Procter & Gamble -- Keeping Head & Shoulders Above Water

June 23, 2006
Strong financials and strong brands enable Procter & Gamble to be innovative.

With big-name brands such as Tide, Vicks, Head & Shoulders, Covergirl, Folgers and Charmin, you would think that sales and management would be a breeze at Cincinnati-based Procter & Gamble Co.

To be sure, the company's tagline boasts "three billion times a day, P&G brands touch the lives of people around the world."

Although well-known brand names do make it easy for companies to take chances, resting on laurels can spell disaster. Maybe that is why P&G - one of IndustryWeek's 50 Best Manufacturers for 2006 -- is constantly monitoring the market and pushing the innovation envelope.

In terms of financials, P&G is doing well. For 2005, the company posted $56.7 billion in net sales. According to the company's annual report, since 2000 P&G has grown sales more than 40% and doubled its profits. It also has returned $11 billion to shareholders through dividends.

Additionally, P&G confirmed previously announced sales and earnings guidance for the April to June quarter of fiscal year 2005/06. The company stated that it continues to expect sales growth for the quarter of 20% to 24%.

With strong numbers and strong brands, P&G is able to parlay its strength into innovation.

Offering one of the first major category innovations since the launch of decaffeinated coffee over two decades ago, P&G rolled out Folgers Simply Smooth, a stomach-friendly coffee. The beans and roasting process are designed to limit the formation of compounds, such as certain phenols, that may be associated with stomach discomfort, explained Mark Sterling, director, division of gastroenterology, UMDNJ-New Jersey Medical School, in a May 12 press release.

The Cincinnati-based company also is refining its line of rechargeable batteries. Duracell's new nickel-metal hydride batteries are aimed at meeting demands for digital cameras.

"With digital camera use skyrocketing, high-performing, rechargeable power options are in high demand," said Dan McCarthy, director of global marketing for Duracell Specialty Products, in a May 24 statement. "Our latest introductions underscore our dedication to the rechargeable category and reinforce our commitment to providing dependable power for every type of digital camera user . . . ."

In terms of health care, P&G has partnered with Bothell, Wash.-based Nastech Pharmaceutical Co. Inc. to manufacturer a nasal spray aimed at treating osteoporosis.

Procter & Gamble Co.
At A Glance

Procter & Gamble Co.
Cincinnati, Ohio
Primary Industry: Chemicals
Number of employees: 110,000
2005 In Review
Revenue: $56.7 billion
Profit Margin: 12.79%
Sales Turnover: 0.92
Inventory Turnover: 5.91
Revenue Growth: 10.38%
Return On Assets: 12.72%
Return On Equity: 42.00%

"We are pleased to enter into this collaboration with P&G, whose clinical development, commercialization expertise, and demonstrated success in the worldwide osteoporosis market solidified our decision . . . ," Steven C. Quay, president and CEO of Nastech, said in a Feb. 1 statement announcing the collaboration.

But with all the good things happening at P&G, the company still faces some challenges.

Speaking to attendees at a conference in May, P&G CFO Clayt Daley noted that P&G was grappling with inventory challenges at Gillette, which it acquired in October.

According to the Boston Globe, if P&G closes two Gillette plants in Boston, the economic impact could cost the government about $26.1 million and result in more than 1,800 lost jobs.

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