數年前時報公司翻譯關於它的書
還將其中一章刪去呢
這篇之所以值得一看
主要是女性顧客這主題
除了許多內幕消息 譬如說
這公司相信從內部找最高主管
他們用語 第一(二)次重大決策時刻
the “First Moment of Truth”, in P&G-speak) and when she tries it at home (the “Second Moment of Truth”).
併購案之前的成長率稱為organic growth(目標 of 4-6% a year)
公司有許多"科學怪人" “proctoids” 暫譯
文字遊戲
Procter & Gamble (P&G) 的成績為 profit & grumbles
Will she, won't she?
Aug 9th 2007 | CINCINNATI
From The Economist print edition
Having bought Gillette and focused on big brands, the world's largest consumer-goods company is betting that scale is the way to success
IN THE corner of a meeting room next to the bosses' office at the headquarters of Procter & Gamble (P&G), a large sculpture of a woman in a hat watches over proceedings with a serene smile. “She is at the centre of all our decisions,” says Richard Antoine, head of human resources and confidant of Alan Lafley, the company's chief executive.
Founded in 1837 by William Procter, a candlemaker, and James Gamble, who made soap, P&G is the world's biggest consumer-goods company. It sold $76.5 billion-worth of them in the year to June 30th. And it probably knows more about consumer marketing than any other firm on the planet. Interestingly, many people at P&G do not use the word “consumer”. Nor might they ask if a “customer” or “shopper” would buy a putative new product. They are more likely to ask: “Would ‘she’ buy it?”
Women have long accounted for four-fifths of P&G's customers. Over the years, the way P&G sells to them has changed dramatically. In the 1930s it sponsored radio shows—the original soap operas—to encourage women (usually housewives) to buy its detergent. Now radio has been surpassed by television and the internet as a means of promotion; and “she” has become ever more independent, demanding and fickle. The variety of products on offer has exploded, not just from makers of branded goods, like P&G, but also from the big supermarket chains that now dominate the retail end of the business and sell their own labels alongside the big brands.
“She is in control now,” says Mr Antoine. The consumer-goods giant is spending lots to find out what she actually wants. Staff from its Consumer and Market Knowledge division tour the world and spend entire days with women to observe how they shop, clean, eat, apply their make-up or put nappies on their babies. They try to understand how a woman reacts in the first three to seven seconds after she sees an item in a shop (the “First Moment of Truth”, in P&G-speak) and when she tries it at home (the “Second Moment of Truth”).
At first P&G struggled in the new world of empowered she-consumers. In 2000, after a big drop in profits, its share price took a tumble (see chart below). Mr Lafley, a company veteran, took over that year (P&G is a great believer in promoting from within). The company he leads has such a reputation for insularity that employees are known as “proctoids”, but Mr Lafley has been trying to open up more to the outside world and to streamline P&G's notorious bureaucracy. He also needed a clear strategy for the company's growth. That, he concluded, lay in investing more in the power of brands: the strongest brands, he reasoned, would be sought out by consumers everywhere.
Mr Lafley began with the acquisition of Clairol, a hair-dye company, in November 2001. Two years later he paid $6.9 billion for Wella, a family-owned German beauty firm. But the biggest deal, in January 2005, was the $57 billion purchase of a company known for serving men rather than women: Gillette, which controls three-quarters of the world market for razors and shaving foam.
Has the huge Gillette purchase paid off? Mr Lafley admits that he took a big risk. Four out of five mergers don't work out, he says, and big deals fail more often than small ones. But he has a list of five reasons why mergers fail. On all counts he says P&G is now doing fine.
Strategy is first on Mr Lafley's list. Mergers of companies that are either not at all complementary or pursue completely different strategies tend to fail. But both P&G and Gillette are strong companies, and their brands and international coverage match each other well. P&G is good at innovation, understands consumers and knows how to nurture brands. Gillette's strengths are technology and the ability to roll out new products within a few weeks. And of course there is the chance to learn about marketing to the other sex. This year Gillette launched Pure Divine, a body wash for women. P&G is working harder to sell High Endurance, which it claims is America's first body wash for men. New Gillette products for women and new P&G products for men are on the way.
Next comes company culture. Though they had their similarities, these two old American companies also had important differences in style. Management at P&G is consensus-driven whereas Gillette's was hierarchical. To ease unification Mr Lafley set up a special team to work out how to take the best from the two cultures. The chief of P&G North America is a Gillette man. Mr Lafley managed to keep around 95% of Gillette staff who were asked to stay. Still, many top Gillette people chose to go, their decision eased by the large pay-offs specified in their employment contracts should the firm be taken over.
Bosses are third. Gillette and P&G made such an obvious strategic fit that their chiefs had already talked a couple of times in the 1990s. In the end James Kilts, the head of Gillette, made the first move because he wanted to avoid a takeover by Colgate-Palmolive, run by Reuben Mark, his arch-rival. Mr Kilts stayed on for a year after the merger to ease the transition. He and Mr Lafley seemed to get along well.
Fourth, mergers often fail to produce the cost savings that companies promise. P&G and Gillette said that their union would yield efficiencies in manufacturing, marketing and distribution of some $1.2 billion annually by the end of the third fiscal year after the merger (ie, June 2008).
Fifth, what about revenues? Clayt Daley, P&G's chief financial officer, admits that a merger can truly be called a success only when the new entity hits its revenue targets too. P&G and Gillette promised about $750m annually by the end of the third year. Mr Daley says the merged company is on track to meet both cost and revenue targets, but is not there yet.
On August 3rd the company said that net sales were 8% higher in the fourth quarter (April to June) than a year before, and rose by 12% in the whole year. Organic growth—ie, stripping out the effects of acquisitions—was only 5% in 2006-07, compared with 8-9% in the couple of years before the Gillette deal. The pre-merger figure was atypical, insists Mr Daley. The company's long-term goal is organic growth of 4-6% a year.
Extra, extra large
Though Mr Lafley says he is meeting his chosen criteria, investors have not been grateful: in the past year P&G shares have underperformed the S&P 500 stockmarket index, although the gap has narrowed in recent weeks. This may explain P&G's decision, also revealed on August 3rd, to boost its share-repurchase programme to $24 billion-30 billion, or 12-15% of its capitalisation, at a rate of $8 billion-10 billion a year for the next three years.
Analysts, though, generally say favourable things about Mr Lafley's spending spree. William Schmitz, who follows consumer-goods industries for Deutsche Bank, is one who thinks that size can become an inhibitor of growth. “The company raised the bar very high by needing to increase sales by some $6 billion annually just to meet its targets for growth,” argues Mr Schmitz, who thinks that without its big mergers P&G would probably grow faster now. But even Mr Schmitz has a “buy” recommendation on the shares.
Scale looks more likely to be a help than a hindrance in today's consumer-goods industry. One reason is that it saves costs in procuring commodities, the prices of which have risen sharply in recent years, pushing up the cost of the foodstuffs, packaging, chemicals and energy that go into the industry's products. In the old days such price increases could be passed on to consumers, but today P&G and its peers are under pressure from gigantic retailers to keep prices low. The biggest of all, America's Wal-Mart, alone gobbles up one-fifth of P&G sales. Several hundred proctoids are stationed in Bentonville, Wal-Mart's home town, and the relationship has deepened since the Gillette takeover. Hence a second advantage of scale: as P&G gets bigger, it is becoming less dispensable for Wal-Mart.
Retailers have increased their power by developing their own brands, or private labels. In the markets where this has gone furthest, such as Britain, retailers' own brands account for 40% of grocery sales. In many countries the growth of private labels is spilling over from food to household goods and personal-care products. According to a recent report by the Boston Consulting Group (BCG), retailers' own brands are also expanding to online sales and convenience stores. And the most sophisticated own-brand producers have begun to “out-innovate” makers of branded consumer goods, says BCG, by using the insights into consumer behaviour gained through their loyalty programmes and research. By evaluating sales data and test-driving innovations in their shops they are able to adapt their innovations more quickly to consumers' needs than makers of branded goods can.
Those marketing techniques are getting more and more sophisticated. In May Wal-Mart and P&G started the rollout of Prism, a system of infrared sensors that counts the number of times shoppers are exposed to product displays, banners and televisions, in order to measure the effectiveness of in-store marketing. Typically obsessive, P&G also sends out staff to trail round after other customers' trolleys, double-checking the sensor system. “We depend on them as much as they depend on us,” explains Jeff Weedman, of P&G's external-business development team.
For retailers and makers of consumer goods alike, the complexity and cost of advertising and marketing have increased. As the world's biggest advertiser, P&G has tremendous clout in adland. It spent $6.8 billion in 2005-06 and at least 10% more in 2006-07 (Advertising Week, a trade publication, reckons $7.5 billion). It has often been a pioneer of new marketing techniques. This year Publicis, a French advertising firm, and Dassault Systèmes, a French software company, turned to P&G for advice before launching a digital-marketing joint venture in June. The scheme allows consumer-goods companies to create and adapt new products online with the input of consumers.
Mr Lafley's quest for big, valuable brands means he is prepared to sell tired ones. He got rid of Sunny Delight, an American soft-drink range, and Punica, a German juice brand, as well as Jif (peanut butter), Crisco (pastry shortening), Pert Plus (shampoo), Sure (deodorant) and P&G's towel business in South Korea. He also shed five detergents: BIZ, Milton, Sanso, Rei and Oxydol. Soon he may take a critical look at underperformers in the Gillette stable too. Growth at Duracell, its battery business, and Braun, which makes electrical appliances, has been disappointing—but “purposefully disappointing”, claims Mr Lafley, because of a focus on Gillette's razors and blades.
These disposals have made P&G more reliant on a smaller number of leading brands. Today it has 23 with annual sales of more than $1 billion. The biggest is Pampers nappies, which collected more than $7 billion last year. Gain, a detergent, is the latest to cross the $1 billion mark. It has a strong scent and is aimed mainly at Hispanics and African-Americans, who according to P&G research attach more importance to a good smell of cleanliness.
The other effect of selling off underperformers is a sharper focus on beauty and health products, which have higher margins and are less under threat from retailers' own labels. The sales helped to finance the acquisitions of Wella and Clairol, which made P&G one of the world's biggest beauty companies. Beauty accounts for $21 billion in sales, more than one-quarter of the group's global total. Seven of its beauty brands—Olay (skin care), Pantene and Head & Shoulders (shampoo), Wella (hair-care), Always (feminine hygiene), Mach 3 (shaving blades and razors) and Gillette (shaving blades, razors, gels, creams and deodorants)—all bring in sales of more than $1 billion a year. As a reward for her success as boss of the beauty business, Susan Arnold was made head of all global business-units in May: she runs beauty and household goods as well as health and well-being.
Innovation is the second area where Mr Lafley has shaken things up. Inventing new products and brands is hard in an industry that, like many of its customers, is well into middle age. According to a study by Deloitte, a consulting firm, the number of new consumer goods and product extensions increased by 80% between 2002 and 2005, but less than one-quarter of them had sales of $7m or more in the year after they were launched.
Until Mr Lafley took over, P&G made all its inventions in-house and the company's expenses for research and development were higher than those of rivals. Proctoids used to say that the phrase “not invented here” was, well, invented here. In 2001 Mr Lafley started the “Connect and Develop” programme to open up his company's innovation model. In addition to 9,000 researchers in 11 research centres around the world, P&G has 75 technology scouts who travel the globe in search of new ideas that P&G might take up and develop. He also pushed for more collaboration between the various bits of the P&G empire. For instance, when developing Crest Whitestrips, a tooth-whitener, P&G drew on the knowledge of people in the toothpaste business and those in R&D working on a novel film technology, as well as experts in bleach from fabric and home care.
After five years of “open innovation” half of the company's inventions come from outside. One-third of new patents are issued to individuals and small companies, says Nabil Sakkab, head of corporate R&D; 30 years ago most were issued to big companies. So it makes a lot of sense to reach out. The company's R&D has become more productive, partly as a result of this. P&G says that its sales per R&D employee have roughly doubled since 2000.
Mr Lafley has also developed joint ventures, such as the one set up in 2002 with Clorox, a maker of household products, to produce food-storage wraps. In addition to the use of its cling-film technology, P&G brought 20 full-time employees to the enterprise, while Clorox contributed its bags, containers and wraps business. In May, Inverness Medical Innovations and P&G formed a 50-50 joint venture for consumer diagnostics. The new company, Swiss Precision Diagnostics, based in Geneva, is the largest pregnancy-test business in the world. Its brands include Clearblue and Accu-Clear.
To continue to build up its superbrands P&G needs to focus more on emerging economies, where the scope for growth in sales of basic consumer goods is far greater than in rich countries. Already more than 40% of P&G's growth comes from emerging markets, which contribute more than one-quarter of its sales. That is a good portion, but Unilever and others sell up to half of their wares in developing countries. Gillette could be useful. It is strong in India, where P&G has long been outgunned by Unilever. China, Russia and Ukraine are already big markets with sales of some $3 billion annually in each country.
P&G has learned that it is a mistake to take a product designed for a developed market into a developing country without proper consideration of the needs and means of women without much to spend. Naturella, for instance, is a pantyliner first sold in Mexico that has become popular in Russia, Poland and other east European countries with women on similar average incomes. Downy Single Rinse, a fabric softener, was designed for parts of the world where water is scarce and rinsing clothes several times is costly or impossible. A laundry detergent called Vizir has become Poland's number one.
Still lagging its rivals, P&G forecasts that by 2010 emerging economies will account for 30% of the group's sales. Continuing to tune its products to the budgets and aspirations of local shoppers will surely be of the essence. And knowing what consumers want—and creating new wants—is still one of the things P&G does best. In the past it used this skill mainly for women in Western countries with relatively high incomes. But in future years P&G will target women, rich and poor, everywhere—as well as the other half of humanity.
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