Wednesday, October 13, 1999
P&G looks within to grow
New products from proven ideas
BY RANDY TUCKER
The Cincinnati Enquirer
Imagine Procter & Gamble's newly acquired Iams or Eukanuba pet foods fortified with the same plaque-fighting ingredients found in the company's Crest toothpaste.
Or picture a cleaning solution for contact lenses that uses the same enzyme-cleaning technology as P&G's Tide laundry detergent.
Sound far-fetched?
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JAGER ON ...
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Tuesday marked Durk I. Jager's first Procter & Gamble annual meeting as president, chief executive officer and chairman. His views on:
• Organization 2005: “We are in the midst of the most dramatic change in the history of Procter & Gamble. With Organization 2005, we've changed our structure. We are changing our reward systems and expectations. We are creating a new culture.”
• Growth: “We're encouraged by the first quarter of our new fiscal year. ... I believe these results are an indication of what's to come. We expect growth will improve over the remainder of the year.”
• Speed to market and innovation: “The key to faster growth is our unique ability to connect expertise from one area of the business to create new ideas in another. We call this scale of knowledge. It creates real advantage.”
• Acquisitions: “We look for two things when we think about buying a company. We want to add to our own scale of knowledge. And, we want to use our existing knowledge in new ways.”
• Internet opportunities: “On one level, it's the opposite of scale. It allows you to focus on very narrow opportunities, ultimately, to markets of one consumer at a time. On the other hand, the Internet is all about scale. The Web permits the aggregation of those one-person markets into a network of enormous value.”
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Not to Durk I. Jager, P&G's chairman and chief executive. He cited those examples Tuesday during the company's annual meeting in downtown Cincinnati to illustrate to shareholders how the company plans to increase sales and profits through innovation.
“The key to faster growth is our unique ability to connect expertise from one area of the business to create new ideas in another,” Mr. Jager told about 1,000 shareholders gathered in the Procter & Gamble Hall of the Aronoff Center for the Arts. “P&G has a wide range of patents. Imagine what we can create by combining our technologies.”
Presiding over his first meeting as P&G's chairman, president and CEO, Mr. Jager also updated shareholders on recent business results for the $38 billion company.
As predicted, the company is off to a good start under its Organization 2005 restructuring program, which is designed to cut costs, promote innovation and accelerate sales and earnings.
The program's goal is to push sales by 6 percent to 8 percent a year and earnings by 13 percent to 15 percent annually.
To accomplish that, P&G will cut 15,000 jobs worldwide, including about 1,900 in Cincinnati, and close up to 10 plants at a cost of $1.9 billion.
About $385 million of that cost was written off in the first quarter of fiscal 2000, which ended Sept. 30.
For the quarter, P&G is expected to show volume growth — or growth in the total number of products sold — of 2 percent. That compares with flat volume growth in the first quarter last year.
Total sales also are expected to improve, growing by about 3 percent to 4 percent annually.
P&G will not report final results for the quarter for several weeks.
“We're encouraged by the first quarter of our new fiscal year,” Mr. Jager said. “I believe these results are an indication of what's to come. We expect growth will improve over the remainder of the year.”
Driving that growth will be the introduction of products that combine technologies from different product groups, Mr. Jager said, underscoring his view of P&G as primarily a technology company.
A prime example of what Mr. Jager called P&G's “scale of knowledge” is the company's new Flash disinfecting wipes, which were introduced in Europe this year.
The wipes, which P&G says keep germs off household surfaces longer, combine bleach from the company's laundry business, nonwoven cloths from its paper business and the cleaner from its hard-surface cleaning business.
Another example of combining technologies is P&G's new powdered drink called NutriDelight, now available only in the Philippines.
The drink, introduced in partnership with UNICEF and health organizations, connects “our expertise in minerals, nutrition and beverages” to “address malnutrition in many parts of the world,” Mr. Jager said.
He said P&G will continue to pursue opportunities for growth outside the company as well, including through its recent acquisitions: pet-food maker Iams Co. of suburban Dayton, Ohio, and Minneapolis-based Recovery Engineering Inc., which makes home water filters.
The company also will continue to explore Internet opportunities, such as reflect.com — a San Francisco-based start-up backed by P&G that will sell beauty-care products personalized for the consumer.
P&G has also started an Internet distribution system called Web Order Management, which allows consumers to place orders directly with the company. Officials say orders are delivered more quickly than with a traditional system.
P&G is also a founding sponsor of an Internet start-up called Yet2.com, described as an innovative Web site that connects technology developers and technology buyers.
Taking advantage of such opportunities will require a significant change in the company's corporate culture, Mr. Jager said.
“A few years from now, we will be a very different company,” he predicted. “We will be faster. More experimental. More open. More collaborative, inside and out. More unexpected. As a result, P&G will be an even more exciting place to work.”
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