Fundamentals Bender Trust Project Little Investment Bankers of Rutgers Rutgers University Josselinne Rodriguez, Michael Kornblum, & Dor Alaluf Dec. 2011.

Fundamentals

Bender Trust ProjectLittle Investment Bankers of RutgersRutgers University

Josselinne Rodriguez, Michael Kornblum, & Dor Alaluf

Dec. 2011

• A Fortune 500 American multinational corporation manufactures of a wide range of consumer goods

• Headquartered in downtown Cincinnati, Ohio • Serves approximately 4.4 billion consumers around the world

with strong portfolio of trusted, quality, leading brands. • Known globally for its household and personal goods in the

following categories: • Beauty products (e.g. Gillette, Old Spice, CoverGirl)• Health & Well-Being (e.g. Crest, Oral-B)• Household Care (e.g. Ace, Tide, Duracell)

• Continuously expands its products offering through in-house development and acquisitions

Procter & GambleCompany Overview

Beauty34%

Health & Wellbeing18%

Household Care48%

Breakdown by Sales (2010)

Procter & GambleCompany Overview

Value Trends

Procter & GambleStock Information

2010 A 2011 E 2012 EEPS 3.67 4.19 4.58

P/E 17.24 15.10 13.82

S&P EPS 77.35 89.55 98.14

S&P P/E 16.26 14.05 12.82

Relative P/E 106% 107% 108%

• Symbol (NYSE): PG • Current Price (11/25/2011): $61.00• Volume (11/25/2011): 4,734,711• 52 Week Range: 57.56 - 67.72• S&P 500: 1,257.81

Procter & GambleStock Behavior Chart

Procter & GamblePorter’s 5 Forces Analysis

• Mass merchandisers• Grocery stores• Membership club stores• Drug stores• Neighborhood stores

Average consumer

Problem: High dependency on mass consumers

Procter & GambleBuyers

• Suppliers: 6 of the top 80,000 are:• Havpak Inc.• Hayco Ltd.• Nelson Packaging Company Inc.• Nippon Shokubai Company Ltd.• Novozymes• Pegas Nonwovens

• Strong codependent supplier relationship

Procter & GambleSuppliers

Barriers to EntryEntrance

• Brand-building• Large and diverse product range• Consumer confidence and loyalty in brand• Understanding of consumer needs as a point for innovation more production more consumption more profits

Threats to Market Share

• Niche market firms Example: Mac vs. Cover girl

• Lack of presence in emerging markets (i.e. BRIC nations)• Due to economic downturns, consumer spending has

decreased globally.

• Large number of substitutes• Unilever (UL)• L’Oreal • Kimberly-Clarke• Clorox Company (CLX)

However• Continuing product differentiation• Strong research & development division• Go-to market capabilities always looking to expand & develop

with consumer needs as a guide

Procter & GambleSubstitutes

Leading Household ProductsRanked by sales

Company Sales(MIL $)

Net Income(MIL $)

Procter & Gamble

70,029 11,291

Unilever 57,118 7449L’Oreal 24,726 2,909Kimberly- Clark 19,145 1,690Colgate-Palmolive

15,330 1,957

Kao 12,993 656Avon 19589 875Reckitt Benckiser

9,161 1,654

Estee Lauder 7,324 218Clorox 5,450 537Church &Dwight 2,422 195Alberto-Culver 1443 106Revlon 1,347 58

Procter & GambleIndustry Competition

Significant competition in 3 Industries where P&G offers products and services in:

• Advantages:• Strong consumer presence and confidence• Strong relations with suppliers • i.e. Target, Walmart

• Diverse product range in all 3 sectors• Large market share

• Disadvantages:• Needs international expansion• No strong online presence• Loss of local jobs, outsourcing manufacturing and back-office

operations work overseas cheap labor

Procter & GambleIndustry Competition

BUY

Stock Recommendation: