Procter & Gamble Case Study

The Scoop

Introducing some familiar names

What would the world be like without Procter & Gamble? Simply put, there'd be no Ivory soap, no Olay, no Pampers, no Tide detergent, no Crest toothpaste -- we'd be bereft of many of the brands that have earned our love and loyalty over the years. And for Procter & Gamble, loyalty is what it's all about: of the company's nearly 300 brands, 22 produce over $1 billion per year in revenue. P&G is a company that thrives on loyal customers and strives to put out products that merit that devotion in 180 countries the world over. It is ranked No. 25 on the 2006 Fortune 500, No. 12 on the Financial Times 500 and is indexed in both the S&P 500 and the Dow Jones Industrial Average.

Procter & Gamble is a $68-billion-a-year company, but it is 25 percent owned by its former and current employees. Even workers in the manufacturing plants often own hundreds of thousands of dollars in company stock, thanks to a lucrative profit-sharing plan. What does the company get for this generosity? It ensures that top-of-the line employees (who could possibly make more in base salary elsewhere) will remain with the company for their entire careers.

But times are a-changin', and Americans' allegiance to brands has begun to erode, replaced more and more these days by a desire to get more bang for the buck. To keep its prices competitive and to meet its ambitious goals for sales, P&G has undergone some "streamlining" of its operations and overhauled its corporate management structure, which helped boost sales that were flagging in the early 2000s. Such moves have helped the company stay at the top of its game -- but even more prominent was the company's purchase of rival consumer goods giant Gillette for $57 billion in stock in July 2005.

In the beginning, there were candles and soap

The P&G story began when William Procter and James Gamble arrived in America with their eyes set on the wide-open West. However, both Procter, a candle maker from England, and Gamble, who apprenticed himself to a soap maker after arriving from Ireland, ended up settling in Cincinnati, where they met after marrying sisters. Their father-in-law convinced them to become business partners, and in August 1837 each man pledged almost $3,600 toward a partnership to produce and sell soap and candles.

By 1859, as America was sliding toward civil war, Procter & Gamble, with 80 employees, reached $1 million in sales. During the Civil War, the company supplied soap and candles to the Union armies, helping to build its reputation outside of Ohio. Then, in 1879, the second generation of Procters and Gambles made a breakthrough. Chemist James Norris Gamble developed an inexpensive, buoyant white soap; Harley Procter read the words "out of ivory palaces" in the Bible one Sunday in church and was inspired. And so, Ivory soap -- 99 and 44/100ths percent pure -- floated into the market.

P&G's greatest hits

Taking a reading of products introduced by Procter & Gamble in the 20th century sounds like a commercial for a compilation of consumer goods' greatest hits. The company's research centers have churned out a remarkable string of successful innovations: Crisco, the first all-vegetable shortening (1911); Tide, the "washing miracle" that was the nation's first synthetic laundry detergent (1946); Crest, the first toothpaste with fluoride, clinically proven to fight cavities (1955); and Pampers, the first mass-produced disposable diaper (1961). More recently, the company has introduced Pantene Pro-V (1992), the world's leading shampoo, and in 1996 received FDA approval for Actonel, a medicine used for the treatment and prevention of postmenopausal osteoporosis.

Acquisitions have also expanded the P&G empire, often providing the company with leverage in either an international market or a new product area. P&G bought Duncan Hines cake mixes in 1956, Charmin Paper Mills in 1957 and Folgers coffee in 1963, all of which represented the company's first foray into these products' respective markets. The additions of Noxell (makers of the Cover Girl and Noxzema product lines) in 1989 and Max Factor in 1991 made P&G the country's largest cosmetics company.

Abroad and upward!

Procter & Gamble began manufacturing in Japan in 1973 after acquiring the Nippon Sunhome Company; after the fall of the Iron Curtain, the company set up shop in Eastern Europe in 1991, with the purchase of Rakona in then-Czechoslovakia.