sales growth, chief executive Bob McDonald has said.

The firm aims to raise the share of growth derived from external partner link-ups from 25% to more than 60%, assuming a 5% annual sales growth over the coming five years.

External partners are already involved in around 60% of the firm's product launches and the company said it received 3,950 external proposals for joint projects in the last year alone.

Mr McDonald told a meeting with partner firms and research institutions that he wants to deliver at least $3bn (€2.13bn; £1.87bn) in annual sales growth by 2015, by deploying what we termed "bigger innovations that create more value."

He said he wanted to make P&G, the world's largest consumer goods company more outward-looking and work towards the goal of having outside partners involved in at least half the new products brought to market.

"We want to be the partner of choice ... we want you to come to us with your big ideas first," he said.

The new approach builds on the industry-leading "connect and develop" programme launched by AG Lafley, Mr McDonald's predecessor, in 2001.

That initiative led to high-profile deals such as P&G's 2004 joint venture with Clorax, a rival consumer goods company, creating Glad brand ForceFlex rubbish bags.

Its successful Olay Regenerist anti-ageing cream was developed with Sederma, a small French skin technology company, while its Swiffer cleaning products use technology licensed from Japan's Uni-charm.

P&G's current partners include Alibaba, the Chinese web services company; General Mills and ConAgra, the US food company.

It also works with India's Council for Scientific and Industry Research and the US government's Los Alamos defence research laboratory.

Bruce Brown, P&G's chief technology officer, said the new sales target represented an important shift to "value creation, against just measuring a number of connections".

"What we really want to do now is say: ‘What are the biggest opportunities that we want to address, and are we looking outside to make the right corrections?'" he added.

Mr McDonald told the Financial Times that he believed P&G could easily meet the $3bn target.

"Frankly I think we can do a lot better ... nowadays it is almost remarkable to have an innovation that doesn't have a connect and develop partner of some kind," he said.

At present, around 75% of P&G joint projects have evolved from the company's own efforts to seek partners.

Data soured from Financial Times; additional content by Warc staff