P&G pursues high growth with beauty brands
that the company is pursuing a high growth strategy by focusing on
fast growing and high margin divisions such as beauty.
At the annual shareholder meeting, CEO A.G Lafley revealed the extent of P&G's growth plans when he said the personal care company expects to reach one billion more customers worldwide by the end of the decade. P&G Beauty was mentioned as one of a handful of categories growing 30 percent faster than the balance and boasting 40 percent higher margins. Lafley said P&G would achieve high growth rates in the future by focusing on such high performing categories. He said: "We'll continue to shift P&G's portfolio towards fast growing, high margin businesses." Reviewing P&G's current sales performance, Lafley said total sales growth for 2007 fiscal year was 12 percent, of which 5 percent was organic, a measure that excludes the impact of acquisitions, divestitures and foreign exchange on year-over-year comparisons. Innovation was highlighted as a key to P&G's growth strategy. Lafley said the company had tripled its innovation success rate over the past five years and that its innovation pipeline was responsible for 6 percent organic growth during the same period. Illustrating the point, he drew shareholders attention to the Olay brand, which was revitalized with new product ranges and is now worth $2bn. On the second anniversary of P&G's acquisition of Gillette, Lafley reported on the integration of the leading shaving firm. He said P&G and Gillette were stronger together than apart and pointed to the Fusion brand as an illustration. The company expects the razor brand to pass the billion dollar sales mark in the next fiscal year, which would make it P&G's fastest ever growing brand. The company head tipped the Gillette skin care brand Pure Divine, which was launched onto a test market two months ago, as a future hit among women. While Lafley emphasized that P&G was 'designed to grow', he said the firm expects to be challenged by higher raw material and energy costs as well as competitive pressure. However, he said the company expects to succeed by being financially disciplined, innovative and by focusing on core strengths and high performing categories. The meeting ended on a humorous note with the question and answer session being dominated by shareholder Evelyn Davis who asked Lafley not to provide a free breakfast so as to discourage people from attending who are more interested in the meal than the business. She also asked whether P&G was intending to buy cosmetics giant Estee Lauder but Lafley told her that it was company policy not to comment on any future acquisitions.