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P&G CEO Challenge 2020KEY DATES & FAQ
STRATEGIC CASE STUDYAPAC
P&G CEO Challenge 2019-2020: Online Case Study (VIETNAM) 01h 03m 56s
National current stage
10 days left
Show Instructions
Case Study: Introduction From: <[email protected]> To: Hey!
Welcome to P&G! I'm so glad that more and more young and ambitious people like you are joining our team! My name is Sam, and I will be your mentor during your internship. I'm so excited that you're joining our Hair Care team! You can ask me any questions concerning working at P&G in general and the work we do in Hair Care, which is one of the Beauty and Personal Care categories and one of the highest revenue generating segments of the company. The plan is that you'll join the Pantene team and will help your colleagues work on a significant marketing challenge to reposition Pantene in order to attract a younger audience (15-25 years old) and therefore increase the sales value by 2020. I do hope that you'll enjoy it. Unfortunately, I'm out of office today because I'm taking part in a major International Brand Management conference. But please don't worry! I've got some really exciting tasks planned for you, which will allow you to immerse yourself into our world and get prepared for the big challenge we must handle at Pantene. Meanwhile, you can dive into the topic and look through some market insights. You certainly know that Procter & Gamble is the world's second largest Beauty and Personal Care company, accounting for 8% of the global market value share. Beauty is the company's second leading business portfolio after Fabric and Home Care. You may also know that P&G has the largest lineup of leading brands in its industry, with 23 brands with over $1 billion in annual sales (our so-called “billion-dollar brands”). There are 2 “billion-dollar brands” that belong to the Hair Care portfolio. Those are Head & Shoulders and Pantene. P&G reshaped its global Beauty and Personal Care landscape when it divested more than 40 brands to a rival group in 2016. Two years later, P&G is rationalizing its portfolio by capitalizing on its major brands and acquiring niche challengers, thus increasing the sales growth rate. But its market share is still falling in some categories.
Expanding is a daunting task when one is already a major player. Procter & Gamble is currently experiencing this challenge in its pursuit of a new growth dynamic. Developed markets with slow growth are still the company's key markets. P&G's BPC1 share in North America and Europe has reduced from 27.4% to 25.5%, mainly due to slowing sales in the US. P&G's share in developed markets tends to rely on well-established brands with high unit prices, giving few immediate opportunities for growth to the company. The Beauty segment of the Company is currently facing strong competition from indie (independently funded) brands. Young consumers are not loyal, they want a more personalized approach, which indie brands can provide since they have more possibilities to launch new and expensive products with higher speed of market entry. Indie brands make more use of social media, while Pantene and other more traditional hair care brands' preferred advertising channel is TV. For indie brands this choice is also influenced by budget whilst TV for established brands ensures high reach in the total population. Finally, Pantene relies on traditional offline sales channels. With this in mind, what I'd like you to do is to review the data and find possible solutions for the challenges the company, and the Pantene brand in particular, are currently facing. On Monday, we will have a team meeting where we will discuss findings, and I'm looking forward to hearing your ideas. In order to immerse you in the subject, I'd like to share some information on the key market trends and the Pantene brand's key strengths and current challenges. Please e-mail me if you have any questions! See you! Sam Miles Pantene Regional Sales Manager Question 1 (Sales): According to Sam’s letter, which assumption is definitely right for P&G? Choose all answers that apply. (Required)
Acquiring niche brands is a winning strategy in terms of boosting sales The company has chosen a strategy to shift from developed markets to emerging markets because they have more potential P&G's traditional hair care brands lack a personalized approach that young consumers want P&G has more billion-dollar brands than any FMCG company in the industry
About P&G The Procter & Gamble Company is focused on providing branded consumer packaged goods of superior quality and value to improve the lives of the world's consumers. The company was incorporated in Ohio in 1905, having been built from a business founded in 1837 by William Procter and James Gamble. The company's purpose to improve the lives of its consumers today delivers this for 5 billion consumers in 180 countries through its leading, billion-dollar brands. The company's 65 individual brands are organized into 5 business segments:
Fabric & Home Care Baby, Feminine, and Family Care Beauty Health Care Grooming The business model relies on the continued growth and success of existing brands and products, as well as the creation of new innovative products. The markets and industry segments in which P&G offers products are highly competitive. P&G products are sold in more than 180 countries and territories primarily through mass merchandisers, e-commerce, grocery stores, membership club stores, drug stores, department stores, distributors,
wholesalers, baby stores, specialty beauty stores, high-frequency stores and pharmacies. P&G's top ten customers accounted for approximately 36% of total sales in 2018 and 35% in both 2017 and 2016. Its growth strategy is to deliver meaningful and noticeable superiority in all elements of P&G's value proposition - product, packaging, brand communication, retail execution and value equation.
P&G Today The 2019 fiscal year met or exceeded each of the core financial goals — organic sales growth, core earnings per share growth and adjusted free cash flow productivity. Organic sales grew 5% which was above expectations. The company focused on growing where consumers shop — whether that's in-store or online. This year, P&G grew its organic sales by 25% in ecommerce, the fastest-growing retail channel around the world. Online sales now account for about 8% of P&G total sales. P&G also provides a superior experience in-store. An independent benchmarking survey that measures retailer perceptions of manufacturers across seven key focus areas ranked P&G #1 for the fourth year in a row. In 2019 core earnings per share were $4.52, a 7% increase and toward the high end of the target range. P&G delivered strong free cash flow results, generating $15.2 billion of operating cash flow. All six of P&G regions had organic sales growth. In the US, sales grew 4%, including 7% in the last quarter, after averaging about 1% over the past three fiscal years. In Greater China, the company grew 10% with double-digit across Fabric Care, Feminine Care, and Skin & Personal Care categories. The company improved market share trends in eight of 10 global product categories throughout the year. P&G is one of only 10 US companies to pay a dividend for more than 120 consecutive years. The company had 63 years of dividend increases.
P&G makes major investments to ensure its supply chain remains a competitive advantage. A synchronized network based on real-time demand signals is serving the evolving needs of consumers and customers. To deliver productivity across supply chain P&G makes improvements in four ways:
Multi-Category Manufacturing Sites. P&G plants supply several categories of goods, in accordance with the demand for them. Consumer purchases trigger updates to our manufacturing schedules in plants and orders of materials to suppliers. Robotics and digitization make savings. For example, automated loading and unloading enables lower inventory. All these technologies used at the newest P&G plants are globally scalable. Digitized Planning. P&G reduced the number of planning sites to eight vs. 300 sites eight years ago. They become much more effective and now can support a new request from a customer for an incremental order in less than one hour, which once required 24 hours or more. Supplier Integration. Co-locating suppliers in plants reduces truck traffic and distribution cost. Increased synchronization of P&G's operations with our suppliers leads to lower inventory and other costs. Customer Collaboration. The newest U.S. mixing centers put 80% of shipments within 24 hours of retailers. It leads to higher in-stock levels and lower cost of goods. Question 2 (Finance): What is TRUE about P&G sales in 2019? (Required)
Sales in Asia Pacific were 2% lower than sales in IMEA (India, Middle East & Africa) Sales in North America were almost equal to sales in Europe, Asia Pacific and Greater China together Net Sales of Europe in 2019 were about $18 billion Regardless of the similar number of brands, Net Sales in the Beauty segment for 2019 were 7% lower than that of Baby, Feminine & Family Care
Question 3 (Finance): Which segment accounted for the biggest % of Net Sales?
(Required)
Fabric & Home Care Beauty Baby, Feminine and Family Care Hair Care
Question 4 (Logistics): Which of the following is TRUE about P&G's distribution model? (Required)
The company is planning to get rid of the intermediaries and gradually shift to direct-to-consumer model in e-commerce Customers such as mass merchandisers, grocery stores, drug stores carry the shipping and handling costs when purchasing goods from P&G, since P&G is their #1 manufacturer Customers can get finished goods for sale directly from the manufacturing site Consumers bring revenue streams both to customers and P&G
Question 5 (Logistics): Which of these statements is TRUE about P&G Supply Chain? (Required)
Multi-Category Manufacturing Sites are top notch technologies developed by P&G and are scalable for other regions Even though the number of planning sites has grown over the past two years, digitized planning technology has helped the company optimize its usability Lower cost of goods has been achieved through the implementation of digitized planning
Consumer purchases trigger updates to P&G manufacturing schedules in plants and orders of materials to suppliers. Used at its Multi-Category Manufacturing Sites it helps the company supply goods according to actual demand
P&G Major Hair Care Brands P&G is the global market leader in the retail hair care market with almost 15% of the global market share, primarily through the Pantene and Head & Shoulders brands. Pantene Pantene is a global hair care brand, which includes a full line of proteinenriched hair products. Pantene got its name from “panthenol” (pro-vitamin B5), which was developed in 1940 in Switzerland and was used to treat burns during WWII. Pantene shampoo first launched in Europe in 1945. Pantene provides one-stop service offerings for all issues related to hair. Pantene recognizes that the hair shampoo market is crowded so it differentiates by investing in consumer satisfaction by providing professional care solutions. Pantene is sold in around 100 countries all over the globe and wherever it's sold, the brand features a different product depending on the needs of that specific consumer base. Pantene also has a money-back guarantee, offering refunds to those consumers who are not satisfied with the product. Pantene targets people looking for affordable hair care and has product offerings for the middle and upper-class groups. It also has come up with products using behavioral segmentation with the benefits sought, for instance, they have created a product range known as “oil replacement” for the segment of people who find importance in oiling their hair and it is exclusively targeted towards the Indian market.
Also, shampoo ranges like Deep Cleanse, Curl Perfection, and Repair & Protect have been created through the understanding of different buyer types. Pantene's current target audience is women from 20 to 49 years old who are proactive in living a healthy lifestyle and also feel confident when their hair looks good. It positions itself as a product that is an affordable alternative to salon brands. In 2006, it repositioned itself as a brand that helps women 'shine'. Aproduct that helps bring out a woman's inner shine, with the help of her outer shine that the shampoo provides. Over the years Pantene has launched many specialized product series like Intense Rescue Shots, Pro-V Blends, Waterless collection, etc. Pantene aims at superior retail execution. With the store coverage, right product forms, sizes, price points, shelving and merchandising Pantene wins offline, and with the right content, assortment, ratings, reviews, search and subscription offerings Pantene wins online. In 2019, Pantene was leveraging shelf sets that have been successful in Latin America, featuring hair treatments and conditioners in golden bottles to encourage a regimen. Where executed, category growth has nearly doubled. Currently, Pantene is widely available in much of the world. Priyanka Chopra and Selena Gomez are the current global ambassadors for Pantene. There are Pantene ambassadors for specific countries like France, India, Thailand, Korea, Russia, etc. Head & Shoulders Head & Shoulders launched in 1961 with a proprietary formula clinically proven to reduce dandruff. Head & Shoulders has been able to gain consumer trust due to the quality of its products. The brand deals in products targeted at the anti-dandruff segment keeping smooth and beautiful hair. It offers products for men, women and products that can be used by everyone irrespective of gender. These are for dry, itchy and sensitive scalps, for relief against dandruff and also for severe scalp conditions.
Head & Shoulders has always been on the brink of a price war with rival companies. It faces stiff competition with several competitors and hence has kept its prices on par through adopting a competitive pricing strategy. It has also kept a penetration policy so that it can reach towards new markets and gain further consumers. Head & Shoulders relies on its reasonable pricing strategy to attract and maintain the loyalty of its consumers as its products are affordable. Moreover, they are available in different sizes so that a person can easily make purchases according to their personal needs. The brand also advocates a promotional pricing strategy during the summer season by offering discounts and incentives. As sales during that time are higher, it results in larger volumes and greater revenues. Question 6 (Marketing): According to the data above, which idea will be the MOST appealing to Head & Shoulders team in terms of strategic development? (Required)
Increase the prices and reposition the brand as premium Introduce a product for shiny hair Optimize the shipping costs Switch to men as primary target audience
Question 7 (CMK): You have several consumer profiles. Whom would you choose to target Pantene ads? You can choose several answers. (Required)
An active, looks-conscious 55-year old woman suffering from dandruff A 25-year old man suffering from oily scalp An active, looks-conscious 30-year old man who needs to have his hair shiny and smooth A 40-year old woman who wants to recover her damaged hair
Global Hair Care Market Market Dynamics The hair care market is part of the Beauty and Personal Care market. It contains such segments as shampoos, conditioners, oils, sprays, hair colors, etc. Since its products are always in high demand, Hair Care remains one of the most competitive segments of the Beauty and Personal Care market. Characterized by the significant role of minor players (companies with less than 1% of total sales), it is very volatile. The considerable number of players that enter and leave the market every year, combined with the dependence on health issues and regional conditions, contribute a lot to heavy fluctuations – especially regarding non-premium segments. An example is the mass segment plunge that took place in 2015. Primarily due to the unstable environment in Latin America (where sales in one year have reduced by 20% over one year), this fall was also an aftermath of the European consumers' changing attitudes towards hair care. These reasons were widely different, but they both had a strong influence on the market, triggering a $7.7 billion slump.
Source: Euromonitor International In 2018, the value of sales reached $77.3 billion. The market is rapidly gaining momentum, which converts into positive forecasts for the nearest five years. Market analysts predict that during this period, global sales of hair care products will rise by 5% every year (given the current situation), which roughly matches the current rate of recovery. Market Trends Among the main trends observed in the hair care market over recent years, three tendencies may be distinguished: a growing share of the premium
segment, the increasing popularity of indie brands, and the rising number of products sold online. It is easy to agree that the diminished sales of mass products observed in 2015 became the main driver of the premium segment's enlarging market share. Still, it is not the only reason why premium hair care started to prevail over mass products. Above all, it is strongly connected with the modern lifestyle. People are starting to pay more attention to their health and to put a lot of money towards making themselves feel and look good. As proof, in the past four years, sales of hair care products generated through health and beauty retailers (drugstores, pharmacies, etc.) have been on the rise and amounted to $22.3 billion in 2018, while in 2015, it was $20.9 billion. This increase, together with the rising number of sales through grocery channels, may be considered as indirect evidence of the fact that people try to use more sophisticated, non-supermarket offered, hair care products. Apart from healthconsciousness, the rising share of premium products can be explained as a consequence of a sustainable increase inglobal welfare, which provides people with money to buy products that are more expensive. Therefore, hair care market forecasts predict a steady development of the premium segment.
Source: Euromonitor International The next two trends are highly interconnected. From the definition, indie brands are small independently funded enterprises, which concentrate on one specific segment of a particular market. Due to financial limitations, indie brands often look for innovations – whether they are in manufacturing or any other field of operation. As for marketing, such companies target the audience via the internet, mostly using advertising on social networks. Hence, they have
a significant reason to sell their products online – as their prospective consumers are online too.
Source: Euromonitor International It is easy to notice that between 2014 and 2016 indie brands' share of the global market was reducing, so it may appear that there was no indication that these smaller brands would gain popularity. However, the market decline in 2015 in fact had a much worse influence on indie brands than on major market players – mainly because of their undiversified portfolio and the impossibility of benefiting from the economy of scale. The number of companies plummeted, and it took some time for the indie segment to recover.
Source: Euromonitor International As indie brands mostly work online, they have a competitive advantage when compared to other market players. The fact is that online sales have become the only distribution channel to show stable annual growth. Over six years, they have risen from $2.2 billion in 2013 to $5.7 billion in 2018. Nevertheless, for some products the online channel is not very convenient. For example, not many people will purchase premium hair care products from internet retailers, as they are not able to check the product before delivery. Question 8 (Sales): Approximate the difference between the global sales volumes of premium hair care in 2013 and 2018.
(Required)
$0.5 billion $0.8 billion $1.1 billion $1.4 billion
Question 9 (Marketing): Given the data, calculate the forecasted value for the size of hair care market in 2020 in $ billion. Round it off to one decimal place. (Required)
Question 10 (Logistics): Regarding the global hair care market for the period 2013-2018, which of the following facts are true? You can choose either one or several answers. (Required)
The online channel is possibly the best option for small brands Sales through grocery channels increased by 4–7% Traditional sales showed better results than e-commerce Pharmacies improved their sales performance
Question 11 (CMK): Market analysts enlisted the grounds for enhancing the market share of premium hair care. Find a logical mistake they made. (Required)
People have purchased fewer mass products
People began to take control of their health People bought more from indie brands People started to earn and spend more money
Regional Hair Care Markets There are different approaches for distinguishing particular regional markets. As for P&G, the company operates in six regions, which are: Asia Pacific, IMEA, Europe, Greater China, Latin America, and North America.
Source: Euromonitor International
Source: Euromonitor International Asia Pacific includes big Asian markets such as Japan, South Korea, etc., along with Australia and New Zealand. With $13.8 billion generated in sales through the hair care market in 2018, it holds a leading position on the global hair care market. As grocery retailers are still the dominating power on the market, with lesser influence from other channels, Asia Pacific stands out as a
region where large companies prevail over small businesses due to welldeveloped distribution networks. IMEA, is a region that has a fast-growing hair care market. Although it currently has the second smallest sales value out of all the regions ($9.1 billion in 2018), it has a lot of potential and, according to forecasts, by 2023 it may have almost doubled and become equal to the North American market. One interesting feature of IMEA is that seasoned companies are less competitive in the region, since local conditions require market players to provide personalized services. For instance, this is relevant to the Middle East and Africa where consumers need products designed for harsh weather conditions. Therefore, this market is more suitable for smaller manufacturers, giving them almost 1/3 of the whole market. This is the best result globally. Europe includes both Western and Eastern Europe, with the largest markets being Germany, France, the United Kingdom, Russia, Italy and Spain. Once the perfect place for the promotion of hair care products, the region is now experiencing issues with shifts in consumer preferences. The trend for natural ingredients has sparked arguments about the chemical components used in hair care manufacturing and has made people refuse some mass products such as low- and medium-priced shampoos. As a result, sales in the region dropped from $22.3 billion in 2013 to $17.6 billion in 2016. In 2018, sales amounted to $18.9 billion. Greater China includes China and some neighboring territories. China is such a large market that it is comparable to whole regions made up of several countries. However, it is the smallest of all in terms of market sales with $8.8 billion in 2018, though it is projected to grow faster over the next 5 years. A characteristic of this market is premiumization: along with growing income, consumers are showing higher interest in premium products and salon professional hair care. Chinese consumers are increasing their hair routine and the product range for them is extending. Latin America is the most mysterious region in terms of market dynamics. In spite of a clear tendency to deal with large corporations, consumers are often disappointed with their services and may turn to local manufacturers.
Therefore, the ratio between locals (especially, indie brands) and multinationals is highly volatile. As for actual values, the market has not recovered from the crash of 2015 when sales collapsed from $16.5 billion to $12.9 billion. The recent figures (2018) are $12.1 billion. North America, with its sales volume of $14.4 billion, remains the most stable market out of all six. It slightly grows almost every year, with rare declines not exceeding 1-2% of total sales. This region is particularly interesting, as consumers' preference for natural components goes hand in hand with their craving for technological innovations. As not many small enterprises can meet both needs, the market is mostly loyal to major players. Question 12 (Sales): Based on the provided data, choose the region where P&G had the lowest market share in 2018. (Required)
Latin America IMEA North America Europe
Question 13 (CMK): Choose all true statements from the list below, based on the text. (Required)
Asia Pacific and North America provide the best market conditions for large companies In the next 5 years, IMEA will be the fastest-growing market in the world Consumers in Europe and North America have the same requirements for hair care products The markets in both Latin America and Europe suffered from drastic falls and still cannot recover
Question 14 (Marketing): Select the market with the lowest growth rate for 2019–2023, based on the forecasts. (Required)
Greater China Europe Latin America North America
Question 15 (Logistics): Imagine you are making a strategic decision for the construction of a new Pantene plant. Based on the data above, where would it be? (Required)
IMEA Latin America North America Europe
Open Questions WARNING: Depending on your browser settings, using the 'backspace' key can cause you to switch pages without saving your results. We recommend working on the following essays using any text editor and then copy-pasting it into the test form. Question 16: You are taking part in a meeting devoted to P&G's strategic development in view of growing indie brands. Come up with ideas for achieving long-term competitive advantages.
(Required)
Question 17: You have been asked to brainstorm the issue of strengthening P&G's position in one of the regional hair care markets. Choose any market you want and write at least 3 suggestions about how the company could change its approach in order to ensure sustainable growth. (Required)
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STRATEGIC CASE STUDYAPAC
P&G CEO Challenge 2019-2020: Online Case Study (VIETNAM) 01h 03m 56s
National current stage
10 days left
Show Instructions
Case Study: Introduction From: <[email protected]> To:
Welcome to P&G! I'm so glad that more and more young and ambitious people like you are joining our team! My name is Sam, and I will be your mentor during your internship. I'm so excited that you're joining our Hair Care team! You can ask me any questions concerning working at P&G in general and the work we do in Hair Care, which is one of the Beauty and Personal Care categories and one of the highest revenue generating segments of the company. The plan is that you'll join the Pantene team and will help your colleagues work on a significant marketing challenge to reposition Pantene in order to attract a younger audience (15-25 years old) and therefore increase the sales value by 2020. I do hope that you'll enjoy it. Unfortunately, I'm out of office today because I'm taking part in a major International Brand Management conference. But please don't worry! I've got some really exciting tasks planned for you, which will allow you to immerse yourself into our world and get prepared for the big challenge we must handle at Pantene. Meanwhile, you can dive into the topic and look through some market insights. You certainly know that Procter & Gamble is the world's second largest Beauty and Personal Care company, accounting for 8% of the global market value share. Beauty is the company's second leading business portfolio after Fabric and Home Care. You may also know that P&G has the largest lineup of leading brands in its industry, with 23 brands with over $1 billion in annual sales (our so-called “billion-dollar brands”). There are 2 “billion-dollar brands” that belong to the Hair Care portfolio. Those are Head & Shoulders and Pantene. P&G reshaped its global Beauty and Personal Care landscape when it divested more than 40 brands to a rival group in 2016. Two years later, P&G is rationalizing its portfolio by capitalizing on its major brands and acquiring niche challengers, thus increasing the sales growth rate. But its market share is still falling in some categories.
Expanding is a daunting task when one is already a major player. Procter & Gamble is currently experiencing this challenge in its pursuit of a new growth dynamic. Developed markets with slow growth are still the company's key markets. P&G's BPC1 share in North America and Europe has reduced from 27.4% to 25.5%, mainly due to slowing sales in the US. P&G's share in developed markets tends to rely on well-established brands with high unit prices, giving few immediate opportunities for growth to the company. The Beauty segment of the Company is currently facing strong competition from indie (independently funded) brands. Young consumers are not loyal, they want a more personalized approach, which indie brands can provide since they have more possibilities to launch new and expensive products with higher speed of market entry. Indie brands make more use of social media, while Pantene and other more traditional hair care brands' preferred advertising channel is TV. For indie brands this choice is also influenced by budget whilst TV for established brands ensures high reach in the total population. Finally, Pantene relies on traditional offline sales channels. With this in mind, what I'd like you to do is to review the data and find possible solutions for the challenges the company, and the Pantene brand in particular, are currently facing. On Monday, we will have a team meeting where we will discuss findings, and I'm looking forward to hearing your ideas. In order to immerse you in the subject, I'd like to share some information on the key market trends and the Pantene brand's key strengths and current challenges. Please e-mail me if you have any questions! See you! Sam Miles Pantene Regional Sales Manager Question 1 (Sales): According to Sam’s letter, which assumption is definitely right for P&G? Choose all answers that apply. (Required)
Acquiring niche brands is a winning strategy in terms of boosting sales The company has chosen a strategy to shift from developed markets to emerging markets because they have more potential P&G's traditional hair care brands lack a personalized approach that young consumers want P&G has more billion-dollar brands than any FMCG company in the industry
About P&G The Procter & Gamble Company is focused on providing branded consumer packaged goods of superior quality and value to improve the lives of the world's consumers. The company was incorporated in Ohio in 1905, having been built from a business founded in 1837 by William Procter and James Gamble. The company's purpose to improve the lives of its consumers today delivers this for 5 billion consumers in 180 countries through its leading, billion-dollar brands. The company's 65 individual brands are organized into 5 business segments:
Fabric & Home Care Baby, Feminine, and Family Care Beauty Health Care Grooming The business model relies on the continued growth and success of existing brands and products, as well as the creation of new innovative products. The markets and industry segments in which P&G offers products are highly competitive. P&G products are sold in more than 180 countries and territories primarily through mass merchandisers, e-commerce, grocery stores, membership club stores, drug stores, department stores, distributors,
wholesalers, baby stores, specialty beauty stores, high-frequency stores and pharmacies. P&G's top ten customers accounted for approximately 36% of total sales in 2018 and 35% in both 2017 and 2016. Its growth strategy is to deliver meaningful and noticeable superiority in all elements of P&G's value proposition - product, packaging, brand communication, retail execution and value equation.
P&G Today The 2019 fiscal year met or exceeded each of the core financial goals — organic sales growth, core earnings per share growth and adjusted free cash flow productivity. Organic sales grew 5% which was above expectations. The company focused on growing where consumers shop — whether that's in-store or online. This year, P&G grew its organic sales by 25% in ecommerce, the fastest-growing retail channel around the world. Online sales now account for about 8% of P&G total sales. P&G also provides a superior experience in-store. An independent benchmarking survey that measures retailer perceptions of manufacturers across seven key focus areas ranked P&G #1 for the fourth year in a row. In 2019 core earnings per share were $4.52, a 7% increase and toward the high end of the target range. P&G delivered strong free cash flow results, generating $15.2 billion of operating cash flow. All six of P&G regions had organic sales growth. In the US, sales grew 4%, including 7% in the last quarter, after averaging about 1% over the past three fiscal years. In Greater China, the company grew 10% with double-digit across Fabric Care, Feminine Care, and Skin & Personal Care categories. The company improved market share trends in eight of 10 global product categories throughout the year. P&G is one of only 10 US companies to pay a dividend for more than 120 consecutive years. The company had 63 years of dividend increases.
P&G makes major investments to ensure its supply chain remains a competitive advantage. A synchronized network based on real-time demand signals is serving the evolving needs of consumers and customers. To deliver productivity across supply chain P&G makes improvements in four ways:
Multi-Category Manufacturing Sites. P&G plants supply several categories of goods, in accordance with the demand for them. Consumer purchases trigger updates to our manufacturing schedules in plants and orders of materials to suppliers. Robotics and digitization make savings. For example, automated loading and unloading enables lower inventory. All these technologies used at the newest P&G plants are globally scalable. Digitized Planning. P&G reduced the number of planning sites to eight vs. 300 sites eight years ago. They become much more effective and now can support a new request from a customer for an incremental order in less than one hour, which once required 24 hours or more. Supplier Integration. Co-locating suppliers in plants reduces truck traffic and distribution cost. Increased synchronization of P&G's operations with our suppliers leads to lower inventory and other costs. Customer Collaboration. The newest U.S. mixing centers put 80% of shipments within 24 hours of retailers. It leads to higher in-stock levels and lower cost of goods. Question 2 (Finance): What is TRUE about P&G sales in 2019? (Required)
Sales in Asia Pacific were 2% lower than sales in IMEA (India, Middle East & Africa) Sales in North America were almost equal to sales in Europe, Asia Pacific and Greater China together Net Sales of Europe in 2019 were about $18 billion Regardless of the similar number of brands, Net Sales in the Beauty segment for 2019 were 7% lower than that of Baby, Feminine & Family Care
Question 3 (Finance): Which segment accounted for the biggest % of Net Sales?
(Required)
Fabric & Home Care Beauty Baby, Feminine and Family Care Hair Care
Question 4 (Logistics): Which of the following is TRUE about P&G's distribution model? (Required)
The company is planning to get rid of the intermediaries and gradually shift to direct-to-consumer model in e-commerce Customers such as mass merchandisers, grocery stores, drug stores carry the shipping and handling costs when purchasing goods from P&G, since P&G is their #1 manufacturer Customers can get finished goods for sale directly from the manufacturing site Consumers bring revenue streams both to customers and P&G
Question 5 (Logistics): Which of these statements is TRUE about P&G Supply Chain? (Required)
Multi-Category Manufacturing Sites are top notch technologies developed by P&G and are scalable for other regions Even though the number of planning sites has grown over the past two years, digitized planning technology has helped the company optimize its usability Lower cost of goods has been achieved through the implementation of digitized planning
Consumer purchases trigger updates to P&G manufacturing schedules in plants and orders of materials to suppliers. Used at its Multi-Category Manufacturing Sites it helps the company supply goods according to actual demand
P&G Major Hair Care Brands P&G is the global market leader in the retail hair care market with almost 15% of the global market share, primarily through the Pantene and Head & Shoulders brands. Pantene Pantene is a global hair care brand, which includes a full line of proteinenriched hair products. Pantene got its name from “panthenol” (pro-vitamin B5), which was developed in 1940 in Switzerland and was used to treat burns during WWII. Pantene shampoo first launched in Europe in 1945. Pantene provides one-stop service offerings for all issues related to hair. Pantene recognizes that the hair shampoo market is crowded so it differentiates by investing in consumer satisfaction by providing professional care solutions. Pantene is sold in around 100 countries all over the globe and wherever it's sold, the brand features a different product depending on the needs of that specific consumer base. Pantene also has a money-back guarantee, offering refunds to those consumers who are not satisfied with the product. Pantene targets people looking for affordable hair care and has product offerings for the middle and upper-class groups. It also has come up with products using behavioral segmentation with the benefits sought, for instance, they have created a product range known as “oil replacement” for the segment of people who find importance in oiling their hair and it is exclusively targeted towards the Indian market.
Also, shampoo ranges like Deep Cleanse, Curl Perfection, and Repair & Protect have been created through the understanding of different buyer types. Pantene's current target audience is women from 20 to 49 years old who are proactive in living a healthy lifestyle and also feel confident when their hair looks good. It positions itself as a product that is an affordable alternative to salon brands. In 2006, it repositioned itself as a brand that helps women 'shine'. Aproduct that helps bring out a woman's inner shine, with the help of her outer shine that the shampoo provides. Over the years Pantene has launched many specialized product series like Intense Rescue Shots, Pro-V Blends, Waterless collection, etc. Pantene aims at superior retail execution. With the store coverage, right product forms, sizes, price points, shelving and merchandising Pantene wins offline, and with the right content, assortment, ratings, reviews, search and subscription offerings Pantene wins online. In 2019, Pantene was leveraging shelf sets that have been successful in Latin America, featuring hair treatments and conditioners in golden bottles to encourage a regimen. Where executed, category growth has nearly doubled. Currently, Pantene is widely available in much of the world. Priyanka Chopra and Selena Gomez are the current global ambassadors for Pantene. There are Pantene ambassadors for specific countries like France, India, Thailand, Korea, Russia, etc. Head & Shoulders Head & Shoulders launched in 1961 with a proprietary formula clinically proven to reduce dandruff. Head & Shoulders has been able to gain consumer trust due to the quality of its products. The brand deals in products targeted at the anti-dandruff segment keeping smooth and beautiful hair. It offers products for men, women and products that can be used by everyone irrespective of gender. These are for dry, itchy and sensitive scalps, for relief against dandruff and also for severe scalp conditions.
Head & Shoulders has always been on the brink of a price war with rival companies. It faces stiff competition with several competitors and hence has kept its prices on par through adopting a competitive pricing strategy. It has also kept a penetration policy so that it can reach towards new markets and gain further consumers. Head & Shoulders relies on its reasonable pricing strategy to attract and maintain the loyalty of its consumers as its products are affordable. Moreover, they are available in different sizes so that a person can easily make purchases according to their personal needs. The brand also advocates a promotional pricing strategy during the summer season by offering discounts and incentives. As sales during that time are higher, it results in larger volumes and greater revenues. Question 6 (Marketing): According to the data above, which idea will be the MOST appealing to Head & Shoulders team in terms of strategic development? (Required)
Increase the prices and reposition the brand as premium Introduce a product for shiny hair Optimize the shipping costs Switch to men as primary target audience
Question 7 (CMK): You have several consumer profiles. Whom would you choose to target Pantene ads? You can choose several answers. (Required)
An active, looks-conscious 55-year old woman suffering from dandruff A 25-year old man suffering from oily scalp An active, looks-conscious 30-year old man who needs to have his hair shiny and smooth A 40-year old woman who wants to recover her damaged hair
Global Hair Care Market Market Dynamics The hair care market is part of the Beauty and Personal Care market. It contains such segments as shampoos, conditioners, oils, sprays, hair colors, etc. Since its products are always in high demand, Hair Care remains one of the most competitive segments of the Beauty and Personal Care market. Characterized by the significant role of minor players (companies with less than 1% of total sales), it is very volatile. The considerable number of players that enter and leave the market every year, combined with the dependence on health issues and regional conditions, contribute a lot to heavy fluctuations – especially regarding non-premium segments. An example is the mass segment plunge that took place in 2015. Primarily due to the unstable environment in Latin America (where sales in one year have reduced by 20% over one year), this fall was also an aftermath of the European consumers' changing attitudes towards hair care. These reasons were widely different, but they both had a strong influence on the market, triggering a $7.7 billion slump.
Source: Euromonitor International In 2018, the value of sales reached $77.3 billion. The market is rapidly gaining momentum, which converts into positive forecasts for the nearest five years. Market analysts predict that during this period, global sales of hair care products will rise by 5% every year (given the current situation), which roughly matches the current rate of recovery. Market Trends Among the main trends observed in the hair care market over recent years, three tendencies may be distinguished: a growing share of the premium
segment, the increasing popularity of indie brands, and the rising number of products sold online. It is easy to agree that the diminished sales of mass products observed in 2015 became the main driver of the premium segment's enlarging market share. Still, it is not the only reason why premium hair care started to prevail over mass products. Above all, it is strongly connected with the modern lifestyle. People are starting to pay more attention to their health and to put a lot of money towards making themselves feel and look good. As proof, in the past four years, sales of hair care products generated through health and beauty retailers (drugstores, pharmacies, etc.) have been on the rise and amounted to $22.3 billion in 2018, while in 2015, it was $20.9 billion. This increase, together with the rising number of sales through grocery channels, may be considered as indirect evidence of the fact that people try to use more sophisticated, non-supermarket offered, hair care products. Apart from healthconsciousness, the rising share of premium products can be explained as a consequence of a sustainable increase inglobal welfare, which provides people with money to buy products that are more expensive. Therefore, hair care market forecasts predict a steady development of the premium segment.
Source: Euromonitor International The next two trends are highly interconnected. From the definition, indie brands are small independently funded enterprises, which concentrate on one specific segment of a particular market. Due to financial limitations, indie brands often look for innovations – whether they are in manufacturing or any other field of operation. As for marketing, such companies target the audience via the internet, mostly using advertising on social networks. Hence, they have
a significant reason to sell their products online – as their prospective consumers are online too.
Source: Euromonitor International It is easy to notice that between 2014 and 2016 indie brands' share of the global market was reducing, so it may appear that there was no indication that these smaller brands would gain popularity. However, the market decline in 2015 in fact had a much worse influence on indie brands than on major market players – mainly because of their undiversified portfolio and the impossibility of benefiting from the economy of scale. The number of companies plummeted, and it took some time for the indie segment to recover.
Source: Euromonitor International As indie brands mostly work online, they have a competitive advantage when compared to other market players. The fact is that online sales have become the only distribution channel to show stable annual growth. Over six years, they have risen from $2.2 billion in 2013 to $5.7 billion in 2018. Nevertheless, for some products the online channel is not very convenient. For example, not many people will purchase premium hair care products from internet retailers, as they are not able to check the product before delivery. Question 8 (Sales): Approximate the difference between the global sales volumes of premium hair care in 2013 and 2018.
(Required)
$0.5 billion $0.8 billion $1.1 billion $1.4 billion
Question 9 (Marketing): Given the data, calculate the forecasted value for the size of hair care market in 2020 in $ billion. Round it off to one decimal place. (Required)
Question 10 (Logistics): Regarding the global hair care market for the period 2013-2018, which of the following facts are true? You can choose either one or several answers. (Required)
The online channel is possibly the best option for small brands Sales through grocery channels increased by 4–7% Traditional sales showed better results than e-commerce Pharmacies improved their sales performance
Question 11 (CMK): Market analysts enlisted the grounds for enhancing the market share of premium hair care. Find a logical mistake they made. (Required)
People have purchased fewer mass products
People began to take control of their health People bought more from indie brands People started to earn and spend more money
Regional Hair Care Markets There are different approaches for distinguishing particular regional markets. As for P&G, the company operates in six regions, which are: Asia Pacific, IMEA, Europe, Greater China, Latin America, and North America.
Source: Euromonitor International
Source: Euromonitor International Asia Pacific includes big Asian markets such as Japan, South Korea, etc., along with Australia and New Zealand. With $13.8 billion generated in sales through the hair care market in 2018, it holds a leading position on the global hair care market. As grocery retailers are still the dominating power on the market, with lesser influence from other channels, Asia Pacific stands out as a
region where large companies prevail over small businesses due to welldeveloped distribution networks. IMEA, is a region that has a fast-growing hair care market. Although it currently has the second smallest sales value out of all the regions ($9.1 billion in 2018), it has a lot of potential and, according to forecasts, by 2023 it may have almost doubled and become equal to the North American market. One interesting feature of IMEA is that seasoned companies are less competitive in the region, since local conditions require market players to provide personalized services. For instance, this is relevant to the Middle East and Africa where consumers need products designed for harsh weather conditions. Therefore, this market is more suitable for smaller manufacturers, giving them almost 1/3 of the whole market. This is the best result globally. Europe includes both Western and Eastern Europe, with the largest markets being Germany, France, the United Kingdom, Russia, Italy and Spain. Once the perfect place for the promotion of hair care products, the region is now experiencing issues with shifts in consumer preferences. The trend for natural ingredients has sparked arguments about the chemical components used in hair care manufacturing and has made people refuse some mass products such as low- and medium-priced shampoos. As a result, sales in the region dropped from $22.3 billion in 2013 to $17.6 billion in 2016. In 2018, sales amounted to $18.9 billion. Greater China includes China and some neighboring territories. China is such a large market that it is comparable to whole regions made up of several countries. However, it is the smallest of all in terms of market sales with $8.8 billion in 2018, though it is projected to grow faster over the next 5 years. A characteristic of this market is premiumization: along with growing income, consumers are showing higher interest in premium products and salon professional hair care. Chinese consumers are increasing their hair routine and the product range for them is extending. Latin America is the most mysterious region in terms of market dynamics. In spite of a clear tendency to deal with large corporations, consumers are often disappointed with their services and may turn to local manufacturers.
Therefore, the ratio between locals (especially, indie brands) and multinationals is highly volatile. As for actual values, the market has not recovered from the crash of 2015 when sales collapsed from $16.5 billion to $12.9 billion. The recent figures (2018) are $12.1 billion. North America, with its sales volume of $14.4 billion, remains the most stable market out of all six. It slightly grows almost every year, with rare declines not exceeding 1-2% of total sales. This region is particularly interesting, as consumers' preference for natural components goes hand in hand with their craving for technological innovations. As not many small enterprises can meet both needs, the market is mostly loyal to major players. Question 12 (Sales): Based on the provided data, choose the region where P&G had the lowest market share in 2018. (Required)
Latin America IMEA North America Europe
Question 13 (CMK): Choose all true statements from the list below, based on the text. (Required)
Asia Pacific and North America provide the best market conditions for large companies In the next 5 years, IMEA will be the fastest-growing market in the world Consumers in Europe and North America have the same requirements for hair care products The markets in both Latin America and Europe suffered from drastic falls and still cannot recover
Question 14 (Marketing): Select the market with the lowest growth rate for 2019–2023, based on the forecasts. (Required)
Greater China Europe Latin America North America
Question 15 (Logistics): Imagine you are making a strategic decision for the construction of a new Pantene plant. Based on the data above, where would it be? (Required)
IMEA Latin America North America Europe
Open Questions WARNING: Depending on your browser settings, using the 'backspace' key can cause you to switch pages without saving your results. We recommend working on the following essays using any text editor and then copy-pasting it into the test form. Question 16: You are taking part in a meeting devoted to P&G's strategic development in view of growing indie brands. Come up with ideas for achieving long-term competitive advantages.
(Required)
Question 17: You have been asked to brainstorm the issue of strengthening P&G's position in one of the regional hair care markets. Choose any market you want and write at least 3 suggestions about how the company could change its approach in order to ensure sustainable growth. (Required)
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