P&G set for continued growth

Related tags Developing country

P&G has reaffirmed that its health and beauty lines,
particularly in developing markets, will continue to sustain future
growth for the company. Simon Pitman reports.

Speaking at a press conference in Boston, US, chief executive A.G. Lafley said that in parallel to growth in its health and beauty business, the company's biggest money-making opportunities for consumer products would be found in markets such as China, Latin America, Eastern Europe, Middle East and Africa.

Cosmetics products are expected to bring steady growth for the company. Currently health and beauty makes up 47 per cent of P&G's​ sales, but this is predicted to increase to 50 per cent by the end of the decade.

The claims come hot on the heels of announcements by Colgate-Palmolive that it is restructuring its production facilities and workforce, and Avon stating that it is redefining its focus in light of tough conditions in the US market.

But propped up by the strong performance of its health and beauty division, as well as its operations in developing countries, analysts say that P&G is in a stronger position than many of the other international players in the global cosmetics and personal care industry.

The company said that it expects its balanced growth, which has seen group sales increase by 10 per cent each year for the past three years, will continue this year. It attributed this success to the focus on its core brands while maintaining an adequate balance across all other brands and categories.

Innovation has been core to sales in the past, and the company said that this would also remain a primary driver of sales in virtually all categories. New categories, which include Daily Facials and At Home Teeth Whitening products, are reported to be driving sales.

The company also emphasised its focus on scale, which has enabled it to accrue investment in branding, while driving cost efficiencies out of the supply chain.

"It's a virtuous circle,"​ said Lafley. "The more scale a company can leverage, the more opportunities there are to grow margins and to reinvest for further growth. The more you can reinvest in innovation to delight consumers, the more you grow. The more you grow, the greater the scale and margins."

Although the developing markets have continued to show strong growth for the company, it also pointed out that there needed to be even more influence in its operations.

"Developing market are a disproportionate opportunity for P&G versus competitors,"​ said Robert McDonald, P&G vice chairman of global operations. "Developing markets represent only about 21 per cent of our total sales versus up to 45 per cent for some competitors."

P&G share prices rose by just under 3 per cent following the announcement.

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