Growth strategies paying off at P&G

- Last updated on GMT

Related tags: P&g, Procter & gamble

Better business plans, closer consumer relationships, tighter
customer partnerships, more sustainable growth' was the slogan
provided by Procter & Gamble's president A.G. Lafley in an
upbeat address to the company's shareholders last week.

'Better business plans, closer consumer relationships, tighter customer partnerships, more sustainable growth'​. This was the slogan provided by Procter & Gamble's president and chief executive A.G. Lafley in an upbeat address to the company's shareholders at its annual meeting last week.

Starting off the address on a high note, Lafley said P&G had "delivered results ahead of growth objectives in fiscal 2003"​ which he took as confirmation that the company's strategies were working.

For fiscal 2002/2003, P&G sales were up 8 per cent, volume was up 8 per cent and net earnings and net earning per share each were up 19 per cent. Core net earnings, which exclude restructuring charges, were up 13 per cent. Core diluted net earnings per share, which exclude restructuring charges, were up 14 per cent.

"We've generated nearly $17 billion (€14.55 bn) in free cash flow since fiscal 2000 - two and half times the amount generated in the prior three years," said Lafley. "P&G is performing like a leading company again."

Lafley said the most important factor was that growth had accelerated over the past three years. He pointed out that in fiscal 2000, P&G brands were growing share in categories representing less than 40 per cent of company sales. Yet during the last six months of fiscal year 2003, shares grew in categories accounting for nearly 90 per cent of sales.

"Building global share at this level is unprecedented in P&G history," Lafley said. "It confirms that P&G's business strategies are working."

Lafley noted that 100 per cent of 2002/03 growth was organic - coming from core, established businesses. "Acquisitions are part of P&G's overall growth strategy,"​ he said. "We'll continue to make acquisitions when they fit P&G's sustainable growth strategy and core capabilities. Some of these acquisitions have been and will be substantial - like Wella and Clairol - but the key drivers of sustained growth should come from core businesses, over the long term."

According to Lafley the secret to success requires focus on being the best in branding, innovation, and scale. "Three years ago, there were ten P&G brands with a billion dollars or more in sales," Mr. Lafley said. "Today, P&G has 13 billion dollar brands - Crest, Iams, and Olay have joined the club."

Creating new brands and categories is also a focus for the company. Lafley cited research provided by Information Resources which revealed that three of the top 10 non-food products introduced in the US last year were P&G products. He said that P&G was multiplying its innovative capability with a 'connect and develop' strategy that links P&G with external innovation partners, adding that P&G's vision was for 50 per cent of all P&G discovery and invention to come from outside the company.

Lastly Lafley highlighted the importance of scale. "We're the global leader in all of our four core businesses: laundry, baby care, hair care and feminine protection. With leadership comes scale economics. The company is building even more scale advantage with P&G's global organisation design, and is starting to see the full benefits of this unique structure."

"The benefits are tangible," urged Lafley, rounding off with the slogan for next year, "Better business plans, closer consumer relationships, tighter customer partnerships, more sustainable growth."

Related topics: Business & Financial

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