Proctor and Gamble 2000 Annual Report Download - page 20

FINANCIAL REVIEW (CONTINUED)
The Procter & Gamble Company and Subsidiaries
18
BEAUTY CARE
Net sales in beauty care were $7.39 billion, comparable to
the prior year, but up 1% excluding the impact of unfavor-
able exchange rates, primarily in Western Europe. Unit
volume declined 2%, impacted by a difficult competitive
environment in key European markets and significant
contraction of the market in China. Net earnings were
$894 million, a 3% decrease from the prior year.
Sales in the current year were slightly ahead of volume
due to the focus on high-performance, premium-priced
initiatives, including the launch of the Physique styling-
led line, cosmetics and skin care product initiatives and
the expansion of Secret Platinum.
Earnings for the current year reflected the weakness in
China and Western Europe and higher marketing costs
associated with the introduction of new products and
initiatives on established brands, which more than offset
gains from minor brand divestitures.
Western Europe was negatively impacted by competitive
factors and the euro devaluation. Plans to restore
growth include improved focus on cost control, as well
as the expansion of premium-priced initiatives such as
the VS Sassoon and Head and Shoulders restages and
expansion of Olay Total Effects.
China, especially hair care, was challenged by a wors-
ening economic situation, which fueled the growth of
low cost local brands and a higher incidence of branded
product counterfeiting. Going forward, the business
will continue to focus on strengthening brand equities
through several upgrades on large brands.
North America increased volume behind premium product
introductions. Physique, positioned as a salon-quality
brand, was launched in the last half of the year and
achieved solid share results. The introduction of Old Spice
Red Zone and expansion of Secret Platinum also provided
good share results.
In 1999, net sales declined 1% to $7.38 billion on a 5%
unit volume drop. Sales were negatively affected by the
financial crisis in Eastern Europe, as well as competitive
activity and the impact of divestitures of non-strategic
brands in Western Europe. Net earnings were $917 mil-
lion, a 9% increase from 1998, reflecting favorable pricing
and steady progress on cost control.
HEALTH CARE
Health care net sales were $3.91 billion, with growth
primarily coming from acquisitions. Volume and sales
increased 34% and 36%, respectively, versus the prior
year. Unfavorable exchange rates impacted sales by
2%. Net earnings were $335 million, a 38% increase over
1999. Excluding the impact of acquisitions, health care
delivered sales growth of 4% despite a 2% volume
decline, while earnings increased 17%.
The Iams Company posted record results, doubling
distribution with the expansion into new retail chan-
nels. Beyond the channel expansion, Iams introduced
several successful product initiatives.
Health care sales in North America grew behind strong
consumption, favorable pricing and volume progress in
pharmaceuticals. Oral care volume gains were driven by
the launches of Crest MultiCare Advanced Cleaning and
other premium dentifrice products.