Posted by Barry Silverstein on August 19, 2010 01:15 PM
Consumer brand powerhouse Procter & Gamble is out to conquer the world.
The company is ramping up an aggressive international expansion strategy, a necessity if it hopes to continue to grow. Traditionally focused on U.S. and Europe, P&G is now setting its sites on the rest of the world as sales sag in its stronghold territories.
One of the main reasons for the soft market has been the changing spending habits of consumers, who've become more frugal and cost-conscious during the recession. According to the Wall Street Journal, nearly two-thirds of U.S. consumers replaced at least one food, beverage, or household product with a cheaper substitute.
As a result, many of P&G's traditionally profitable brands — including Charmin, Crest, Gillette, Mr. Clean, and Tide — might have been bumped by generic brands. The impact on P&G's bottom line was significant. A year ago, the company suffered the first drop in annual sales since 2001.
While P&G tried to combat the consumer rebellion by slashing some prices and producing cheaper versions of its own brands, it hasn't always worked. The company came out with lower priced Charmin Basic and Bounty Basic, which seemed to win over some consumers. But P&G discontinued Tide Basic, probably because it undermined the other products in the Tide line.
For its Duracell brand batteries, P&G has engaged in a price war with competitor Energizer to regain market share that it was losing. Energizer "blamed competitor price cuts for hurting the value of the entire battery business," according to the Journal.
Now P&G is looking to beef up its sales in developing countries. The problem is, with the company's concentration on the U.S. and Europe, P&G has to make up a lot of ground elsewhere.
In Brazil, for example, a country in which people "take more showers, use more hair conditioner and brush their teeth more often" than consumers in other countries, P&G's products are a natural fit — yet the company has badly lagged behind competitors Colgate and Unilever. P&G's strategy there is to introduce new products in several categories simultaneously, leveraging its promotional dollars by doing joint marketing campaigns. It's a different way of doing business for P&G — usually, it markets each brand separately.
For its part, Colgate doesn't seem concerned. Franck Moison, COO of emerging markets at Colgate, told attendees at an investor conference, "I don't quite understand why people are moving into a battle that they have very little chance to win."
But to generate interest in its brands, grow in new geographic areas, and boost profits, that's just what P&G may need to do.