P&G sees great potential in beauty care
growing, higher-margin and more asset effective business than food
and household products. Shifting its business to beauty care over
the last several years has boosted P&G's growth.
Following its strategy to develop and invest in faster growing, higher-margin, more asset-efficient businesses with global leadership potential, P&G acquired Clairol in 2001 and Wella in 2003. As a result, beauty care became the largest business at the company with sales worth more then one third of the total. This is in comparison to 2000, when beauty care was worth less then one fifth of the sales.
Tracey Long, beauty care external relations specialist explained the three key reasons for focusing on the beauty care business.
First, she named population trends as a key reason. "Current demographics, including the boom in the 50+ segment, makes beauty products a faster-growing market than food or household."
Long then went on to name innovation and low capital costs as further reasons for growth in this sector.
"Beauty product sales tend to respond well to innovation, which drives growth (and beauty offers more frequent innovations than the food and household sectors, on the whole)," said Long.
Higher margins are largely the result of the lower capital costs associated with the manufacture of beauty products - there tend to be fewer capital and processing costs associated with the manufacture of these products than with foods and household products," she added.
According to P&G's annual report 2003, the company creates more new brands and categories than any other consumer goods company. Last year, three of the top 10 new non-food products introduced in the US were P&G products.
P&G recently announced robust sales growth of 19 per cent for the second quarter. The strong results were primarily driven by P&G's good performance in beauty care and health care. P&G also benefited from focusing on its leading brands, top customers, biggest countries and key developing markets.
"We're strengthening P&G's leadership in health care and beauty care, two of the fastest-growing categories in which we compete. We expect these two high-growth businesses to represent an increasing share of P&G's total business in the future", said the company's chairman of the board, president and CEO A G Lafley in the last annual report.
Focusing on its several billion-dollar beauty care brands, P&G saw beauty care net sales rocket by 43 percent to $4.41 billion in the second quarter - though excluding Wella, this was a more measured increase of 13 per cent. P&G's net sales in fabric and home care increased seven percent, in baby and family care nine percent, and in snacks and beverages net sales increased 10 percent.
