Procter Gamble Co the in Beauty and Personal Care (World)

8/10/2019 Procter Gamble Co the in Beauty and Personal Care (World)

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PROCTER & GAMBLE CO, THE IN BEAUTY ANDPERSONAL CARE (WORLD)

July 2014


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Euromonitor International PASSPORT 2BEAUTY AND PERSONAL CARE: PROCTER & GAMBLE CO

Disclaimer

Much of the information in thisbriefing is of a statistical nature and,while every attempt has been madeto ensure accuracy and reliability,Euromonitor International cannot beheld responsible for omissions orerrors.

Figures in tables and analyses arecalculated from unrounded data andmay not sum. Analyses found in thebriefings may not totally reflect thecompanies opinions, reader

discretion is advised.

Procter & Gamble, despite

being the leading beauty and

personal care player, is los ing

ground due to not adapt ing to

market shif ts quick ly enough.

Going forward, its success wil l

depend on creat ing new

segments as it has lost groun d

to its key rivals .

ScopeSCOPE OF THE REPORT

Beauty and

Personal Care

US$454,132 million

Baby and Child-Specific Products US$15,936million

Bath and Shower US$39,152 million

Colour Cosmetics US$55,499 million

Deodorants US$22,147 million

Oral care US$43,110

Fragrances US$45,135 million

Hair Care US$77,075 million

Men's Grooming US$35,441million

Skin Care US$107,248 million

Sun Care US$9,487 million

Depilatories US$4,739million
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STRATEGIC EVALUATION

COMPETITIVE POSITIONING

MARKET ASSESSMENT

GEOGRAPHIC AND CATEGORYOPPORTUNITIES

BRAND STRATEGY

OPERATIONS

RECOMMENDATIONS


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Procter & Gamble is the worlds leading beauty

and personal care company, accounting for an11% market share in 2013. Beauty is thecompanys second leading portfolio after home

care and more particularly laundry care. Withinbeauty, the company has wide coverage, but theleading categories include hair care (30% of totalsales), mens grooming (22%), oral care (16%) andskin care (9%).

It also has presence in home care, tissue andhygiene and consumer health. The company iscurrently undergoing rigorous restructuring with aview to streamlining its focus. To this end, it hasmade a number of divestments, including that ofsnack brand Pringles.

Procter & Gamble also has a wide regionalpresence in beauty and personal care withoperations in Asia Pacific, Western Europe,Eastern Europe, Latin America, Middle East and

Africa and North America. Procter & Gambles

largest regional operation is in North America, as aresult of its presence in the US, which accounts forover 20% of its global beauty sales.

11.0

11.2

11.4

11.6

11.8

12.0

0

10,000

20,000

30,000

40,000

50,000

60,000

2008 2009 2010 2011 2012 2013

%m

arke

ts

hare

Sa

les

(U

S$m

illion

)

P&G: Sales vs Market Share 2008-2013

Sales % Market Share

Key factsSTRATEGIC EVALUATION

Procter & Gamble Co, The

Headquarters: Cincinnati, Ohio, USA

Regional involvement:

Global

Category involvement:

Hair care, mens grooming,

oral care, skin care

World BPC value share(2013):

11.3%

World BPC valuegrowth (2012-2013):

3.7%


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Procter & Gambles operating income for FY2013

improved over 2012, thanks to the wide-scalerestructuring the company has undertaken.

Traditionally, Procter & Gamble operated in themore premium tier of the pricing spectrum acrossall industries, which it justified through itsbreakthrough innovations, but at the onset of therecession when consumers downgraded tocheaper alternatives, the company lost some ofits customers. This coincided with its competitorsoffering increasing product sophistication atcompetitive price points, while Procter &Gambles own innovation pipeline slowed down.

Procter & Gamble acted fast, undertaking anumber of cost-cutting measures such asreducing marketing and other administrativeexpenses, resulting in improved margins.

In 2012 however, the company announced alarge- scale restructuring programme includingdivestments, job cuts, and commonmanufacturing and redesigning platforms. Thecompanys operating margin dropped in 2012 dueto restructuring costs, but picked up in 2013.

12,000

12,500

13,000

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14,000

14,500

15,000

15,500

16,000

70,000

72,000

74,000

76,000

78,000

80,000

82,000

84,000

86,000

2009 2010 2011 2012 2013

Opera

ting

income

(US$m

illion

)

Ne

tsa

les

(US$m

illion

)

P&G: Net Sales vs Operating Income FYEnding June 2009-2013

Net Sales Operating Income

Contribution to Revenue FY2013

Beauty

Grooming

Health Care

Fabric Care and HomeCare

Baby Care and FamilyCare

Financial analysisSTRATEGIC EVALUATION


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Timeline for P&Gs restructuring programmeSTRATEGIC EVALUATION

2016 Projected savings US$10 bilion

2014 Exits pet food and MDVIP (a personalised healthcare operator) Announces complete redesign of end-to-end supply chains involving consolidation ofoperations into multi-category sites

Converts to common manufacturing and technology platform, designs supply systems toallow for more online product customisation

Consolidates customer shipping and product customisation operations into fewer distributioncentres

Merges India, the Middle East and Africa into one IMEA region

Integrates Greater China, ASEAN, Australia, New Zealand, Japan and Korea as Asia Cuts 2,300 roles

2013 4,100 job cuts CEO Bob Macdonald resigns AG Lafley returns as CEO/AG Lafley reorganises P&G operations into four units: Global Baby, Feminine and Family Care;

Global Beauty; Global Health and Grooming; and Global Fabric and Home Care Reports to have saved US$1.2 billion, exits global bleach business

2012 1,600 job cuts Divests Pringles

2012 Announces restructuring programme including job cuts to deliver US$800 million in savings,US$6 billion in less expensive packaging materials and planned efficiency in supply chainand US$1 billion cut to marketing spending


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GBU - Global

Business Unit

Create, design, manufacture andmarket products

Focus of brand building at global,regional and local levels

Responsible for managing brandfranchise building resources

SMO - Sales and

Marketing

Operations

Responsible forselling, distribution,shelving, price andexecution and

merchandising.Selling resourcesconcentrated in theSales and MarketingOperations

P&G streamlines operations to enhance productivitySTRATEGIC EVALUATION


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0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2011 2012 2013 2014

US$m

illion

P&G: Net Sales vs Operating Income for

First Nine Months FY2011-FY2014

Net Sales Operating Income

P&Gs restructuring programme appears to be

bearing fruit for the company with net sales andoperating income for the first nine months of fiscal2014 even higher than the same period in 2013.

The company has stated that it is on track with itsrestructuring plans. Its plan was to save US$800million via 5,700 job cuts, which it has also achieved.It has gone beyond its initial plan and cut a further2,300 roles in 2014. The company also stated that

through its restructuring it aims to save another US$1billion by increasing the efficiency of its supply chains.It has made good strides developing the efficiency ofits supply chains. It is in the process of redesigning itssupply chains to make them multi-categoryoperations, thus benefiting from greater synergy aswell as scale. Its greatest savings, however, isexpected to come from cutting back on expensive

packaging materials. It is not clear how far thecompany has gone with this strategy.

The next step is for Procter & Gamble is to increaseits investment in R&D since its innovation pipeline forcategories such as skin care is not very extensive.

Financial comparisons for first nine months of fiscal yearsSTRATEGIC EVALUATION


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STRENGTHS

OPPORTUNITIES

WEAKNESSES

THREATS

Procter & Gamble haswide global exposure.Its products are sold in180 countries throughwide-ranging distributionchannels including mass

merchandisers andgrocery stores.

Global exposure

Procter & Gamble hasstrong brands to itsname. The companyboasts 24 billion dollarbrands. It also claims 50leadership brands that

contribute 90% of itsoverall sales and profit.

Leading brands

Procter & Gamble stillemploys soft marketingtechniques, tapping intoemotive aspects,compared to its rivals,which are using hard

scientific facts toconvince consumers ofproduct efficacy.

Falling behind inmarketing trends One of the key issuesfor Procter & Gamble isthat market dynamicshave shifted, but itsmodel is yet to adapt tothese changes.

Not changing businessmodel

Procter & Gamble is theglobal leader in electrictoothbrushes. Withincreasing oral healthawareness and risingdisposable incomes inemerging markets, itstands to benefit in thelong run.

Electric toothbrushes

Gillette has strongpotential in mens skin

care given it is a brandmen strongly associatewith. With menincreasingly purchasingfor themselves, P&Gcan capitalise on thisbrand.

Mens skin care

While Procter & Gamblefaces strong competitivethreats frommultinationals, localplayers are alsoincreasing competitivepressure as they matchinnovations withcompetitive price points.

Local competition

Procter & Gamble is upagainst strongcompetition fromUnilever, LOralandColgate. In somecategories, Procter &Gamble is fast losingshares to these rivals.

Category competition

SWOT: Procter & Gamble Co, TheSTRATEGIC EVALUATION


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Procter & Gamble has announced a US$10 billionproductivity programme to enhance the companysperformance. The programme includes funding top

line growth, ensuring consumer value propositionsare superior, overcoming macro headwinds anddelivering better bottom line growth.

Instead of launching new brands or makingacquisitions, the company focuses on extendingexisting brands into sub-ranges, eg Gillette Fusion

as part of its billion dollar brand strategy. It hasdiscontinued Max Factor in the US market. Thisrationalisation may save on costs but may limit thecompany from pursuing opportunities at both thepremium and economy ends as the companycrowds into the mid-range price segment.

To accelerate growth Procter & Gamble isimplementing three key changes, which it refers toas 40/20/10. The company aims to focus resourceson the 40 largest and most profitable businesses,accounting for 50% of sales and 70% of netearnings. The next change includes focusing onthe 20 most profitable innovations accounting formost of the portfolio revenue, and the third change

involves investing in 10 emerging markets mostcritical to the companys growth.

Procter & Gambles objective has been to focus onbillion dollar brands. The company has 24 billiondollar brands spanning across a number ofcategories including skin care and laundry carewith a strong global presence. The billion dollarbrands each generate between US$1 billion andover US$12 billion in revenue. According to thecompany, investing in the already well-established

billion dollar brands has a greater potential togenerate returns than brands with limited presenceand less familiarity.

Focus on core operations Focus on billion dollar brands

Brand rationalisation Improving productivity

Procter & Gamble focuses on core businessesSTRATEGIC EVALUATION


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MARKET ASSESSMENT


BRAND STRATEGY

OPERATIONS

RECOMMENDATIONS


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6

2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

%y

-o-ygrow

th

Procter & Gamble vs Beauty and Personal Care Market 2008-2013

Beauty and Personal Care Procter & Gamble

Procter & Gambles global

beauty and personal caregrowth declines in 2011 acrossmost of its key categories. Inmature markets, consumers

trade down, while increasingcompetition in emergingmarkets means the companybenefits less from growth herethan some of its competitors.

In 2013, growth continues to fallas it lags behind the industry upagainst competition in all itsmajor markets. The companydecided to shift focus from

emerging markets to NorthAmerica, its home market wherecompetition has been building,from Unilever in hair care andLOralin colour cosmetics andskin care.

Despite the success of itsrestructuring programme in2012, Procter & Gamble faceskey challenges from majorcompetitors such as LOral,

Unilever and Colgate. Thecompanys brands are

overstretched and not in linewith the industry trends wherebrands are increasinglysegmented.

P&G trails behind global beautyCOMPETITIVE POSITIONING


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There was little movement among the worldsleading beauty and personal care manufacturersover the 2008-2013 period, with the top fourremaining entirely unchanged. However, in 2013-2014, there were some notable acquisitions, withLOral the most active in the top 10 purchasingMagic Holdings in China, Cheryls Cosmeceuticalsin India as well as professional skin care brandsCarita and Declor from Shiseido.

Market stability was also maintained by a uniformityof strategy among the leading players, with themajor players focusing on expansion in emergingmarkets, and, where possible, premiumisation.

Procter & Gamble has been finding itself in the faceof mounting competitive pressure. It hastraditionally operated at higher price points,

justifying it on the basis of ground breakinginnovations, but now its rivals are matching similar

product features at competitive price points but alsomaintain a more segmented portfolio. Procter &Gamble is now aiming to boost its innovationpipeline, but following the economic downturn, itsmargin has been narrowing, further adding to thechallenge.

Little movement at the topCOMPETITIVE POSITIONING

Global Leading Beauty and Personal Care

Companies 2013

Rank Company2013 %growth

2013 %share

1Procter & Gamble Co,The

3.7 11.3

2 LOralGroupe 4.8 9.7

3 Unilever Group 7.8 8.1

4 Colgate-Palmolive Co 6.2 3.8

5 Beiersdorf AG 6.2 3.0

6 Este Lauder Cos Inc 7.6 2.9

7 Johnson & Johnson Inc 4.8 2.8

8 Avon Products Inc -2.7 2.4

9 Shiseido Co Ltd 0.3 2.1

10 Henkel AG & Co KGaA 3.8 1.8


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MARKET ASSESSMENT


BRAND STRATEGY

OPERATIONS

RECOMMENDATIONS


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In terms of regional expansion, Procter & Gamble finds itself facing a dilemma. North America is thecompanys key regional market, but like many of its rivals it decided to pursue emerging market growthmore strongly. However, it found its home ground coming under increasing competitive attacks. Unileverexpanded its hair care presence, LOralexpanded in skin care and colour cosmetics and Colgatethreatened its oral care shares in North America. Subsequently, Procter & Gamble decided to shift focusfrom emerging markets to North America.

While this happens, Procter & Gamble is losing ground in emerging markets, where competitive pressure isnot just coming from multinationals but also local players. For example, in China local skin care players aregaining strong ground thanks to increasing product sophistication which they can offer at competitive pricepoints due to more relaxed government regulations. Procter & Gamble needs to adopt an appropriatestrategy that will allow it to address competition in both North America and other emerging markets.

Asia Pacific

AustralasiaEastern Europe

Latin AmericaMiddle East & Africa

North America Western Europe

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CAGR2013-2

018

Market size 2013 (US$ million rsp)

Procter & Gamble Co, The: BPC Presence 2013 and Growth Prospects 2013-2018 by Region

Note: Bubble size represents company share of category in 2013, range displayed: 8.9-16.4%

Dilemma in developed vs emerging market expansionMARKET ASSESSMENT


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Procter & Gamble has faced challenges in most of its key beauty categories. While its innovation pipelinehas been slow in recent years, impacting its market share globally, the company appears to be removedfrom key market trends. Leading beauty players including LOral and Unilever have been operating highlysegmented portfolios across the pricing spectrum and age groups. For example, Unilever operates anumber of brands in regular and salon-inspired hair care in different pricing segments. TRESemm is in themass segment among the salon-inspired brands and Sunsilk is its counterpart in the regular segment. Doveis the more premium range in the regular hair care category and Nexxus in salon-inspired hair care. Procter& Gamble, on the other hand, only operates one key brand in each category, diluting them across the widerpricing spectrum, ranging from mass to masstige. With a diluted brand image and less innovative features,higher pricing proves detrimental for the company.

Baby and Child-Specific Products

Bath andShower

ColourCosmetics

Deodorants

Depilatories

Fragrances

Hair Care

Mens Grooming

Oral Care Skin Care

Sun Care

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CAGR2013-2

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Market size 2013 (US$ million rsp)

Procter & Gamble Co, The: BPC Presence 2013 and Growth Prospects 2013-2018 by Category

Diverse presence across beauty industryMARKET ASSESSMENT

Note: Bubble size represents company share of category in 2013, range displayed: 0.2-32.5%


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MARKET ASSESSMENT


BRAND STRATEGY

OPERATIONS

RECOMMENDATIONS


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P&G Hair Care Value Sales Breakdownby Region 2013

AP NA

WE LA

EE ME&A

Aus

P&G Hair Care Value Sales Breakdown byCategory 2013

Shampoos

Conditioners

Colourants

Styling Agents

Salon Hair Care

Other

Hair care is Procter & Gambles largest beauty and personal care category, and shampoos comprises morethan 50% of its total sales, with conditioners accounting for a further 20%.

Asia Pacific is Procter & Gambles largest regional market, accounting for approximately 30% of its globalhair care sales. Sales in Asia Pacific mostly stem from China, accounting for nearly 60% of its Asia Pacifichair care sales. Procter & Gamble has deep penetration in shampoos in China, controlling over 40% of themarket. It is only in China where it has greater coverage across the pricing tiers through three key brandsRejoice, Head & Shoulders and Pantene. Rejoice is a mass-market brand, while Head & Shoulders ispositioned as a more specialised brand targeting dandruff. Pantene has smaller shares than these two andsits in the upper pricing tier. North America and Western Europe make up some 40% of P&Gs global haircare sales, followed by Latin America at 20%. Unlike China, Procter & Gamble does not have as strong a

presence in the mass hair care segment in the other regional markets.

Hair care is largest beauty portfolio for P&GGEOGRAPHIC AND CATEGORY OPPORTUNITIES


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P&G hair care share loss in key marketsGEOGRAPHIC AND CATEGORY OPPORTUNITIES

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P&G Hair Care Market Share Movements by

Category 2008/2013

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P&G Shampoo Market Share by Region2008/2013

20082013

Globally, Procter & Gamble lost 70 basis points inhair care market share over 2008-2013. However,while it managed to gain 20 basis points in marketshare for shampoos, it lost share in bothconditioners and colourants, its second and thirdleading categories, respectively.

Conditioners and colourants have been sufferingfrom a slow innovation pipeline and subsequentlyfalling behind its competitors. Hair oil has becomevery popular as a conditioning format, but Procter

& Gamble entered the category after its keycompetitors. In hair colourants, rival LOralsGarnier Olia has been a breakthrough in massretail channels given its ease of application andusage of oil for pigment penetration.

Procter & Gamble has also lost market share inshampoos across all regions with the exception ofLatin America and Asia Pacific, but even within

Asia Pacific it lost market share in its largestmarket, China. On the other hand, Procter &Gambles share growth in hair care emerged fromnew growth frontiers including India and Indonesia.In Latin America, the company is benefiting fromintroducing its latest innovations such as Pantene

Age Defy.


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It is not just a slow innovation pipeline that isimpacting Procter & Gambles market share in haircare, but also because its hair care portfolio is lesssegmented in terms of pricing coverage incomparison to its key hair care rival Unilever.

Shampoos can be broadly classified as regular,anti-dandruff, salon-inspired and organic/natural.Both Procter & Gamble and Unilever havecoverage in these hair segments, but Unilever haswider pricing coverage in each of these segments

than Procter & Gamble. For example, underregular retail brands, Unilever has Dove in theupper pricing tier and Sunsilk in the lower tier, butProcter & Gamble has Pantene in the upper tierand no significant coverage in the mass segment(with the exception of Rejoice, which is mostlyconfined to China). Similarly, under salon-inspiredbrands, Unilever has coverage ranging from mass

to premium, but Procter & Gamble is confined topremium and mid-market.

With wider coverage across the pricing spectrumacross the broad shampoo classifications, Unileverhas been able to refine its offerings to suitconsumer needs more closely.

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P&G vs Unilever Market Share inShampoos in Developing and Emerging

Markets 2008-2013

Procter & Gamble Unilever

For example, from Unilevers hair care portfolio, aconsumer is able to select an affordable salon-inspired brand, a product range that has proved tobe very successful with consumers as they areperceived as good value for money. In addition, abrand portfolio covering a wider expanse of pricingtiers allows for greater flexibility in developingpresence across emerging markets. For example,Unilever is able to offer Dove, TRESemm andSunsilk to cover consumers with wider variety of

needs and affordability as opposed to Procter &Gamble which can mainly offer Pantene.

P&G shampoos less segmented than rivalsGEOGRAPHIC AND CATEGORY OPPORTUNITIES


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There is limited scope for Procter & Gamble to fill the pricing gaps in its hair care portfolilo. The mid-pricetier of the regular retail shampoos market is not widely covered by any key players. Procter & Gamble,through Pantene, is present in the upper tier, while Unilever is present through Dove. On the other hand,Unilevers mass brand is Sunsilk. There could be a potential for Procter & Gamble to develop presence inthe mid-price market, but there are competitive challenges from affordable salon-inspired brands such asTRESemm. Procter & Gamble was astute in introducing more sophisticated ranges such as Pantene AgeDefy to help add value to Pantene and further distinguish it as an upscale mainstream retail brand. With anageing population in its key regional markets North America and Western Europe, Procter & Gamble canexpect to benefit from its ranges targeting mature women, but this would not be as beneficial in emerging

markets with younger populations.

Too late to fill the gaps in shampoos portfolioGEOGRAPHIC AND CATEGORY OPPORTUNITIES

Mainstream

Pantene

Rejoice(China)

Anti-Dandruff

Head &Shoulders

Salon-Inspired

VidalSassoon

Aussie

Natural/Organic

ClairolHerbal

Essences

Mainstream

Dove

Sunsilk

Anti-Dandruff

Clinic/

Clear

Salon-Inspired

Nexxus

TRESemm

V05

Natural/Organic

Organics

Price rangeProcter & Gamble UnileverHigh

Low


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Affordable salon-inspired brands have been performing well as seen withTRESemm, whose value pack sizes combined with its salon heritagehave been received with considerable enthusiasm in the market.Subsequent to its acquisition of Alberto-Culver, Unilever had introducedTRESemm in various emerging markets including Brazil, Thailand, Indiaand Indonesia, where the brand has been doing very well.

Given TRESemmsgood performance, the question is, should Procter &Gamble focus on mass-market salon-inspired ranges? Procter &Gambles Aussie is a similar range to TRESemm, although Aussie is

more niche. Aussie is based on unique Australian ingredients which claimto have effective properties for deep conditioning.

Given that TRESemm has already established a strong position in themarket, the competitive barriers are high, but Procter & Gamble can use

Aussie to further tap into the salon-inspired natural/organic hair caresegment and highlight the brands unique ingredients from Australia to

emphasise the brands efficacy.

Beauty manufacturers are increasingly relying on scientific terms such as

keratin shampoos/conditioners or active ingredients to draw consumerattention as well as convince them of product efficacy. Aussie doeshighlight its unique Australian ingredients, but could use the concept tophrase something similar to keratin - shorter and sounding novel andscientific.

Create a new segment in salon/organic hair careGEOGRAPHIC AND CATEGORY OPPORTUNITIES


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Fragrance

+

Other HairBenefits

Procter & Gamble is tapping into opportunities in dry shampoos. Itlaunched a new range - Herbal Essences Naked Collection. Theproducts are infused with a mint scent that lasts long after showering,capitalising on the sensorial trend in hair care.

The star product under Herbal Essences Naked Collection is its dryshampoo. In line with all other products in the range, it focuses on thescent experience, but also claims to be based on new tapioca pudding-based dry shampoo technology, which claims not to leave aconcentrated white circle on the head.

Dry shampoo under the Herbal Essences Naked Collection is aninteresting innovation since scent-infused products offer strongpotential in the dry shampoos category. Dry shampoos still comprisesa small fragment of the total hair care market, but the category hasgood growth potential as the products are being positioned as for usein conjunction with wet shampoos not only as a time saving option, butalso to protect hair from frequent exposure to surfactants in wetshampoos.

Dry shampoos, however, still face the challenge of matching the samefresh feel of wet shampoo. The Naked Collections dry shampoo hasan edge here since the mint-infused smell can add to the fresh feel.Most shampoo brands, including TRESemm, Dove and Garnier, nowhave a dry shampoo range, but the olfactory claim is not as distinct asthe Herbal Essences Naked Collection dry shampoo.

P&G taps into sensorial aspects of dry shampoosGEOGRAPHIC AND CATEGORY OPPORTUNITIES

.

.


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P&G Mens Grooming Value Breakdownby Subcategory 2013

Men's Razors and Blades

Men's Pre-Shave

Men's Post-Shave

Men's Toiletries

Mens grooming: High priority but men go from shaving to savingGEOGRAPHIC AND CATEGORY OPPORTUNITIES

31.0

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32.0

32.5

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34.0

2008 2009 2010 2011 2012 2013

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P&G Mens Grooming Global Market

Share 2008-2013

Within beauty and personal care, mens groomingis a high priority category for Procter & Gamble, asindicated by the company separating it frombeauty to form a stand-alone division in order tobe able to provide a more in-depth focus.

Globally the company is the leading player inmens grooming with over 30% of value sales,thanks to mens razors and blades, in which it hasan unrivalled position.

Despite its strong position in mens grooming, itsshare has been steadily declining. There are twokey reasons for this. The first is that it does nothave sufficient price coverage in mens razors andblades and the second is that it is not fully tappinginto the potential of mens toiletries.

The companys position in mens razors andblades comes mainly from its positioning in themid-price tier, but consumers have been graduallytrading down. Procter & Gamble has responded tothis with a breakthrough innovation, the FusionProGlide with FlexBall, but it is yet to be seen ifprice-conscious consumers will upgrade,particularly in the face of several cheaperalternatives..


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Within mens grooming, mens razors and blades

accounts for 75% of P&Gs total mens grooming

sales. Globally, it is by far the leading player in thecategory, accounting for 66% of global market value.

Between 2008 and 2013, the companys share in

mens razors and blades has been sliding. This is not

so much due to competition as it is to market trends.In Western Europe and North America, whichtogether make up nearly 50% of the global mens

razors and blades market, men appear increasinglyless interested in paying too much for razors andblades, particularly in light of the economic downturn.Related to their reduced willingness to pay is thecurrent vogue for the stubble look, leading to lessfrequency in shaving.

Cheaper alternatives are also appearing. Bic, a muchcheaper brand, recorded growth of 6% in North

America and Western Europe combined, comparedto a 1% decline for Gillette in these regions, over2008-2013. In addition, private label has seen greaterpenetration, while subscription to sites such as DollarShave Club and Automated Men also offer cheaperalternatives.

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Top Three Players in Global Mens

Razors and Blades 2008-2013

Procter & Gamble Co, The

Energizer Holdings Inc

St Bic SA

Male consumers trade down to cheaper razors and bladesGEOGRAPHIC AND CATEGORY OPPORTUNITIES


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0

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Men'sShaving

Men'sToiletries

Va

luesa

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(US$

millionrsp

)

Mens Grooming Breakdown by Shaving vsToiletries 2013 and % CAGR 2013-2018

Skin Care

Hair Care

Deodorants

Bath and Shower

Razors andBlades

Pre-Shave

Post-Shave

% CAGR 2013-2018

In 2014, the companys new launch Fusion ProGlidewith FlexBall, which it claims is based on ground-breaking technology, is still a launch in the upperpricing tier. Its design claims to effectively shave thehard-to-reach contours of the face with amanoeuvrable handle that offers better grip and moreprecise control.

The question is how successful is this product likely tobe? In light of consumers downgrading to cheaper

alternatives, the answer would appear not to belaunching more premium products, but instead offeringconsumers products at lower price points.

An ongoing issue with Procter & Gamble has been itslack of presence in the lower pricing tiers across allcategories. The company boasts of its ground-breaking innovations to justify premium pricing, but thismay not bear fruit in mens shaving due to target

consumers strong propensity to save.

Procter & Gamble could increase its focus on mens

toiletries, which has much higher growth prospects inCAGR terms, but has also surpassed the market sizefor mens shaving.

P&G continues to launch in premium shaving segmentGEOGRAPHIC AND CATEGORY OPPORTUNITIES


27/48


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Mens Grooming Forecast Growth byCategory by Region 2013-2018

Men's Toiletries Men's Shaving

Mens skin care a potential category for P&GGEOGRAPHIC AND CATEGORY OPPORTUNITIES

0

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Mens Grooming Market Size Breakdown

by Region 2013

Men's Toiletries Men's Shaving

Procter & Gamble has the option of tapping morevigorously into all categories under mens toiletries

including deodorants, skin care, hair care and bathand shower. Mens toiletries sales now equal those of

mens shaving in most regions, but in Asia Pacific

mens toiletries is larger than mens shaving.

Furthermore, projected growth for mens toiletries is

also higher across all regions.

Deodorants is the largest category, but skin care is

projected to be the fastest growing one with an 8%CAGR over 2013-2018. In both mens skin care anddeodorants, P&G faces steep competition. In mens

deodorants, Unilever is the market leader controllingnearly 40% of the market, followed by Procter &Gamble, with 10% of the market. In mens skin care,

LOralcontrols 20% and Beiersdorf another 13%.While it would be harder to penetrate deodorants due

to the strong dominance of Unilever due to both itsbrand credibility and wider pricing coverage, Procter& Gamble has stronger prospects in skin care due tothe perception of Gillette being a mens brand

compared to LOral Paris which is generally

associated as a female brand.


28/48


A drawback for Gillette could be that it speaks less tofemale consumers than a brand such as LOralParisand this is considered an important factor given thatmens toiletries are often picked up by their femalepartners.

However, this practice appears to be changing as mentake more interest in grooming and are now moreactively involved in the purchasing process.Traditionally, this market was under-represented withproducts that men could connect with, but niche brands

such Bulldog are gradually changing the scene. Bulldogand King of Shaves specialise in mens toiletries withdedicated and targeted formulations and brandingmessages.

Gillette, as one of the leading brands in the mensgrooming category, could capitalise on this trend. Itcould consider launching lines with targeted maleformulations more vigorously. It could further tap into

the digital media, particularly in terms of marketing suchproducts. Moreover, there are strong opportunities in

Asia Pacific, particularly in China, with the regionprojected to lead absolute growth in mens skin careglobally. This could also provide a much-needed boostto the companys overall skin care category sales.

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Mens Skin Care Market Size 2013 andForecast Growth by Region 2013-2018

Market Size 2013 % CAGR 2013-2018

Gillette suitable for mens skin careGEOGRAPHIC AND CATEGORY OPPORTUNITIES


29/48


Skin care is Procter & Gambles fourth leading beauty and personal

care category, accounting for 9% of its total BPC sales in 2013.Procter & Gamble has been losing share in skin care due to a numberof factors, although the overriding factor is the gradual shift in marketdynamics, which Procter & Gamble appears to have been slow toadapt to.

P&Gs relatively slow innovation pipeline has been blamed for its loss

in market share, but this is not entirely true. Its most recent launchOlay Regenerist Luminous claims to be based on ground- breaking

technology. Its skin-energising technology claims to boost matureskins cellular bioenergy. The line comprises facial moisturiser andeye cream. Prior to Olay Regenerist Luminous, Olay launched anOlay BB cream and then a CC cream. It also has a sophisticatedrange of targeted products including Olay Regenerist Advanced Age-Defying Eye Roller, which claims to instantly reduce eye puffiness,and Regenerist Anti-Ageing Lip Treatment, which is said to moisturiseand visibly reduce the appearance of lip lines. It also has a skin care

device similar to LOralsClarisonic, but sold at a much lower pricepoint and launched before LOralacquired Clarisonic. It has a kitwhich combines the device and Olay skin perfecting cleanser. Theseranges should have been sufficient to help the company make greaterstrides in skin care market share, but its portfolio seemscomparatively less segmented than its competitors.

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Procter & Gamble Skin CareMarket Share 2008-2013

P&G slow to address shift in skin care dynamicsGEOGRAPHIC AND CATEGORY OPPORTUNITIES


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The skin care market is becoming increasinglysegmented along age groups, consumeraffordability and price points, which are againinterrelated.

LOralmaintains three distinct divisions acrossthe pricing tiers. Garnier is at the mass level,LOralParis is a mid-price brand and then it hasa range of premium brands. Higher concentrationof ingredients is found in the premium brands,which are targeted at older and more mature age

groups, but lower proportions of the sameingredients are also available in the mid-pricebrand LOral Paris at more affordable pricingpoints. Garnier, on the other hand, is targeted ata younger age group and often combines multiplefunctions.

Procter & Gamble mainly competes through onebrand, Olay, in skin care across the mass pricing

spectrum, which dilutes the brands image.Consequently, even though Olay has a range ofproducts targeting a wide spectrum of agegroups, it is not as distinct as LOralsbrands.Overall, it appears LOralhas a greater varietyon offer for more diverse groups.

Greater segmentation in skin care portfolio neededGEOGRAPHIC AND CATEGORY OPPORTUNITIES

Price

FunctionalityAge

Product Segmentation


31/48


Procter & Gambles loss of market share in skin care also

reflects its inability to create the same marketing hype asenjoyed by some of its key competitors.

LOralwas a pioneer in popularising the serum format andthe BB cream trend. In addition, short and scientific termssuch as active ingredients and/or active molecules help to

draw attention, while making their brands seem equallyconvincing as the more descriptive explanation of thescience behind the technology. LOralspackaging around

consumer segmentation also helps to add to the hype. Forexample, LOralsSkin Perfection Magic Touch Instant BlurCream, targeted at a younger age group, is packaged in apink box - the packaging clearly communicating to younggirls. On the other hand, Revitalift, designed for more maturegroups, is packaged in red - which carries more gravity andweight attracting older age groups. In addition, a number ofworld-renowned actors have been appointed to represent

the brand. LOralscommercials are more hard hitting. While Revitaliftuses terms such as Triple Power, Olay employs Your Best

Beautiful. At a time when skin care is taking on a more

advanced scientific form, hard-hitting catchy phrases arelikely to strike a chord with consumers over softer terms.

Not enough hype around skin care offeringsGEOGRAPHIC AND CATEGORY OPPORTUNITIES


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Some 30% of P&Gs global skin care sales comefrom the worlds leading skin care market, China,

but it is increasingly losing share to otherplayers.

China is a lucrative market for all skin caremanufacturers, leading to extreme competitivepressure. While the growing competitivepressure is not news, the changing competitivelandscape deserves some attention.

Previously, competition came mainly fromforeign multinationals, but now local players arealso gaining ground in terms of productsophistication, albeit positioned at morecompetitive price points due to more relaxedgovernment regulations for local companies.Moreover, consumers in the lower pricingsegments also prefer local brands since they canidentify with them more closely. This shift in

Chinas competitive landscape is not only makingit necessary to have more clear segmentationalong pricing lines, but also to create strongermarketing buzz and brand excitement tocommunicate the brands distinct and nichepositioning in comparison to rival brands.

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P&G vs LOraland Leading Local Players

in Skin Care in China 2008-2013

L'OralGroupe

Procter &Gamble Co,The

Jala (Group)Co Ltd

ShanghaiJahwa UnitedCo Ltd

ShanghaiInoherbCosmeticsCo Ltd

Shifting dynamics in Chinas competitive landscapeGEOGRAPHIC AND CATEGORY OPPORTUNITIES


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P&G vs Colgate: Market Share Gain inOral Care 2008-2013

Colgate-Palmolive Co Procter & Gamble Co, The

Oral care more successful for P&G but falling behind rivalsGEOGRAPHIC AND CATEGORY OPPORTUNITIES

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P&G vs Colgate: Market Share in OralCare 2008-2013

Colgate-Palmolive Co Procter & Gamble Co, The

Oral care is one of Procter & Gambles moresuccessful categories. In 2013, Procter & Gamble

recorded 5% growth in oral care, second highest forthe company after deodorants, which grew by 7.5% inthe same year.

Despite oral care performing well in comparison to thecompanys other categories, it was lower incomparison to other key oral care players, namelyColgate and Unilever, recording growth rates of 8%and 6%, respectively.

Procter & Gamble marginally lost share in global oralcare, while Colgate and Unilever both recordedpositive market share growth. While Colgate gained 60bps in market share, Unilevers market share grew by10 bps. This reflects how well the players performedregionally. Colgates growth was predominantly drivenby emerging markets, while Procter & Gambleappears to be focusing on developed markets.

While Colgate gained market share in Asia Pacific,Australasia and Eastern Europe, Procter & Gamblegained share in Latin America, North America andWestern Europe, with Latin America the only emergingregional market in which the company recordedpositive share growth.


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Given market share shifts, it appears that both P&G andColgate are streamlining their regional focus in the faceof intense global competition. Regional priority for eachof the companies is linked to the regional balance oftheir oral care portfolios. While North America andWestern Europe combined account for more than 50%of P&Gs global oral care sales, for Colgate this is a

much lower proportion.

The more interesting story, however, is in Latin America,

which holds greater weight in terms of regional sales forColgate in comparison to Procter & Gamble, but Procter& Gamble is aggressively pushing into this region.

Procter & Gamble is capitalising on rising disposableincomes in Brazil, the largest oral care market in theregion. In 2012, it introduced a new range of oral careproduct under its brand Oral B and appointed theleading model Gisele Bndchen as the brand

ambassador. This has proved successful for thecompany, contributing to its share gain in the market. Onthe other hand, Colgates more economy brand Sorrisohas lost share, clearly indicating that Brazilianconsumers are looking for more sophisticated productsfor their oral care regimen.

Colgate Oral Care Value SalesBreakdown by Region 2013

LA

AP

WE

NA

EE

ME&A

Aus

P&G Oral Care Value Sales Breakdown

by Region 2013AP

Aus

EE

LA

ME&A

NA

WE

Western market focus takes away P&G growth from oral careGEOGRAPHIC AND CATEGORY OPPORTUNITIES


35/48


In order to beat its rivals in oral care globally, P&Gneeds to develop a stronger presence in otheremerging markets. In Asia Pacific, Eastern Europe andLatin America, Procter & Gamble forms a distantsecond to Colgate and in the Middle East and Africa itranks number four. With the exception of Latin

America, Procter & Gamble lost share in all theseregional markets.

One common problem for Procter & Gamble is that it is

positioned as more premium and hence lessaccessible to consumers with lower affordability.Combined with this, in some markets, such as China,local competitors are also coming up with oral careproducts with more sophisticated functionality. In somemarkets, Colgate has region-specific brands, such asDarlie, accessible to consumers with lower affordability.

The question for Procter & Gamble is what would form

an appropriate strategy to expand in emergingmarkets. It does not have the option of including a newmass brand, given the cost implications. It can continuewith further segmentation offering more closelytargeted benefits to justify its premium positioning, butalso take advantage of higher pricing margin.

Focusing on targeted benefits to help P&G oral careGEOGRAPHIC AND CATEGORY OPPORTUNITIES

P&G vs Colgate in Oral Care: Share and

Ranking by Region 2013

ColgateProcter &Gamble

Region % share Rank%

shareRank

AP 24.2 1 11.4 2

Aus 46.0 1 14.2 3

EE 27.0 1 19.0 2

LA 51.1 1 16.3 2

ME&A 25.8 1 14.2 4

NA 18.1 2 33.7 1

WE 19.1 1 18.9 2


36/48


Procter & Gamble also has the option of taking a long-term view on emerging market oral care. Procter &Gamble is the global leader in electric toothbrushes, which it can capitalise on.

With ever-growing oral health awareness globally, there is a good opportunity for electric toothbrushes,which are designed to cleanse bacteria more effectively, preventing tartar and plaque.

Penetration of electric toothbrushes is higher in Western markets due to higher affordability, but there areopportunities for further growth with consumers upgrading from manual toothbrushes. In emerging markets,higher cost is a deterrent, but with increasing disposable incomes more consumers could be expected toupgrade in the long run.

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P&G Oral Care Presence 2013 and Growth Prospects 2013-2018 by Category

2013 % CAGR 2013-2018

Long-term potential for electric toothbrushesGEOGRAPHIC AND CATEGORY OPPORTUNITIES


37/48


Mouthwashes/dental rinses is a category that offers greater prospects in the near future. The globalforecast, at over 4% CAGR, for mouthwashes/dental rinses is the highest among the oral care categories.

Increasing oral care awareness is expected to drive growth as consumers adopt a multi-care routineincluding brushing, followed by mouth rinsing. While they are well established in North America, sales areexpected to grow in Western Europe as well as other emerging markets. Unlike electric toothbrushes,mouthwashes/dental rinses are affordable in addition to their claims of addressing oral care issues withgreater effectiveness than simply brushing.

Johnson & Johnson is the global leaderwith Listerine, but the brands marketshare has fallen as its parent focuses onother divisions. Procter & Gamble is thesecond leading player, but its marketshare remained static, while Colgate, thethird leading player gained share in 2013.P&Gs presence in this category revolvesprimarily around North America. It wouldbenefit from expanding its presence inother emerging markets.

While there are competitive barriers inemerging markets, the category is still inits nascent stage. Good productdevelopment and effective marketingcampaigns could help to overcome suchcompetitive barriers.

Long-term potential for electric toothbrushesGEOGRAPHIC AND CATEGORY OPPORTUNITIES

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Mouthwashes/Dental Rinses Growth Prospects byRegion 2013-2018

Absolute Value Growth (US$ million) 2013/2018 % CAGR 2013-2018


38/48


P&G targets Middle East & Africa for colour

cosmetics

Potential for Olay in bath and shower

Colour cosmetics is one of Procter & Gamblessmaller BPC categories, accounting for 6% of itsglobal BPC value sales. The companys presence

in colour cosmetics derives primarily from NorthAmerica, contributing over 40% of its global colourcosmetics sales. The companys leading brand is

Cover Girl, a mass brand. It also owns Max Factor,another mass brand, which was withdrawn from

the US in 2009, and SKII, a premium brand,present mainly in Asia Pacific.

In 2013, Procter & Gamble lost 10 bps in globalcolour cosmetics market share. This was mainlydue to loss of market share in North America,where it faces strong competition from LOralinvesting in both product development and

marketing. While Procter & Gamble faces intensecompetition in its key market, it is building share inthe Middle East, with strong growth prospects inpercentage terms. It is using Max Factor to driveshare; a good move given the brands heavy

coverage, which sits well with regional tastes.

Bath and shower is another smaller category,accounting for 4% of P&Gs total BPC sales globally;

with China accounting for more than 30% of its globalsales in the category, followed by the US, contributingover 20%.

In terms of regional prospects, Procter & Gamble iswell placed since absolute growth in the category will

be driven by the US and China. Procter & Gamble hasa well-segmented portfolio offering a wide range ofbrands.

It has extended Olay in bath and shower, althoughpenetration is still limited. As seen with Dove, Procter& Gamble has the potential to further extend Olay inbath and shower as a brand specialising in skin care.

Procter & Gamble could use Olay bath and shower to

market in India, projected to be the third leadingmarket to drive growth in this category. Unilever,however, dominates India with nearly 50% marketshare mainly through Lux. Procter & Gamble couldbreak into this market with Olay, but needs to be quicksince Dove is growing rapidly.

Competitive barriers for colour cosmetics and bath and showerGEOGRAPHIC AND CATEGORY OPPORTUNITIES


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MARKET ASSESSMENT


BRAND STRATEGY

OPERATIONS

RECOMMENDATIONS


40/48


Gillette is Procter & Gambles leading beauty and

personal care brand and the worlds number two

BPC label. It is one of the companys billion dollarbrands, with sales of US$12 billion in 2013. Gilletteis among Procter & Gambles most diverse brands

in terms of geographic profile. It ranked numberone in every regional mens grooming market in

2013.

The US is P&Gs leading market for Gillette,

followed by Brazil. Given that the Brazilian marketis set to lead growth in mens grooming over 2013-2018 this puts the Gillette brand in a veryfavourable position.

The Gillette brand is positioned as mass, howeverProcter & Gamble has been branching out topremium mens grooming with the Art of Shaving,

which it launched in the UK in 2011, but with

product sophistication increasingly found undermass brands, premium brands face intensecompetition. To this end, the focus is more onGillette, which has expanded into skin care, haircare, deodorants and fragrances in addition to itsmost recent launch Fusion ProGlide with FlexBall.

Gillette Regional Breakdown 2013

Asia Pacific Australasia

Eastern Europe Latin America

Middle East and Africa North America

Western Europe

Gillette enjoys broad geographic reachBRAND STRATEGY


41/48


Pantene is Procter & Gambles leading hair care brandand the worlds number two hair care label. It is one of

the companys billion dollar brands, with sales of US$5billion in 2013.

Pantene has been something of a problematic brandfor Procter & Gamble in recent years, due in part to anoverweight portfolio and confusion over its positioning.Moves to push the mass brand upmarket have beenundermined by significant price cuts in core markets.

In recent years, Procter & Gamble has been trying torevive the brand. It relaunched the brand with improvedformulation and packaging in 2012. In 2011, Procter &Gamble switched to plant-based PET for its PanteneNature Fusion bottles to maintain a consistent naturalimage for the brand. The Nature Fusion range wasrolled out in 2011 and 2012 to new markets includingThailand. In 2012, it launched Pantene Age Defy formature hair, which it also introduced in Brazil.

The brand relies heavily on celebrity brandambassadors including most recently US actressZooey Deschanel. In keeping with Procter & Gamblesglobal aspirations however, it has also enlisted Indianpersonalities such as Padma Lakshmi. 0

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Pantene Global Hair Care MarketShare 2011-2013

Procter & Gamble aims for more premium image for PanteneBRAND STRATEGY


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Olay is one of Procter & Gambles billion dollar beautyand personal care brands, with sales of US$3.7 billion

in 2013. It generates over 85% of its revenue in skincare, where it is the worlds number three brandunderpinned by its number two position in facial skincare.

The brands strong exposure to skin care provides astrong base for innovation, and has met with notablesuccess through anti-ageing extensions, such asRegenerist, Definity and Pro-X Intensive previously. In

2014, it launched Olay Regenerist Luminous based onskin-energising technology designed to boost matureskins cellular bioenergy. The line comprises facialmoisturiser and eye cream. Olay, however, is comingunder strong competitive pressure in key markets suchas China, where its competitors are expanding theirdistribution coverage through distinctive brandsincluding that of parapharmacies/drugstores.

Procter & Gamble has begun to leverage the strengthof the Olay brand in other key brands. It launched theVenus & Olay razor in a high-profile marketingcampaign. It also continued to extend Cover Girl withOlay as part of the Simply Ageless line, but theseremain limited.

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Olay Global Market Share in Skin Care2011-2013

Procter & Gamble looks to cross-category branding for OlayBRAND STRATEGY


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MARKET ASSESSMENT


BRAND STRATEGY

OPERATIONS

RECOMMENDATIONS


44/48


P&G emerging market manufacturing sites by country 2013OPERATIONS

Western Europe:Turkey

Eastern Europe:Russia, Czech

Republic, RomaniaAsia Pacific:China, India,Philippines, Vietnam

Middle East and Africa:Egypt, Lebanon,Morocco, Saudi Arabia

Latin America:Argentina, Colombia,Mexico, Brazil,Guatemala, Peru,Venezuela


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MARKET ASSESSMENT


BRAND STRATEGY

OPERATIONS

RECOMMENDATIONS


46/48


Create new segments Scientific overtones in its marketing messages

While Procter & Gamble is losing ground due to itslack of coverage in the mass segment, slowinnovation pipeline and outdated marketingmessages, it has the opportunity to create newsegments by combining some of the existingmarketing segments. For example, while it wouldbe harder for Procter & Gamble to compete withUnilever in salon-inspired hair care segment, it can

market Aussie as a salon-inspired natural/organicbrand.

Given the strong competitive pressure in most ofthe categories in which it competes, a significantpart of its future growth trajectory will depend oncreating new segments.

The companys marketing messages are also notin line with current trends. It continues to tap intothe emotive aspects of product experience usingphrases such as Your Best Beautiful for Olay or

Be Strong and Shine for Pantene, while its rivalsare turning to more hard-hitting scientific terms toconvince consumers of product efficacy. Forexample, LOralrefers to active ingredients and

Unilever makes use of keratin as part of productclaims.

This is in line with the sophistication that beautycategories are increasingly assuming. Procter &Gamble would benefit from using similar short andcatchy, but scientific terms as part of its marketingstrategy.

In need of greater alignment with market dynamicsRECOMMENDATIONS


47/48

FOR FURTHER INSIGHT PLEASE CONTACTOru Mohiuddin

Senior AnalystBeauty & Personal Care

[email protected]


48/48


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