Proctor and Gamble 2004 Annual Report Download - page 9

P&G’s฀foundation฀is฀household฀products.฀These฀are฀large฀
businesses฀that฀are฀growing฀steadily฀and฀reliably฀generate฀
earnings฀and฀cash.฀Overall฀Company฀performance฀has฀been฀
driven฀by฀these฀foundation฀categories฀for฀generations.฀We฀
grew฀P&G฀sales฀eightfold฀in฀the฀1970s฀and฀1980s฀when฀
virtually฀all฀our฀business฀was฀in฀household฀categories.฀Our฀
enthusiasm฀and฀expectations฀for฀these฀household฀businesses฀
have฀not฀diminished.฀We฀remain฀the฀global฀leader฀in฀many฀
of฀these฀businesses,฀and฀are฀growing฀fast฀in฀categories฀such฀
as฀Home฀Care.
Health฀Care฀and฀Beauty฀Care฀are฀faster-growing,฀higher-
margin฀businesses฀in฀which฀P&G฀is฀emerging฀as฀a฀global฀
leader.฀We฀expect฀both฀Health฀and฀Beauty฀to฀be฀
disproportionate฀engines฀of฀growth฀in฀the฀first฀decade฀of฀฀
the฀21st฀century.฀These฀businesses฀are฀appealing฀because฀
they’re฀huge฀markets฀–฀the฀beauty฀market฀is฀more฀than฀฀
four฀times฀the฀size฀of฀the฀fabric฀care฀market,฀for฀example฀–฀
There฀are฀major฀unserved฀and฀underserved฀populations฀in฀
every฀market฀where฀P&G฀competes.฀The฀opportunity฀is฀
greatest฀in฀developing฀markets.฀The฀risk,฀however,฀is฀greater,฀
too.฀The฀key฀is฀to฀be฀selective,฀focused฀and฀disciplined.฀We฀
have฀made฀clear฀choices฀about฀where฀we฀will฀focus฀P&G฀
investments฀and฀efforts,฀and฀are฀executing฀plans฀in฀ways฀
that฀minimize฀risks.
This฀approach฀is฀working฀in฀big฀developing฀markets฀such฀as฀
China,฀Russia฀and฀Mexico.฀In฀China,฀for฀example,฀we฀entered฀
the฀market฀in฀1988.฀Our฀first฀categories฀were฀Shampoo,฀฀
Skin฀Care฀and฀Personal฀Cleansing.฀We฀became฀market฀
leaders฀in฀these฀categories,฀and฀developed฀distribution฀and฀
supply฀chains฀to฀reach฀China’s฀largest฀cities.฀In฀the฀mid-
1990s,฀we฀entered฀Fabric฀Care,฀Feminine฀Care฀and฀Oral฀
Care.฀Then,฀we฀entered฀Baby฀Care฀in฀the฀late฀1990s.฀
We฀accelerated฀entry฀into฀these฀categories฀by฀using฀the฀
distribution฀and฀supply฀chains฀we’d฀built฀earlier,฀and฀we฀
leveraged฀P&G’s฀branding฀and฀innovation฀strengths฀to฀win฀
with฀consumers.฀We’ve฀doubled฀the฀size฀of฀P&G’s฀China฀
business฀over฀the฀past฀three฀years.฀We’re฀now฀expanding฀
these฀categories฀by฀innovating฀to฀the฀needs฀of฀more฀Chinese฀
consumers.฀In฀2001,฀P&G฀brands฀were฀focused฀on฀premium-
tier฀consumers.฀The฀premium฀tier฀made฀up฀about฀16%฀of฀
the฀market฀in฀the฀categories฀where฀we฀competed.฀Today,฀
we’ve฀expanded฀our฀product฀offerings฀to฀mid-tier฀consumers฀
and฀are฀reaching฀more฀than฀50%฀of฀the฀market.฀There฀still฀฀
is฀room฀to฀grow,฀and฀we฀remain฀optimistic฀about฀P&G’s฀
potential฀in฀China.฀
A฀Unique฀Organization฀Structure฀Creates฀Advantage
I฀explained฀in฀my฀2002฀Letter฀to฀Shareholders฀that฀P&G฀฀
had฀moved฀to฀a฀new฀operating฀structure.฀We฀organized฀
around฀Global฀Business฀Units฀(GBUs),฀Market฀Development฀
Organizations฀(MDOs),฀a฀Global฀Business฀Services฀
organization฀(GBS)฀and฀Corporate฀Functions.฀We’re฀now฀
with฀no฀dominant฀leaders.฀P&G฀shares฀are฀low,฀and฀we’re฀
developing฀the฀capabilities฀to฀grow฀rapidly.฀
We฀will฀keep฀our฀foundation฀healthy฀and฀growing฀while฀we฀
build฀momentum฀in฀these฀newer฀businesses.฀Our฀near-term฀
goal฀is฀to฀break฀out฀as฀a฀clear฀global฀leader฀in฀Beauty฀and฀to฀
continue฀building฀Health฀Care฀at฀a฀fast฀rate.฀This฀makes฀P&G฀
a฀unique฀investment฀proposition.฀We฀have฀strong฀healthy฀
household฀businesses฀–฀anchored฀by฀leading,฀billion-dollar฀
brands฀like฀Pampers,฀Ariel฀and฀Downy฀that฀are฀growing฀at฀
rates฀above฀industry฀averages.฀We฀also฀have฀faster-growing,฀
higher-margin฀health฀and฀beauty฀businesses฀that฀are฀
growing฀ahead฀of฀both฀industry฀averages฀and฀P&G฀target฀
growth฀rates.฀No฀other฀consumer฀products฀company฀offers฀
this฀unique฀portfolio฀balance.
Serving฀More฀Consumers฀Drives฀Growth
We฀are฀building฀capability฀to฀serve฀lower-income฀consumers฀
who฀are฀not฀buying฀and฀using฀P&G฀products฀on฀a฀regular฀
basis฀today.฀
Accelerate฀growth฀in฀
developing฀markets฀
and฀with฀lower-
income฀consumers.
Accelerate฀faster-
growing,฀higher-
margin฀health฀and฀
beauty฀businesses.
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