Procter & Gamble's Approach to Global Market Challenges
September 22, 2024
Note: We reveal investment insights through the quotes of top business leaders.
Key Takeaways
- Procter & Gamble's dynamic strategy focuses on adapting to changing consumer preferences through innovation and sustainable growth, ensuring a strong value equation for both consumers and retail partners.
- The company enhances supply chain resilience by shifting to regional suppliers and leveraging automation technologies, improving agility and sustainability.
- Strategic collaborations, such as with Walmart, drive growth and promote sustainable practices, showcasing P&G's commitment to innovation and market reach.
- P&G balances promotional efforts with innovation to navigate economic fluctuations, utilizing data analytics to maintain competitive pricing and product differentiation.
- The company's focus on premiumization and market expansion reflects its strong market positions and responsiveness to global consumer spending trends.
Adapting to Changing Consumer Preferences
Procter & Gamble emphasizes a dynamic strategy that adapts to evolving consumer needs, focusing on sustainable growth through innovation and pricing. They aim to maintain a strong value equation for consumers and retail partners, ensuring alignment with market trends and preferences.
"Our strategy is dynamic and sustainable. It adapts to the changing needs of consumers, customers and society and is focused on growing markets, creating versus taking business, the most sustainable and typically most profitable way to grow." --- (PG, earning call, 2024/Q2)
"We've taken some pricing that we had to really adjust. We're now thinking on the same strategy we had on Colgate, not necessarily the online piece, but how to adjust the go to market strategy in China on the Holly and Hazel business to really develop the foothold of where we think the market's going to evolve to." --- (CL, conference, 2024/06/05)
"We continue to monitor changes in the retail landscape and seek to identify actions we may take to build our global e-commerce and digital capabilities, such as expanding our direct-to-consumer business, and distribute our products effectively through all existing and emerging channels of trade and potentially mitigate any unfavorable impacts on our future results." --- (PEP, sec filing, 2024/Q2)
"Like the U.S., we see the lower income consumers remaining under pressure and at the margin slightly more shift towards value orientated channels, at home orientated channels and lesser the away from away from home, and clearly that's related to our focus, not just on the marketing and the innovation, but the RGM and affordability and driving premiumization." --- (KO, earning call, 2024/Q1)
"The elasticity in general is not changing. I think we've done and you see it in the results, I think the teams have done a very good job of making sure that we maintain a healthy value equation for our retail partners and our consumers with strong innovation, with pricing, only pricing where necessary, balancing pricing with strong productivity." --- (PG, earning call, 2024/Q1)
Supply Chain and Regional Adaptation Strategies
Procter & Gamble is enhancing its supply chain by shifting to regional and local suppliers, emphasizing agility, flexibility, and sustainability. Automation technologies are also pivotal in improving efficiency and productivity, enabling the company to adapt effectively to global market challenges.
"That combined with a supply chain where we have very intentionally moved from global limited number of suppliers to more regional suppliers and local suppliers allows us to source differently if there's an availability issue for a material or if there's a cost arbitrage to be had." --- (PG, conference, 2024/05/14)
"To achieve these objectives, our supply chain requires even greater agility, flexibility, scalability, transparency and productivity in a rapidly evolving landscape." --- (PG, conference, 2024/06/04)
"Optimized sustainable and flexible up and down the supply chain, inclusive of our retail partners." --- (PG, earning call, 2024/Q2)
"We have an opportunity, we’ve had an opportunity on Luvs, the mid-tier brand, where we postponed innovation due to some supply chain challenges." --- (PG, earning call, 2024/Q2)
"Automation technologies will play a key role in delivering in accelerating our supply chain progress as we aim to deliver supply assurance and significant long term productivity savings, while also driving improvements in safety, quality and service." --- (PG, conference, 2024/06/04)
Strategic Responses to Market Challenges
Procter & Gamble is strategically enhancing its competitive edge by balancing innovation and pricing in response to market pressures. The company is focusing on selective market expansion and leveraging global capabilities to drive growth, while also addressing competitive dynamics through targeted promotions and operational efficiencies.
"And as we do this, we expect to enhance our competitive advantage and drive greater returns on investment by improving speed to market on a global basis for future product and commercial initiatives reducing product costs while delivering superiority by leveraging our global technical capability enhancing the strategic nature of our customer relationships around the world, increasing our ability to realize our brand's full potential and generating approximately $200,000,000 in SG and A savings in the next few years to invest back into the business and support meaningful margin leverage as we drive volume mix led organic sales growth." --- (KMB, conference, 2024/06/04)
"We’re going to be strategic about where we do that, particularly where the pharmacy channel is strong and the therapeutic benefits are growing, and we have a unique offering to go get some of our competitors in that space. We’re going to be very selective on how we continue to take that around the world, but we will take it to new markets around the world where we see that opportunity." --- (CL, earning call, 2024/Q2)
"We have validated it now in more than 119 strategic sales. That process involved taking 21 proven drivers of market shares, everything from better quality perception to average price index to measuring the breadth and depth of distributed assortment, and then deploying these input metrics." --- (UL, earning call, 2024/Q2)
"Olivia Tong: Great, thanks. Good morning. Just a follow-up on promotions, if you could just talk about how much is competitors catching up on innovation, driving you to spend more to stay superior, versus a response to the tougher macros and needing to make yourself competitive on price." --- (PG, earning call, 2024/Q2)
"to enhance connectivity for better execution. As we do this, we expect to enhance our competitive advantage, drive greater returns on investments by improving speed to market on a global basis for future product and commercial initiatives, reducing product costs while delivering superiority by leveraging our global technical capability, enhancing the strategic nature of our customer relationships around the world, increasing our ability to realize our brand's full potential and generating approximately $200,000,000 in SG and A savings in the next few years to invest back in the business and support meaningful margin leverage as we drive volume and mix led organic sales growth." --- (KMB, conference, 2024/05/30)
Sustainability Initiatives and Their Impact
Procter & Gamble's sustainability initiatives focus on reducing their environmental footprint through innovative product development, such as promoting cold water washing with Tide and increasing recycled content. Their strategy is built on three pillars: reducing their own impact, leveraging scalable technologies, and monetizing recycling efforts, all aimed at achieving significant greenhouse gas reductions.
"Washing in cold with Tide helps deliver on multiple consumer needs while enabling the development of a new habit that can sustain for the long term, potentially generationally – well aligned with our commitment to making the everyday choice the more sustainable choice for people." --- (PG, press release, 2024/04/22)
"And then 2, recycle content to also meet our recycled content goals. anonymous: At Procter and Gamble, our priorities are to reduce our footprint, develop products that enable consumers to reduce their impact through less water, less energy and less waste." --- (PG, event transcript, 2024/05/16)
"The way we deliver sustainability is easily described as 3 pillars: reducing our own footprint gaining technologies that we have in the marketplace when we can't scale them ourselves and monetizing them like polypropylene recycling for example." --- (PG, conference, 2024/05/14)
"epidemics, pandemics or similar widespread public health concerns; (18) the ability to manage the uncertainties, sanctions and economic effects from the war between Russia and Ukraine; and (19) the ability to successfully achieve our ambition of reducing our greenhouse gas emissions and delivering progress towards our environmental sustainability priorities." --- (PG, sec filing, 2024/Q1)
"And I think that's the dynamic we want to see. So that's why you see innovation strengthening, focus on market growth being the number one focus for the current year and for the next fiscal year." --- (PG, conference, 2024/06/04)
Digital Transformation and Innovation Strategies
Procter & Gamble's digital transformation focuses on enhancing innovation speed and cost-effectiveness through early digital vetting of ideas. They emphasize customer feedback to drive product innovation and adapt to industry shifts, ensuring their strategies align with evolving market demands and regulatory changes.
"We're actually getting more innovation and ideas vetted much earlier digitally now that helps increase the speed but lower the cost of that innovation." --- (PG, conference, 2024/05/14)
"We'll continue to listen to our customers and use their feedback to drive innovation across our products." --- (GOOG, earning call, 2024/Q2)
"Each industry shift is an opportunity to conceive new products, new technologies, or new ideas that can further transform the industry and our business." --- (MSFT, sec filing, 2024/Q4)
"For example, our net earnings and cash flows could be affected by any future legislative or regulatory changes in U.S. or non-U.S. tax policy, including changes resulting from the current work being led by the OECD/G20 Inclusive Framework focused on 'Addressing the Challenges of the Digitalization of the Economy.'" --- (PG, sec filing, 2024/Q1)
"The increase in volume was driven by growth in North America and Europe (both due to innovation in Personal Care), partially offset by a decline in Greater China (due to the decline of the super-premium SK-II brand and market contraction)." --- (PG, sec filing, 2024/Q1)
Financial Strategies Amid Economic Fluctuations
Procter & Gamble's financial strategies amid economic fluctuations focus on balancing promotional efforts with innovation, managing cost inflation, and enhancing productivity. Companies are adapting to challenges like currency fluctuations and tariffs by leveraging data analytics and maintaining differentiated offerings to sustain market value.
"Now as volume becomes the important aspect here, you may see some players move to that strategy of doing more promotions, but overall the category has been very constructive in terms of big players spending money on media, driving value to the categories through innovation, and offerings that are differentiated in the marketplace, and making sure that we’re using the analytics and the data that we have to drive balanced promotional strategies in the categories." --- (CL, earning call, 2024/Q1)
"Debt and credit issues, currency controls or fluctuations in certain of these international markets (including restrictions on the transfer of funds to and from certain markets), as well as the threat or imposition of new or expanded tariffs, sanctions or export controls have also continued to impact our operations in certain of these international markets." --- (PEP, sec filing, 2024/Q1)
"But in the end, our strategy remains yes, there'll be cost inflation, yes, we'll look to put it through. Yes, we'll work on productivity." --- (KO, earning call, 2024/Q2)
Global Market Trends Influencing Strategy
Procter & Gamble's strategy is heavily influenced by its strong market positions in fabric and feminine care, holding over 35% and 20% market shares, respectively. Additionally, global consumer spending trends, particularly in North America, are prompting the company to explore premiumization and innovation to adapt to evolving market dynamics.
"In fabric care, we generally have the number one or number two market share position and are the global market leader with over 35% market share in the markets in which we compete, primarily behind our Tide, Ariel and Downy brands." --- (PG, sec filing, 2024/Q4)
"On March 27, 2024, we announced the 2024 Transformation Initiative designed to sharpen our strategic focus through a new operating model that leverages three synergistic forces: • Accelerating pioneering innovation to capture significant growth available in our categories by investing in science and technology to satisfy unmet and evolving consumer needs, • Optimizing our margin structure to deliver superior consumer propositions and implement initiatives and deploy technology and data analytics designed to create a fast, adaptable, integrated supply chain with greater visibility that can deliver continuous improvement," --- (KMB, sec filing, 2024/Q1)
"The Hershey Company | Q1 2024 Form 10-Q | Page 31 TRENDS AFFECTING OUR BUSINESS Throughout the first quarter of 2024, the U.S. consumer continued to drive momentum within the economy; however, we expect some moderation in consumer spending throughout the remainder of 2024 as cost fatigue and labor markets restrict income growth and constrain consumer spending power and purchasing behaviors." --- (HSY, sec filing, 2024/Q1)
"We are a global market leader in the feminine care category with over 20% global market share." --- (PG, sec filing, 2024/Q4)
"In North America, while we've been pushing the premiumization over the years and the elevation strategy, the reality is that when we compare some of our higher tier products, Tier 6 and even Tier 7 with markets that have done a remarkable job of Korea and China, there are opportunities to go further in North America." --- (KMB, conference, 2024/05/30)
Collaborations and Partnerships for Growth
Procter & Gamble is leveraging strategic collaborations, such as its partnership with Walmart to promote cold water washing, to drive growth. These alliances enhance innovation and market reach, demonstrating a commitment to sustainability and improved consumer practices across various sectors.
"Walmart's collaboration accelerates a growing Tide-led coalition of brands and organizations touting the benefits of cold water to help make cold wash the new standard, joining the ranks of World Wildlife Fund, HanesBrands, and several appliance manufacturers." --- (PG, press release, 2024/04/22)
"And for those that don't want to bring innovation or don't want to get to the right price point for our member, we will fight every day for that. And we think Member's Mark, we are building the quality of this thing, and it's creating the ability for us to have even higher quality conversation with our supplier partners about what the bar looks like now." --- (WMT, event transcript, 2024/06/07)
"Previously, Uber Eats delivered Costco orders in Texas and this new agreement allows consumers the ability to order from Costco through Uber Eats across all of Canada as well as 17 states in the U.S. We are also working to expand this partnership to several of our international countries in the coming months." --- (COST, earning call, 2024/Q1)
"But they have been studying with the China team to understand, okay, let's understand how you're doing it less than an hour and work out because the competitors have launched a 15 minute delivery, how do we start playing in that space? So I truly think, you know, there's such a great way to leverage learnings across all of the different markets and work out where they can play in other markets and how do we all together move closer towards profitability because we've got some markets that are currently driving profitable growth and others that are still walking their way to it." --- (WMT, event transcript, 2024/06/07)
"They are on a path to profitability. And I think what we're seeing is this maturity in the core business, and we're seeing some premiumization in the items being purchased. But we're also looking at like some investment areas too, to look at how do they actually complement the whole ecosystem of the financials." --- (WMT, event transcript, 2024/06/07)