Sunday, October 5, 2003

Overseas sales have big impact back home

By Cliff Peale
The Cincinnati Enquirer

As the World Turns is a Procter & Gamble-produced TV soap opera. It might as well be a business strategy.

A new generation of image-conscious young consumers in countries such as Russia, China and Brazil is taking center stage in P&G's global market plan, and with good reason.

With disposable cash in hand and a willingness to spend, this emerging economic force is felt by tens of thousands of P&G employees, retirees and shareholders in Greater Cincinnati.

As in It's A Wonderful Life, every time a clerk rings up a sale for Wella products at a mall near the Kremlin, the Cincinnati economy gets its wings.

"Our compensation is based partly on that," said Gretchen Price, vice president of finance for the global market-development group, based in Cincinnati. Part of every market-development employee's bonus is based on the success of overseas markets, she said.

"In addition, we're helping to lead the strategic thinking, the planning, and everything else that goes into those operations," she said.

Staples such as Tide detergent and Bounty paper towels are so dominant in the U.S. that future growth is limited, analysts say.

But in countries such as Russia and China, particularly outside major population centers, hundreds of millions of people have never purchased a P&G product. It's enough to make a sales force giddy with anticipation.

"That's where the population is growing," said Kerry Clark, president of P&G's global market operations. "And the populations are not only growing, they're much younger" than in the United States and Western Europe.

It is this potential that fires the imagination of P&G's market analysts. Higher profits. Greater return to shareholders. It adds up to continued and growing employment at P&G headquarters in Cincinnati.

P&G's economic impact for Greater Cincinnati is at least $3 billion a year, according to the last comprehensive study done in 1998. That includes $1.3 billion in salaries and benefits and $382 million for goods and services purchased from local companies.

Investors demand earnings growth, which translates into higher stock value. However, watching P&G's developing Russia strategy perhaps more closely than any stakeholder group will be its Cincinnati employees.

Consider baby care, a $19 billion worldwide market for P&G and its competitors. If market penetration achieves U.S.-like levels in developing countries such as Russia, baby care (mainly diapers and wipes) could mushroom to $120 billion, says Deb Henretta, president of global baby care at P&G.

In Russia, disposable diaper penetration is only 14 percent, Henretta says. "There's absolutely enormous potential," she says.

Technological and management efficiencies make it difficult to project how many employees P&G might add in Cincinnati as its global market expands. However, the impact already is being felt. For example, P&G has about 700 workers- including Henretta - at its baby-care offices in Blue Ash. They work on planning, marketing and research for the company's global diaper operations.

More P&G employees work downtown in P&G's global market-development operations. And then there is the finance, legal and human resources work done here in Cincinnati. All require highly specialized expertise to cope with the cultural, legal and product-packaging issues unique to each market.

If P&G scores globally, packaging companies, advertising agencies, marketing consultants, hotels, airlines and the everyday local service companies that fuel the P&G juggernaut will share profits from countries whose distance belies their importance to the Tristate's future.

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