Rising Tide

rising tideLessons from 165 yrs of Brand Building at P&G

Brief HistoryGetting Started

Ivory Soap Story of Tide: Detergent WarsLearning to Compete in Japan

Success in Shampoos (80s)Diaper Wars

Success in MexicoThe Russian Experience

Restructuring P&GMillion Dollar Brands

Brief History

William Procter, an English storekeeper & candle maker and James Gamble, a Irish soap maker settled in Cincinnati, set up their business and married sisters Olivia and Elizabeth Ann Norris

Father-in-law Alexander Norris (also a candle maker) suggested that they join hands to survive the banking crisis of 1837

P&G was born with the commodity business of soaps and candles

Cincinnati – the largest meat packing center in the US was a hub for Soap and Candle makers who depending on the byproducts

Humble Beginnings

The development of Rail Roads helped P&G transport their commodities to markets beyond Cincinnati

Manufacturing Unit was set up in Central Avenue, Downtown CCN

Through most of the 19th century, P&G continued to sell unbranded soaps and candles

The first movement from commodities to consumer goods came with the launch of Ivory (1870s) and now the company has evolved into

a Global Giant with over 33 million dollar brands

Getting Started: Rising Tide

This book chronicles the evolution of P&G from local candle maker to global multinational

Second purpose of the book is to explain the company’s success in its core business of building consumer brands

Research for the book done through a series of interviews conducted with a host of senior and middle managers

Some shortcomings

Despite having documented data, the authors have relied on interviews with P&G managers

….managers employed with P&G, while being interviewed

Therefore success is attributed to hard work and resourcefulness of enterprising employees

And failures are put down to reasons beyond management control or shown as “lessons” which enabled the company to become stronger

Why read this book?

Story of how P&G succeeded in building strong brands

18791946

19901955

1961

Why read this book?

Succeeded against the worthy competitors

Why read this book?

And built an organization, admired by many

History of Ivory Soap

• In 1879, a soap maker at P&G forgot to turn off the soap mixer, during lunch.

• More than the usual amount of air was shipped into the batch of “The White Soap”

• To cover up his mistake, the soap maker packaged & shipped the air-filled soap to customers around the country.

• Soon customers were asking for more "soap that floats." When company officials found out what happened, they turned it into one of the company’s most successful products - Ivory Soap.

Excellent Laundry Soap, of great purity and more than average cleansing power

“It Floats” / Purity 99 44/100 %

“Suitable for all kinds of washing needs: face and hands, clothing and delicate articles….”

Earliest Advertising in all Leading Magazines of US

“If your grocer does not keep the Ivory Soap and declines to get it for you, the manufacturer (P&G, Cincinnati) will furnish it direct”

Crisis in Production

In 1884, a fire broke out in the downtown factory consuming a sizable portion of the soap operations

This disaster gave P&G an opportunity to overhaul their soap production setup.

The opportunities in the market were immense and the competition high. “IvoryDale” Unit built in the outskirts of Cincinnati helped Ivory move into

the next level of readiness in terms of product availability

Ivory defined and taught P&G to get over initial setbacks and prepare for bigger businesses

Detergent Wars: The early days• In the 1920s, Americans used soap flakes to clean their laundry. The

flakes performed poorly in hard water, leaving a ring in the washing machine, dulling colors, and turning whites gray.

• P&G began an ambitious mission to change the way Americans washed their clothes. Researchers discovered two-part molecules which they called synthetic surfactants.

• Each part of the "miracle molecules" executed a specific function--one pulled grease and dirt from the clothes, while the other suspended dirt until it could be rinsed away.

• In 1933, this discovery was introduced in a detergent called "Dreft," but it could only handle lightly soiled jobs. The next goal was to create a detergent that could clean heavily soiled clothes. That detergent was Tide®.

Detergent Wars: The Tide Revolution• Created in 1943, Tide detergent was the combination of synthetic

surfactants and "builders." The builders helped the synthetic surfactants penetrate the clothes more deeply to attack greasy, difficult stains.

• Introduced to test markets in October 1946 as the world’s first heavy-duty detergent, consumer response to Tide was immediate and intense.

• Tide detergent outsold every other brand within weeks. It became so popular that store owners were forced to limit the quantity purchased per customer.

• Tide detergent was improved 22 times during its first 21 years on the market, and P&G still strives for perfection. Each year, researchers duplicate the mineral content of water from all parts of the United States and wash 50,000 loads of laundry to test Tide detergent’s consistency and performance

Learning to compete in Japan

• “If you cant compete with them in Japan, you cant compete with them anywhere”

• P&G entered Japanese market by acquiring Nippon Sunhome Ltd in 1973 – and in three years their laundry powder “Cheer” become a best seller

• Understanding Japanese Culture: Mistakes in Advertising

• Understanding Local Customs and Culture – instead of adapting American way of working helped P&G gain a foothold in the Japan market.

“The Great Flying Leap”

5 Key Points for Growth in Japan

Understand Japanese Consumers

Tailor Products To Japan

Market With Sensitivity To Culture

Sell The Company’s Image

Penetrate The Japanese Distribution System

Innovation in Japan

• On Kao / Lion: By attacking them on their home turf P&G weakened its rivals, delayed their international expansion and P&G gained deep insight into the local marketplace

• Febreze odor removing fabric spray is P&G’s crowning glory in innovative

marketing

Success in Shampoos (80s)

Market ScenarioPantene: Acquired by Richardson Vicks Inc in 1985

Other Brands - Head & Shoulders : had a 25% MS in the early 60sPrell: Had a 22% MS in the 70s

By the 80s – Hair styles had changed/ aggressive new competition / P&G responding sluggishly

Most products in hair care were “very similar, without much differentiation”

Manufacturing of shampoos inexpensive – low entry barriers compared to the other categories of P&G

Evolution of P&G ShampoosPert – BC18 – Pert Plus – Pantene Pro V

Pert, launched in 1979 to turn the tide. Campaign line “Coast for your hair” The brand was positioned on refreshment and a green hi-scent

formulation.

With competitors adding and communicating the component of conditioner more aggressively; Pert quickly changed its brand promise

to “Wash & Go”

Since conditioner was seen as a very important aspect; Pert failed to evoke a strong response amongst consumers

Though P&G had a proven track record with technological breakthroughs (synthetic cleaning – Drene 1930s & dandruff control – Head &

Shoulders 1960s), it seemed to have lost its technological edginess

Technology Breakthrough

Testing (Beauty Care Product 18) BC18 : HPT , Focus Response

Success of Pert Plus – First Shampoo + Conditioner

Entry into Taiwan Market – Pantene Pro V

Pantene Pro V : “Don’t‘ hate me because I’m beautiful” / Selling on the aura of beauty instead of functional performance

Going Global

Diaper Wars

Primary Competitor - Huggies (Kimberly Clark)

Introduction of Luvs – a premium diaper brand

Learning from detergent category on multiple brand in a single category (Tide = premium , Cheer = safe on colors, Gain = fresh scent , Oxydol = bleach)

P&G worked on a strategy that Pampers stands for VFM and Luvs – a more premium offering

Success in Mexico

Strong competition from Colgate – Entrenched Player

Advertising Council Issues – Get the Language Right

Turning Point – Rapido Detergent / Perfect for local water conditions Followed by the success of Ariel

Mexico seen as a entry point / Hub to Latin America

Ariel become P&G’s first Blockbuster Brand in Mexico

Based on Enzyme Formulations originally developed in Europe

Russia Market

Tracking the breakdown of communist Russia

Division of markets & setting objectives

Test Launches based on set objectives

Values of Company communicated

Crash of the Russian Market

Agree on Realistic Volume Forecasts

Restructure Internal Process and Workloads

Re-evaluation Of Supply Chain / Economize & Simplify Operations

Severance Package To Reduce Workload

Localize Management and Production




Success in MexicoBusiness with WallMartThe Russian Experience


Restructuring P&G

Strategic Acquisitions

Pruning Low Potential SBUs / Exit Options

Supply Chain Reconfiguration – Understanding Issues

Deal with Wall Mart

Understanding & Implementing Value Pricing

Lafleys 10 beliefs

Values of P&G

Strategic Acquisitions

By 2K – P&G has a fast growing brands in beauty & health care (including oral care) and had traditional strong brands in fabric care,

home care and paper products (including feminine protection)

Major Acquisitions of the period : Max Factor (1991), Tambrands (1997), Iams (1999), Clariol (2001) and Wella (2003)

Pruning Low Potential SBUs

P&G departed from Crisco, Spic and Span, Biz, Duncan Hines and Jif

Hard Look at Food & Beverage Business / No Power Brands apart from Folgers and Pringles

Concerns on Citrus Hill Orange Juice (planned entry into Juices) and Fisher Nuts (planned entry to complement Pringles in the salty snack

category)

Sept ‘92 – P&G liquidated Citrus Hill (along with selling off other minor Juice Brands) & in ‘95 after accumulating modest losses sold Nuts business to

John B San Filippo

Supply Chain Reconfiguration

The era of passing out costs increases to consumers was over, so what were the avenues of cost control?

If orders were primarily coming through Electronic Orders, what was the role of the modern salesman?

Customers were getting more sophisticated in their use of IT and inventory management

Purchasing decisions in customer organizations were shifting from traditional criteria such as price and allowances to a more holistic set of criteria

Value Pricing

• Look at the Market Value of the Company and subtract what the Balance Sheet says – the difference is the future earning power at NPV

• If Brands are your source of Value Creation – then you have to ask “What are we doing to create strong brands” The stronger you make the more value you add to the company”

• Strong Brand Franchises are created by creating strong consumer loyalty. “As a consumer if I came to a store and saw Tide at half the price I pad the week before, I’d be angry”

Bold Move and Subsequent Repercussion

• Between 1989 – 90, P&G shifted virtually all its offerings to value pricing – attracting strong reactions

• SUPERVALU added a Surcharge to P&G products / Certified Growers Midwest, a big distributor removed 40 P&G products off the list / Von’s a leading grocery chain in New England removed 13 products off the shelf /

• “P&G is acting like a dictator, and like all dictators, they will fail. We will do everything in our power to undermine their plan” – Stop & Shop, leading grocery chain

Deal with Wal-Mart

In 2002, it took 117 prime time ads to reach 80% of 18-49 yr

By Comparison, 50% of the US Households shopped at Wal-Mart every week / 80% shopped at WM every month

Walton & Pritchett’s Canoe trip

Deal on Knowledge Transfer, Total System Efficiency, Total Quality

Sharing of experiences in Electronic Ordering, Custom Built Displays and New Sources of Cost Control

10 things I believe – A.G. Lafley

Lead change: Change is inevitable

The consumer is boss

Innovation is our lifeblood

Power of strategy: Where to play and how to win

Power of execution: Win in the store

Power of brands

Power of knowledge and learning

Power of P&G people: Without us, no strategies, no brands, no execution

Direct, simple and transparent: What you see is what you get

Take purpose, values and principles seriously




Success in MexicoBusiness with WallMartThe Russian Experience

Million Dollar Brands

mail: [email protected]: rpkiLinkedIn: linkedin.com/in/pradeep26

Rising Tide

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