Company Analysis

Procter & Gamble Co.
(P&G, NYSE: PG) is a Fortune 500 American multinational

corporation headquartered in Downtown Cincinnati, Ohio[2] that manufactures a wide range
of consumer goods. As of mid 2010, P&G is the 6th most profitable corporation in the world,
and the 5th largest corporation in the United States by market capitalization, surpassed only
by Apple, Exxon Mobil, Microsoft, and Walmart. It is 6th in Fortune's Most Admired
Companies 2010 list.[3] P&G is credited with many business innovations including brand
management and the soap opera.
According to the Nielsen Company, in 2007 P&G spent more on U.S. advertising than any
other company; the $2.62 billion spent by P&G is almost twice as much as that spent by
General Motors, the next company on the Nielsen list.[4] P&G was named 2008 Advertiser of
the Year by Cannes International Advertising Festival.[5]
Proctor & Gamble is a leading member of the U.S. Global Leadership Coalition, a
Washington D.C.-based coalition of over 400 major companies and NGOs that advocates for
a larger International Affairs Budget, which funds American diplomatic and development
efforts abroad.[6]
Background
William Procter, a candlemaker, and James Gamble, a soapmaker, formed the company
known as Procter & Gamble in 1837. The two men, immigrants from England and Ireland
respectively, had settled earlier in Cincinnati and had married sisters. The two men decided to
pool their resources to form their own company, formalizing the relationship on October 31,
1837.
The company prospered during the nineteenth century. In 1859, sales reached one million
dollars. By this point, approximately eighty employees worked for Procter & Gamble. During
the Civil War, the company won contracts to supply the Union army with soap and candles.
In addition to the increased profits experienced during the war, the military contracts
introduced soldiers from all over the country to Procter & Gambles products. Once the war
was over and the men returned home, they continued to purchase the companys products.
In the 1880s, Procter & Gamble began to market a new product, an inexpensive, yet high
quality, soap. The company called the soap "Ivory." In the decades that followed, Procter &
Gamble continued to grow and evolve. The company became known for its progressive work
environment in the late nineteenth century. William Cooper Procter, William Procter's
grandson, established a profit-sharing program for the companys workforce in 1887. He
hoped that by giving the workers a stake in the company, they would be less inclined to go on
strike.
Over time, the company began to focus most of its attention on soap, producing more than
thirty different types by the 1890s. As electricity became more and more common, there was
less need for the candles that Procter & Gamble had made since its inception. ltimately, the
company chose to stop manufacturing candles in 1920.
In the early twentieth century, Procter & Gamble continued to grow. The company began to
build factories in other locations in the United States, because the demand for products had
outgrown the capacity of the Cincinnati facilities. The companys leaders began to diversify
its products as well and, in 1911, began producing Crisco, a shortening made of vegetable
oils rather than animal fats. In the early 1900s, Procter & Gamble also became known for its
research laboratories, where scientists worked to create new products. Company leadership
also pioneered in the area of market research, investigating consumer needs and product
appeal. As radio ecame more popular in the 1920s and 1930s, the company sponsored a
number of radio programs. As a result, these shows often became commonly known as "soap
operas."
Throughout the twentieth century, Procter & Gamble continued to prosper. The company
moved into other countries, both in terms of manufacturing and product sales, becoming an
international orporation. In addition, numerous new products and brand names were
introduced over time, and Procter & Gamble began branching out into new areas. The
company introduced "Tide" laundry detergent in 1946 and "Prell" shampoo in 1950. In 1955,
Procter & Gamble began selling the first toothpaste to contain fluoride, known as "Crest".
Branching out once again in 1957, the company purchased Charmin Paper Mills and began
manufacturing toilet paper and other paper products. Once again focusing on laundry, Procter
& Gamble began making "Downy" fabric softener in 1960 and "Bounce" fabric softener
sheets. One of the most revolutionary products to come out on the market was the companys
"Pampers", first test-marketed in 1961. Prior to this point, there were no disposable diapers.
Babies always wore cloth diapers, which were leaky and labor intensive to wash. Pampers
simplified the diapering process.
Over the second half of the twentieth century, Procter & Gamble acquired a number of other
companies that diversified its product line and increased profits significantly. These
acquisitions included Folgers Coffee, Norwich Eaton Pharmaceuticals, Richardson-Vicks,
Noxell, Shultons Old Spice, Max Factor, and the Iams Company, among others. In 1996,
Procter & Gamble made headlines when the Food and Drug Administration approved a new
product developed by the company, Olestra. Olestra, also known by its brand name Olean, is
a substitute for fat in cooking potato chips and other snacks. Procter & Gamble has expanded
dramatically throughout its history, but its headquarters still remain in Cincinnati.
Current Status:
With $79 billion in sales across the world in 2009 and 24 brands with $1 billion of sales each,[4] P&G
is a global giant for household and personal goods. P&G divides its business into three Global
Business Units (GBUs) that develop and produce products and its Corporate group which handles the
operation and administration of the company.
Beauty (33% of 2009 sales, 36% of 2009 net income)[18]: The Beauty GBU includes all hair and skin
products, medications, razors, electric shavers, and batteries. This business unit includes several
product lines acquired when the P&G bought consumer products company Gillette in 2005. Proctor
& Gamble's global market share in blades and razors is 70%, primarily centered around its Mach3,
Fusion, Venus, and Gillette brands. [19] In June 2009, P&G further expanded its men's grooming
business with the acquisition of the high-end shaving company "The Art of Shaving" and the men's
skin care line Zirh. [20]
Health and Well-Being (21% of 2009 sales, 24% of 2009 net income)[18]: The Health and Well-Being
GBU provides oral care, feminine health, pharmaceuticals, snacks, coffee, and pet care products.[21]
In oral care, the company has the number two market share position at 20% globally. [21] In potato
chips, the company's Pringles brand holds a market share of approximately 10%. [21]
Household Care (46.8% of 2009 sales, 43% of 2009 net income)[18]: The Household Care GBU
manufactures a wide range of products from laundry detergent to diapers. The company's baby care
market share in 2008 was 29%. [22]
Procter & Gamble Co. was the world's top advertiser in 2007, spending almost $9.4 billion
worldwide. The company outspent its largest competitor, Unilever, the second-highest advertiser, by
almost two-to-one (Unilever spent $5.2 billion). [23]

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Procter & Gamble Co.

(P&G, NYSE: PG) is a Fortune 500 American multinational

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