Proctor and Gamble 2004 Annual Report Download - page 7

markets.฀As฀we฀build฀leadership฀scale,฀we฀believe฀we฀can฀
grow฀developing฀markets฀to฀a฀third฀of฀P&G฀sales.
There฀are฀also฀important฀sources฀of฀continued฀bottom-line฀
improvement.฀Global฀Business฀Services,฀for฀example,฀has฀
locked-in฀substantial฀guaranteed฀savings฀over฀the฀next฀four฀
fiscal฀years฀–฀and฀is฀expecting฀additional฀purchasing฀savings฀
over฀the฀same฀period.฀In฀addition,฀the฀shift฀in฀our฀portfolio฀
toward฀Health฀Care฀and฀Beauty฀Care฀has฀added฀almost฀three฀
percentage฀points฀to฀the฀Company’s฀gross฀margin฀over฀the฀
past฀five฀years.฀We฀expect฀the฀more฀balanced฀portfolio฀to฀
continue฀improving฀gross฀margins฀in฀the฀years฀ahead.
The฀key฀point฀is฀that฀P&G฀strategies฀are฀working,฀and฀there฀
is฀plenty฀of฀room฀left฀to฀grow.฀We฀are฀committed฀to฀keep฀
leading฀product฀innovation฀in฀our฀categories;฀nothing฀is฀
more฀central฀to฀sustained฀growth฀than฀category-leading฀
innovation.฀We฀are฀equally฀committed฀to฀continued฀
innovation฀in฀marketing฀and฀sales,฀as฀well฀as฀other฀areas฀฀
dollar฀beauty฀brands฀and฀new฀capabilities฀added฀by฀Clairol฀
and฀Wella,฀we฀are฀well฀positioned฀for฀strong฀growth.
฀
In฀Health฀Care,฀we฀have฀strong,฀growing฀franchises฀in฀Crest,฀
Iams฀and฀Prilosec฀OTC.฀We’ve฀only฀scratched฀the฀surface฀
with฀Actonel,฀our฀first฀billion-dollar฀pharmaceutical฀brand,฀
and฀we’re฀optimistic฀about฀our฀pipeline,฀particularly฀Intrinsa,฀
our฀female฀testosterone฀patch.฀
Home฀Care฀is฀another฀faster-growing,฀higher-margin฀growth฀
opportunity.฀We฀have฀more฀than฀doubled฀P&G’s฀Home฀Care฀
business฀in฀the฀past฀three฀years.฀Still,฀P&G฀is฀a฀significant฀
player฀in฀categories฀representing฀less฀than฀half฀of฀the฀total฀
home฀care฀market.
฀
Developing฀markets,฀with฀80%฀of฀the฀world’s฀population,฀
are฀another฀opportunity.฀P&G’s฀organic฀volume฀in฀these฀
markets฀is฀growing฀more฀than฀50%฀faster฀than฀in฀developed฀
of฀the฀business.฀And฀we฀are฀focused฀on฀getting฀the฀most฀from฀
dedicated฀business฀units,฀global฀scale฀and฀the฀strength฀of฀our฀
growth฀businesses฀to฀capture฀the฀significant฀opportunities฀still฀
ahead฀of฀us.
Challenges฀Play฀to฀P&G฀Strengths
While฀our฀business฀is฀strong,฀and฀future฀prospects฀are฀฀
bright,฀there฀are฀clearly฀challenges฀we฀must฀acknowledge฀฀
and฀manage.
First,฀there฀are฀business฀issues฀we฀need฀to฀address฀in฀the฀near-
term.฀Family฀Care฀and฀Coffee฀categories฀have฀experienced฀
considerable฀price฀competition฀and฀commodity฀cost฀pressure.฀
Hair฀Colorants฀faces฀heavy฀competitive฀activity.฀To฀become฀฀
a฀leader฀in฀Colorants,฀we฀need฀an฀even฀more฀competitive฀cost฀
structure;฀we฀need฀to฀lead฀innovation;฀and฀we฀need฀to฀build฀
even฀stronger฀brand฀equities.฀We฀recognize฀these฀issues฀and฀฀
are฀taking฀decisive฀steps฀to฀address฀them.฀
There฀are฀also฀the฀ever-present฀risks฀of฀complacency฀and฀
complexity.฀When฀times฀are฀good,฀it’s฀easy฀to฀lose฀focus,฀฀
to฀lose฀touch฀with฀consumers฀and฀customers,฀to฀let฀costs฀
rise.฀We฀recognize฀this,฀and฀are฀committed฀to฀keeping฀P&G฀
businesses฀simple฀and฀focused฀like฀a฀laser฀on฀delivering฀
superior฀consumer฀value฀and฀better฀customer฀service.
Competitive฀pressure,฀of฀course,฀is฀an฀unrelenting฀challenge.฀
We฀compete฀against฀some฀of฀the฀best฀companies฀in฀the฀
world,฀and฀they฀are฀not฀standing฀still.฀They฀are฀responding฀฀
to฀P&G฀share฀growth฀with฀their฀own฀initiatives.฀Branded฀
competition,฀as฀well฀as฀retailer฀brands฀in฀a฀variety฀of฀formats,฀
present฀a฀constant฀challenge฀to฀lead฀innovation฀and฀offer฀
superior฀value.฀
Another฀challenge฀is฀rising฀commodity฀costs.฀Where฀
possible,฀we฀recover฀these฀costs฀via฀pricing.฀When฀we฀
cannot฀fully฀price฀to฀recover฀higher฀costs,฀we฀must฀฀
find฀offsetting฀cost฀savings฀elsewhere.฀We฀cannot฀permit฀
We’re฀confident฀P&G฀can฀reliably฀deliver฀the฀future฀growth฀to฀which฀฀
we’ve฀committed.฀Our฀strategies฀are฀working.฀There฀still฀is฀room฀to฀grow.฀
Our฀strengths฀enable฀us฀to฀respond฀to฀external฀trends฀and฀challenges.฀
Major฀changes฀are฀improving฀the฀consistency฀of฀P&G฀performance.
Sources฀of
Confidence
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