Proctor and Gamble 2003 Annual Report Download - page 15

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Our goal is to delight consumers through better-performing
products at a good value, while delivering superior
shareholder returns. The challenge in Baby and Family Care
is to do this in an environment of much higher capital costs
and longer innovation lead times. Our approach to
managing complex innovation in this environment is paying
dividends with consumers and shareholders alike.
Baby and Family Care includes three of the Company’s most
recognizable billion-dollar brands: Pampers, Bounty, and
Charmin. Industry consolidation and consumer expectations
have increased competition and the importance of staying
in front on innovation. Babies are only in diapers about
three years, so one-third of our Baby Care consumer base
turns over every year. New moms are very interested in
finding the latest and greatest performance and value.
We’re focused on four strategies:
Better and Cheaper Designs. Historically, we invented
product improvements first and cost-saved them later. We
asked consumers to pay for this inefficiency with higher
prices. Today, we build structural cost reduction into original
designs. It’s working. In the past year, unit costs have
declined by more than $300 million. While delivering strong
profit progress, we’ve still invested a substantial portion of
this cost reduction into more innovation and lower prices
to improve consumer value and grow market share.
360° Innovation. We’re getting more out of every initiative
by what we call “360° innovation.” We expect innovation
in all elements that impact consumer value: product, design,
package, in-store presentation, price, and clear, compelling
marketing communication. We’ve developed a new
research technique to evaluate how these elements interact
with each other for each new initiative. Pampers Baby
Stages of Development doubled the size of P&G’s premium
diaper business, and Charmin was successfully launched in
Mexico and Germany leveraging 360° innovation.
Innovation-Friendly Equipment. Consumers don’t care
what kind of equipment we use to make products, but they
will switch brands if we fall behind on performance or value.
This is why we invested $1 billion in a sustainable capital
standardization program over the past several years to make
it easier and more cost effective to innovate in Baby Care.
Diaper production lines that were different in every part of
the world were replaced with a standard modular converter.
We can now innovate off-line and then quickly replace one
or two modules. Today, we make more diapers than we did
five years ago with 30% fewer lines – and our capital needs
in the future will be lower. Total capital spending in Baby and
Family Care finished 2002/03 below 6% of sales, better than
key competition and well below our historical average.
Virtual Design. Designing physical prototypes of products
and equipment is expensive and time-consuming. Again,
consumers don’t want to pay for this. We’ve expanded
our capability to use computer-aided virtual design for
everything from better-fitting diapers to faster, more
efficient paper machines. This has cut development costs
and accelerated time to market.
Baby Care and Family Care are very large categories that
present significant opportunities for category growth, share
growth, geographic expansion and improved shareholder
returns. Being consumer- and customer-friendly on the
outside while managing complex innovation inside is the
key to success.
The challenge in Baby and Family Care is to be
consumer- and customer-friendly on the outside
while managing complex innovation inside.
We’re meeting this challenge.
Mark D. Ketchum
President