P&G turns to innovation to win more customers in a tough global economy

When the economy is not good and customers become more discerning, consumer product companies have to rely on innovation to cater to more demanding requirements.

Procter & Gamble Co (P&G), an innovation advocate, is one company that can benefit from a focus on innovation during the economic recession.

After having spent the past few years innovating its products, in-store design and technology, P&G, the world's leading daily consumer product maker, said its sales revenue and volume for 2009 in China will grow faster than in the previous year, and that its market share also is rising.

"The business has been growing very nicely in China this year," said Henry Karamanoukian, general manager of customer business development for P&G China.

As the world's most populous and fastest-growing market, China was P&G's second-largest market by sales volume and the fourth-largest by sales in 2008.

As markets in the United States and Europe turned sluggish in the economic slowdown, China began playing a more critical role in saving P&G from a downturn in business.

During the company's 2008 fiscal year (from July 2008 to June 2009), P&G reported sales revenues of $79 billion worldwide, down by 3.3 percent from $81.7 billion in fiscal 2007.

But emerging markets gained profits. In China, "last year was good. We had double-digit growth in sales revenues, and a single-digit gain in volume," Karamanoukian said.

In its 2008 financial report, the company said it will invest more in emerging markets like China in 2009.

Since early this year, the company has begun rolling out a series of innovative programs to build recognition and sales for P&G.

Karamanoukian said P&G will sustain growth in China "mainly because of innovation".

The upbeat report for China is in contrast to P&G's worldwide sales.

"We faced even greater challenges in fiscal 2009 as we encountered one of the most difficult economic environments in decades," A&G Lafley, P&G's board chairman, said in the company's 2008 financial report.

Innovation-driven growth

Early this year, P&G initiated the Global Data Synchronization program exclusively in China that invited major retailers such as Carrefour to join a program that helps connect retailers and P&G through high technology tools.

Under the program, retailers and the company can get in-time information on the inventory of each category of P&G products, as well as latest sales trends.

"We cut inventory by 30 percent and increased availability of products on the shelves," Karamanoukian said.

"It's not a big investment, but it is significant because the data for P&G and the retailers are 100 percent connected by codes," he said.

P&G this year also initiated a multi-brand operation strategy, represented by its Living Artist booths. Living Artist booths, located at all major retailing destinations, display P&G products such as body care, beauty care, hair care and oral care items at one location.

When consumers visit the booth, they are more likely to purchase more P&G products, and the booth also helps strengthen consumer recognition of the P&G brand in connection with different categories of products.

P&G this year also launched new categories of products in China, including Camay body-care products targeting middle-income consumers, Crest Pro-Health toothpaste and Olay Pro X beauty care products targeting high-end users. All are selling well in China, Karamanoukian said.

The efforts are paying off. According to the company's 2009 first-quarter financial report, P&G reported higher-than-expected business from July to September, with its organic sales rising by 2 percent to $19.8 billion.

"The result gives us encouragement. We are making the right choices to grow market share. We are investing in innovation, expanding our portfolio and improving consumer value to serve more consumers," said P&G CEO Bob McDonald.

Choosy consumers

As the economy fluctuates, consumers are becoming more difficult to please.

"It's more difficult to attract them Innovation is very crucial. Those strongly trying innovation will perform better than the others," said Chris Morley, China president of ACNielsen.

It's not only P&G that is spending more on innovation.

Shao Qingfen, China president of Kimberly-Clark (China) Co Ltd, a leading sanitary care producer worldwide, said in Shanghai in late October that the company will invest in developing lower-priced paper products in China.

The company also is considering setting up a manufacturing base in China in coming years, but details are not available yet.

France-based L'Oreal this summer also launched hair care product lines in China to compete against P&G's hair care brands.

(China Daily 11/23/2009 page4)