The Procter & Gamble Company (P&G), a small American family-owned business that began in 1837, is now a multi-billion-dollar company that’s regarded as the world’s largest consumer packaged goods company.
Very few brands in the world are as renowned and admired as Procter & Gamble, which operates in five main segments, including beauty, grooming, healthcare, fabric, and home care, and baby, feminine, and family care.
From living rooms, nurseries, and kitchens to bathrooms, laundry rooms, and utility rooms, P&G has made its way in millions of homes worldwide and is improving lives in small yet meaningful ways, one product at a time. No wonder it has endured and continued to grow exponentially.
Here are a few statistics highlighting not only the scale at which P&G operates but also the impact that it has:
- Net sales of $76.1 billion in 2021
- Net income of $14.3 billion in 2021
- Share price of $134.9 in 2021
- Products sold in more than 180 countries
- 62 iconic brands that people trust in their homes
- 101,000 employees in 2021
A global leader in the fast-moving consumer goods industry, P&G has always challenged norms and shaped the future.
Let’s now take a look at the exciting growth journey of P&G from an idea born in Cincinnati, Ohio, to a multi-national company that’s second to none in the world right now.
Procter & Gamble Join Forces
William Procter, an emigrant from England, and James Gamble, an emigrant from Ireland, both were settled in Cincinnati, Ohio. While the former was a candlemaker, the latter was a soap maker. They married sisters, Olivia and Elizabeth Norris, becoming a family. But they were no ordinary family. They took their personal relationship and turned it into a professional one as well, thanks to the suggestion of their father-in-law, Alexander Norris, who highlighted that both their trades included the use of lye that was made from wood ashes as well as animal fat, which way readily available in the hog-butchering center of Cincinnati and maybe they should consider becoming partners. And just like that, Proctor and Gamble was established in 1837.
The Initial Years
Procter took charge of the store they set up on Main and Sixth Street, while Gamble oversaw the manufacturing operations just behind their outlet. Candles were the primary product of the company, which saw stiff competition from over a dozen other companies.
The enterprising partners with a knack for business expanded their business throughout Hamilton and Butler counties. Making the most of the various transportation channels, including waterways and rail, Proctor and Gamble continued to grow by supplying its products to different regions by 1851.
This is when the famous moon-and-stars symbol was created as a trademark to help distinguish P&G's products from others. While the symbols were initially created to help identify the products at their shipping destinations, they became a symbol of quality to P&G's customers, who would only purchase if and only if the container had the moon-and-stars symbol.
Throughout the 1850s, Proctor & Gamble continued to grow. In the early half of the decade, operations were moved to a larger factory and a different location that provided the company better access to shipping routes, as well as warehouses. Plus, an office building was leased in downtown Cincinnati to give the company proper office space and corporate image. Proctor took control of sales and bookkeeping while Gamble continued to run the manufacturing arm of the business. Such was the growth that the company reached sales of $1 million by 1858-1859, with around 80 employees working full-time.
Thriving Even During The Civil War
A key raw material in Proctor & Gamble's products was rosin, which was procured from the south. In 1960, just before the American Civil War, the sons of Procter and Gamble traveled to New Orleans and purchased as much rosin as possible. This proved to be crucial as when wartime shortages disrupted competitors' supply chains, Procter and Gamble continued to prosper. The company even provided candles and soaps to the Union army. Not only did this prove to be lucrative for the company but it also widened the customer base and made the moon and stars a symbol that was revered.
While Procter and Gamble had managed to avoid being a victim of wartime scarcities skilfully, but with the course of time, its stock of raw material shrank. Taking matters into its own hands, the company began experimenting and exploring new ways of manufacturing. From producing stearic acid using tallow instead of lard stearic, which was expensive and short in supply, to substituting rosin with silicate of soda, the company found better ways of doing things. Such was the success of these innovative techniques and ingredients the company came up with that they were later even used in modern detergents and soaps.
Ivory Soap Catapulting Procter and Gamble To The Top
As soon as the war ended, Procter and Gamble invested in expanding to new markets as well as updating its facilities. At the same time, the company hired a chemist to work alongside James Gamble and develop new products, including a new soap. The idea was to develop a premium-quality soap inexpensively, and they did just that in 1878. The White soap, later renamed Ivory soap, soon made a name for itself and helped Procter and Gamble cement its position in the industry.
At this crucial moment, Harley Proctor, William Procter's son, put forth the idea of advertising the product in newspapers and convinced the board of directors to leverage marketing. Back in the day, advertising was not at all common and even risky as it was believed that only disreputed manufacturers advertised. After extensive debate, a budget of $11,000 was allocated to advertising in 1882, and the slogan of "99% pure" bode well with the public given all the other ads has outlandish claims. While the company embraced advertising, it left no stone unturned in ensuring the excellence of the products and carefully analyzed as well as improved the products before launching them. This is said to be the beginning of Procter and Gamble's superior product development practices, which continue to this day.
Ivory was a huge success – there's no doubt about it. It, in combination with the company's newfound ability to spread its message using advertising, helped it grow in the 1880s. More people were hired, additional plants were set up, and new products were launched, including the yellow soap, which helped drive sales to $3 million by 1889.
Key Takeaway 1: Grab Opportunities & Make Iterative Improvements
When their father-in-law highlighted that both Procter and Gamble should merge, rather than laughing out at the idea, both considered it seriously, and well, the rest is history.
While Procter handled sales, Gamble took over the manufacturing side of the business, and they began expanding to new regions, selling soaps and candles. From carving out a unique identity for themselves through moon and stars symbols to experimenting with the ingredients and coming up with innovative new products as well as embracing advertising, the company did it all in its quest to grow. Its product development process, advertising, and commitment to quality helped it achieve a competitive advantage and set it up for success.
Taking The Company To Unprecedented Heights
Yes, the company was growing rapidly, market sentiments were positive, and customers couldn’t get enough of the products. But it wasn’t all sunshine and rainbows. In the 1880s, labor unrest began adversely impacting companies all around the United States, and Procter & Gamble, too, suffered at the hands of it.
Doing Right By The Employees
The company understood the importance of averting labor problems and stopping them from escalating into a crisis. Procter’s grandson, William Cooper Procter, who has just joined the company in 1883, was put in charge of drafting P&G’s labor policies. In 1885, the proposal to give employees Saturday afternoon off was approved. A couple of years later, a profit-sharing plan was implemented to align the interests of the employees with the company's interests. Then in the subsequent year, employee bonuses were tied to their performances. All of these helped improve employee performance incrementally.
After The Procter & Gamble Company was incorporated in 1890 and William Alexander Procter was made the president, an employee stock-purchase program was implemented and linked to the profit-sharing plan, giving employees an even greater incentive to perform well and elevate the company as well as themselves. Down the line, a highly acknowledged sick-ness disability program and eight-hour workday were also announced to further ensure the wellbeing of employees.
All these steps made P&G a pioneer in employee benefit programs while ensuring higher productivity and performance of the company.
Onwards & Upwards
Expansion and diversification of the products portfolio was a continuous process that P&G stuck to through thick and thin. New products such as the P&G White Naphtha was launched in 1902, and it too proved to be a success and helped P&G solidify its position as the market leader in the cleaning industry. Moreover, P&G invested in building factories in different regions of the United States, including Kansas City, Missouri, and Port Ivory, New York, given that the demand was high, and it had to expand capacity to cater to it.
After years of experimentation with hydrogenation and extensive research, P&G launched Crisco, a first-of-its-kind shortening made solely from vegetable oil, in 1911. With that, P&G took a bold risk of delving into a different market altogether – that of food products. Courtesy of strong advertising, Crisco soon took off and became the go-to choice of shortening for consumers.
World War 1 did bring shortages of raw material and gave way to supply chain bottlenecks, but thanks to proactive management and stockpiling of resources needed, P&G remained shielded and went on its merry way to grow.
With the wide usage of light bulbs, the demand and, in turn, the sales of candles declined. However, the company never looked back and launched an array of products in the 1920s. Ivory Flakes, Chipso Soap, Camay, and Oxydol were some of the products the company came up with, and with these, the company had an extensive and diversified line of soap, toiletries, and food products.
While the Great Depression proved to be a menace for most companies, P&G remained immune to it. In the first half of the 1930s, synthetic soap products were launched. These were followed by a synthetic detergent, Dreft, and synthetic shampoo, Drene. All along, different forms of advertising were leveraged, including newspapers, radio, and television broadcasts, and a huge chunk of the overall budget was allocated to it in order to boost sales.
Changing The Way Business Is Done
P&G redefined the way business is done. The company invested heavily in research and development, hiring chemists to develop new products and economists to study consumer behavior.
Extensive market research was conducted in which P&G toured kitchens and laundry rooms around the U.S to see how the products are practically used and how improvements can be made. This was complemented by studies on consumer behavior to understand the pain points of customers and address their needs with new products.
In addition to this, P&G introduced brand management to the world in 1931. The company emphasized the concept of standalone brands that would compete not just against products of other companies but also with those of P&G itself. Since then, brand management has not remained a permanent fixture at P&G but also at other leading companies in the world.
Playing An Integral Role In World War 2
During challenging times of the Second World War, P&G stood with the government and did all in its capacity to help. P&G oversaw the construction and operation of ordnance plants, catered to government contracts for mortar shells, and supplied Glycerin, which was used in medicine and explosives.
Key Takeaway 2: Don’t Be Afraid To Take Bold Risks & Make Big Bets
By giving employees a piece of the pie and taking care of their overall wellbeing, P&G quelled frustration and any plans to strike against the company.
Moreover, P&G continued to diversify its product portfolio, introducing new products such as P&G White Naphtha, Crisco, Ivory Flakes, Chipso Soap, Camay, and Oxydol, Dreft, and Drene while expanding its production capacity and harnessing the power of advertising. All of these, in conjugation with the company’s commitment to research and development and brand management, helped P&G prosper in good as well as bad times.
Innovative and bold steps such as introducing the profit-sharing plan, delving into the food market with Crisco, advertising on radio and television, and debuting brand management worked wonders for P&G.
Post-World War 2 To The End Of 20th Century
New Products Driving Sales To $1 Billion & Beyond
Just as World War 2 ended, P&G stepped on the gas to achieve growth. With the availability of raw materials and change in consumer sentiment for the better, P&G wasted no time in upping the ante.
In 1946, P&G introduced Tide, a miraculous synthetic detergent that redefined the way people washed clothes. The quality of the product was backed by a $21 million advertising budget, and the result was quite extraordinary. Tide became the number 1 laundry detergent in just 2 years after launching despite its high price. Over the years, P&G launched several laundry products, including Cheer in 1950, Dash in 1954, Downy in 1960, Bold in 1965, Ariel in 1967, and Era in 1972. Tide, however, remained the best laundry detergent even in the 21st century.
In 1955, P&G launched Crest toothpaste, establishing itself in the toiletries industry. After years of research, the company came up with a breakthrough product that had the potential to significantly reduce cavities, and hence, it was even endorsed by the American Dental Association.
P&G never limited itself and was always on the lookout for opportunities and diversification. In the 1950's1950's, P&G entered into the paper-goods market and introduced White Cloud toilet paper in 1958 and Puffs tissues in 1960. The following year, P&G launched Head and Shoulders and Pampers disposable diapers and used smart pricing strategies as well as advertising to win market share.
The diapers were a huge success and a testament to P&G'sP&G's ability to churn out innovative products. In 1976, P&G launched a premium diapers brand called Luvs.
Throughout the late 20th century, P&G continued its rapid growth. It consistently improved its previous products and added new ones, including Bounce fabric softener, Coast Soap, and Sure antiperspirant. Rely tampons were introduced and quickly became a hit due to their absorbent properties. Later on, Always pads were launched, and they became the sanitary napkin of choice, winning market share and trust of women.
A-List of Acquisitions & International Expansion Fuel Growth
P&G had gone international in 1930 when it acquired the British firm, Thomas Hedley and Company, the makers of fairy soap.
Beginning in the 1950's1950's, P&G began aggressively acquiring smaller companies in its quest to expand to new markets and regions. W.T. Young Foods, a Kentucky-based nut company, and Nebraska Consolidated Mills Company were purchased in 1955 and 1956.
In 1957, P&G bought Charmin Paper Mills and began producing toilet and tissue paper. In the same year, it also acquired Clorox Chemical Company, the leading American liquid bleach manufacturer.
In the early 1960's, P&G set its eyes on the food industry and strived to expand its footprint. The 1963 acquisition of Folgers coffee brand and launching of Pringles potato chips allowed them to do just that.
However, contending the charges put forward by Federal Trade Commission, P&G had to divest Clorox in 1967 and agree to not make any groceries and coffee acquisitions for a decade. P&G made further inroads into the groceries industry by acquiring Ben Hill Griffin citrus products in the 1980’s. It also purchased Pantene and Oil of Olay skincare products in 1985.
Given the boom in the healthcare industry in the 1980’s, P&G left no stone unturned in trying to capitalize on the opportunities. It entered into the over-the-counter (OTC) drug market by acquiring Norwich-Eaton Pharmaceuticals, the manufacturer of Pepto Bismol and Chloraseptic, and Richardson-Vicks Company, the manufacturer of Vicks and Nyquil. It also purchased Dramamine, the motion-sickness treatment, and Metamucil, a laxative, from G.D. Searle & Co, becoming a leader in the OTC market. It also partnered up with a number of companies, including Syntex Corporation, Gist-Brocades Company, UpJohn, and Triton Bioscience, and Cetus Corporation, to formulate various OTC drugs that had huge potential.
P&G was a very versatile company and never narrowed its focus. This was clear when P&G entered into the cosmetics business in 1988 with a billion-dollar acquisition of Noxell Corporation, maker of Noxema products and Cover Girl cosmetics. In the same year, P&G also acquired Blendax, a European health and beauty-care goods producer, as well as Bain de Soleil sun care-product line. In 1990, P&G purchased Shulton's Old Spice, an American brand of male grooming products. The very next year, P&G also bought Max Factor and Betrix lines from Revlon, Inc. In 1992, Pantene Pro was launched, and it soon became the best shampoo in the world.
Some Crucial & Much-Needed Changes In the Late 20th Century
In 1985 P&G witnessed its first decline in earnings after more than 30 years. This didn't go down well with the analysts, who claimed that P&G was slow to respond to changes in consumer preferences and its mass marketing practices were not yielding results anymore. It was clear that some fundamental changes were needed.
Hence, P&G diversified its advertising. Rather than solely relying on network television, it changed its marketing strategy by adopting micro-marketing techniques across a broad spectrum of marketing channels. Plus, market research was computerized. P&G also changed its brand management structure and opted for a matrix system in which category managers were put in charge of leading several brands, increasing the efficiency by cutting down layers of management. Moreover, P&G, for the first time, began focusing on profits rather than settling for market share.
P&G was threatened by the weak economy and increased interest of consumers in value. Hence, the company came up with "Every Day Low Pricing" (EDLP) for the majority of its products. This bode well with the consumers but brought criticisms from wholesalers. Additionally, P&G embraced the going green bandwagon and began taking sustainability quite seriously. This was followed by divesting a few of its holdings, including one-half of its Cellulose & Specialties pulp business, the forestry business, and an Italian coffee business.
While sales stood at a whopping $30 billion in 1993, the company decided to undertake a major restructuring of the business to streamline it. The primary goal was to boost the company's private-label brands by making them more price-competitive, bringing products to market faster, and improving profitability. It was a difficult yet much-needed step. 13000 jobs were cut, and 30 plants were closed worldwide. Resultantly, P&G improved its bottom line by $600 million.
Even during the restructuring period, P&G continued to expand internationally and acquire new companies at a brisk pace. P&G acquired Vereinigte Papierwerke Schickedanz AG's European tissue unit in 1994, marking its entry into Europe's tissue and towel market. In the same year, it also acquired the fragrance line of Giorgio Beverly Hills, Inc. Moreover, the company reorganized its management structure around four regions, North America, Latin America, Europe/Middle East/Africa, and Asia. A couple of years later, P&G bought Eagle Snacks brand line, Baby Fresh, and Lavan San household cleaner, and Magia Blanca bleach. The very next year, P&G acquired Tambrands, Inc. and the Tampax line of tampons, becoming the leading provider of feminine products.
1998 brought with it a major restructuring initiative named Organization 2005 to boost innovation, launch new products faster, and increase revenue as well as profit. The significant change that the restructuring brought to the fore was increasing focus on brands rather than geographies, and this helped P&G significantly in the years to follow.
Just before the close of the century, P&G made two significant acquisitions: one of Iams Company, the leading pet food maker in the US, and Recovery Engineering, Inc., which had the PUR brand of water-filter products. Safe to say, both these acquisitions worked out quite well.
In 1999, P&G went on to launch Swiffer, a dusting mop for quick cleaning, and Febreze as well Dryel, fabric care, and household cleaning products.
Key Takeaway 3: Adapt With Changing Times
P&G has never limited itself. From launching an array of quality products and entering in toiletries, paper goods, food, OTC drugs, and cosmetics industry to expanding internationally with an endless list of acquisitions, P&G continued to grow.
In the process, it faced numerous challenges, such as charges by FTC and a decline in earnings in 1985, but the company bounced back stronger than ever. It even took the difficult yet much-needed step to restructure the business in order to enhance efficiency. Being flexible and proactive enabled P&G to stay a step ahead and remain resilient in the face of adversities.
P&G In The 21st Century
Further restructuring, launching of new products, and acquisitions continued into the 21st century.
The restructuring that began in the 1990s was completed in the early 2000s. While operational problems were fixed, more than twenty-thousand jobs were shed. It was a difficult yet much-needed step to re-direct P&G on the growth path.
Some notable acquisitions included purchasing the Clairol haircare business from Bristol-Myers Squibb Company, which augmented P&G's positions in the fast-growing and profitable beauty and haircare industry. In addition to this, the acquisition of Dr. John's SpinBrush, a battery-powered toothbrush, and the launch of Crest Whitestrips, a tooth whitening product, gave a boost to the Crest brand, propelling sales.
In 2003, P&G made another successful acquisition of Wella AG, a leading producer of haircare products, entering into the growing salon market. Two years later, P&G became the largest consumer good company by acquiring Gillette.
Here Comes The Growth Factory
It's a well-documented fact that by the early 2000s, P&G was losing steam. There was a stark difference between the company's growth goals and what it was able to achieve due to its innovation pipeline. Something had to be done. The company launched Connect + Develop program to bring in innovation from outside and build on the. While it remains a success even today, it was soon realized that more had to be done.
This was when P&G came up with the unique idea of setting up a "new growth factory." It consisted of a network of structures and enhanced capabilities to quickly introduce new products from ideation to market. From business groups, entrepreneurial guides, a novel innovation manual, and a disruptive college, among other things, the growth factory had it all to strengthen the core business and capitalize on innovation opportunities faster than ever before.
It was a remarkable strategy that took a leaf from the book of Thomas Edison and Henry Ford, combining inspirational ideas with mass production in an age of cut-throat competition and shrinking product lifecycles.
Transformational-sustaining innovations to deliver breakthroughs in existing innovations strengthened organization support for forming and running disruptive businesses, and effective revamping of strategy development and review process enabled P&G to increase its innovation success rate significantly.
More Restructuring & Acquisitions
By 2012, P&G exited the food industry, having sold Jif Peanut Butter, Crisco, Folgers Coffee, and finally Pringles. By 2014, it also left the pet food business.
The company decided to restructure once again in order to streamline the company and enhance its focus on the main brands that were driving growth and contributing to the majority of the profits. From Vicks and the numerous beauty brands to Duracell, various brands were divested. At the same time, acquisitions such as that of the consumer health division of Merck Group, among others, laid bare the fact that P&G has not cast aside its main strategy to grow by acquisitions.
Key Takeaway 4: Never Stop Innovating
P&G came into the 21st century whilst still in a restructuring mode. It was clear that the company's growth was slowing. From new acquisitions and product launches, the company was continuing to do what had served it well.
But there was one main change: focus on innovation. It became crystal clear that P&G could only continue to grow in a vastly competitive world and changing consumer preferences as well as market dynamics by innovating. Hence, the company doubled down on its flagship program Connect + Develop and then came up with this revolutionary concept of "Growth Factory." It not only helped the company make the most of new opportunities but also re-invent the culture of the company, which in turn continued to deliver desirable results.
Core P&G Strategies Fueling Growth
How can a company as large and as diverse as P&G operates successfully and continues to grow? Through well-defined and clear-cut strategies that reinforce as well as build on each other and lead to substantial value creation.
P&G’s winning integrated strategy includes five key aspects, and they are as follows:
- A Strong & Focused Portfolio
- Superiority Across The Entire Value Chain
- Productivity An Integral Part Of DNA
- Constructive Disruption
- Empowered & Agile Organization
Let’s now take a look at each of the core strategies in detail to better understand how P&G does what it does so successfully time and again.
A Strong & Focused Portfolio
P&G product’s portfolio consists of ten categories of daily-use products, including personal healthcare, oral care, fabric care, home care, skin, and personal care, haircare, grooming, baby care, feminine care, and family care. In each of these categories, P&G has a market-leading share, and the company strives to leverage its position to scale up.
Superiority Across The Entire Value Chain
P&G pursues excellence in its products, packaging, communication, retail execution, and value offerings. The company is well aware that superiority matters and is an unparalleled opportunity that can give it a competitive advantage. Hence, it has set the superiority bar quite high and continuously tracks the underlying metrics, including category growth, market share, household penetration, sales, and profits.
Productivity An Integral Part Of DNA
Boosting efficiency across all business operations is part of the P&G DNA. From reinventing the way it works, figuring out economical ways of doing things, and delivering cost and cash efficiency to harnessing the power of technology to automate, going digital, and deriving insights from data, P&G continues to take numerous steps to do things better.
Leading with constructive disruption to create positive outcomes is something that P&G continues to do. Combining around 180 years of experience and expertise with the leanness and agility of a startup, P&G comes up with creative solutions to create value for all its stakeholders. To stay on top of the changing customer preferences and market dynamics, P&G goes the extra mile to innovate.
Empowered & Agile Organization
From enabling and engaging employees to creating a strong, driven culture, P&G has created an organization that’s accountable and supportive of each other to deliver desired results. This is done through strong leadership, empowering people to accelerate growth, committing to being a force for good, ensuring sustainability, equality, and inclusion while abiding by ethics and corporate responsibility.
Key Takeaway 5: Craft An Effective Business Strategy
P&G continues to grow due to its highly specific business strategy consisting of action plans that drive the company forward.
A versatile and strong products portfolio followed by the pursuit of excellence, focus on enhancing efficiency, continuous innovation, and empowerment of the employees help P&G post balanced top and bottom-line growth.
What’s even better is that P&G continues to make iterative improvements in its core strategies in the quest to achieve even better results, continuing to raise the bar for all.
P&G Today & Key Strategic Takeaways
Today, P&G remains committed to improving the lives of 5 billion people in around 180 countries and continues to innovate and lead in each and every aspect while supporting good causes and protecting the environment.
Growth By Numbers
Key Strategic Takeaways
Don’t Wait For Opportunities. Create Them!
From delving into new industries and geographical regions to launching new products ahead of time, P&G created growth opportunities for itself. Rather than getting bogged down with problems at hand, such as growing competition, supply chain disruptions, and high risks associated with expanding, P&G constantly explored new and better ways of doing things. This has continued to serve the company quite well.
Hire The Right People For The Right Work & Take Care Of Them
Investment in human capital pays high returns, and it’s the only way companies can make it big. P&G knew this. Right from its profit-sharing plans with employees in the 19th century to beneficial human resources policies today, P&G has continued to be the top employer of choice today. It has always empowered employees and encouraged them to contribute more in order to help the company grow. This has proven to be a master-stroke that separated P&G from the rest of the companies.
Craft A Business Strategy For Today & Tomorrow
P&G has evolved its strategy a number of times, restructured its business more often than it would have liked to, and never hesitated to take risks. Why? Because P&G understands that if you worked a certain way in the past and that delivered results, there’s no guarantee that it will continue to work in the future. This is why it is imperative to stay on your toes and think ahead. Being bold and taking risks in what you believe is crucial; otherwise, you’ll find yourself lagging behind.
Encourage Collective Creativity
Individual creativity can be uncontrollable, but collective creativity can be managed and encouraged. P&G did just that. The company firmly believes that breakthrough innovations improve lives and can win the company decades instead of just quarters. This is precisely why the company spends on average $2 billion on R&D to come up with new offerings that are simpler, easier to access, affordable, and deliver better results.