Confident of success for the long haul

Last year P&G became the eighth largest corporation in the world by market capitalisation and the fourteenth largest US company by profit. This year it was ranked 20 in the Fortune 500.

Celebrating 15 years in SA, P&G has become a market leader in most of its product categories. More significant, however, is the company's long-term prospects, says Andrew Peterson, GM for P&G SA, which manages the South and East Africa region.

“For a consumer goods company like ours, 45-million consumers is not much, but there are 670-million consumers in subSaharan Africa and roughly half of them are in southeast Africa. Clearly we have to look beyond SA's borders — that's where tomorrow's business lies.”

He says P&G has not been immune to the global economic crisis, with South and East Africa facing the additional challenge of currency devaluations and escalating costs of raw materials.

“Because many products are imported there has been an increase in consumer prices.

“A recession is bad enough but when consumer prices shoot up as well you get contraction in markets, so performance in most of our markets has flattened or contracted.”

“However, while many companies experienced shrinking markets, P&G's global operations reported a 1% organic growth in the last quarter; organic sales were up 1%, reflecting a 6% net benefit from pricing and mix, which offset lower volume.

“We've been through a lot in the past 172 years — depressions, wars and currency crises. We know what to do and we don't jeopardise the long term by doing crazy things short term.

“We have a broad enough portfolio in terms of countries and brands to be confident that we'll survive by doing the right thing.”

Marketing director Levent Kömur says the best thing a company can do in times of crisis is to have strong brands.

“To do this we need to build people. Now is the time to hire, to prepare for the upswing — people building people so that they can build brands which, in turn, build more people.”

Throughout its history P&G has played a pioneering role in many areas. In 1925 it became the first company to conduct data based market research with consumers. Today it conducts more than 10000 consumer research studies every year.

It is also credited with sponsoring and producing the first radio soap operas in the 1930s. When the medium switched to television in the 1950s and 1960s most of the new serials were sponsored and produced by P&G.

In 1961 the company introduced the first affordable, successful disposable diaper, Pampers, the world's leading brand today.

Innovation is at the heart of P&G's business, says Kömur.

“We have to innovate, not for the sake of innovation but for our very survival and to maintain that competitive edge.”

Peterson says innovation should not be limited to brands, but permeate the entire business.

“For instance, we were one of the first multinationals to outsource our back-office about 10 years ago. Nowadays this is common business practice.”

The breadth of P&G's business has created unexpected opportunities, with almost 50% of the company's products collaboratively developed and commercialised by partnering organisations.

A plastic film technology arising from diaper research paved the way for one of P&G's greatest external partnerships.

At the time of its discovery it would not have been strategic for P&G to enter the plastic-wrap business.

Instead, a joint venture was formed with Clorox, one of P&G's biggest competitors in the cleaning products sector. The result was Glad, the world's leading plastic wrap.

“We engage suppliers with a long-term view and, where necessary, train them,” says Peterson.

“We don't chop and change — we've worked with some suppliers for the best part of a century.”

Source: Business Day

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