Soaps and

Other Detergents

Brian Amato

Daniel Froats

Eileen Min Byul Kim

Maegan Nevins

Agenda

Introduction

Industry Analysis

Advertising Strategies

Recommendations

Ad-to-Sales Ratio Highly Saturated Market

Overall Spending

Why the Industry?

Industry Analysis

Industry Definition

Industry that produces substances that loosen and remove soil from a surface for personal hygiene, sanitation or cleaning clothes, linens and furnishings

Major Products

Primary Activities

Manufacturing & packaging soap

Preparing, manufacturing, and packaging cleaning compounds

Industry Structure

HHI = 562.7

Calculated using top-5 companies

Slightly skewed by “Others” of 54.6% of small other firms

C4= 40.5%

20%9%

6%6

%5%

55%

Market Share

P&G

S.C. Johnson & Son

Ecolab

Colgate-Palmolive

Unilever PLC

Others

Top - 3 Players

P&G S.C. Johnson & Son

Colgate-Palmolive

Industry Structure

The US soap and detergent manufacturing

industry includes about 650 companies with

combined annual revenue of about $27 billion

The industry is highly concentrated: the top 50 companies generate about 90% of revenue

Industry Structure:Barriers to Entry – Medium

Hig

h

Low

Capital Intensity

CompetitionConcentrationLife Cycle Stage (Mature)Regulation and Policy

Technology ChangeIndustry Assistance

Ind

ustry

Analy

sis: Key S

ucce

ss Facto

rsMarketing expertise

Appropriate pricing strategy

Economies of scale

Brand loyalty

Development of

new/innovative products

Supply contracts for commodity

inputs

Industry’s Products

• Line extensions that serve multiple needs• Cross-selling strategies to take advantage of

existing brand equity

Multi-Purpose Products

• Specialized products to generate growth in mature market

Specialized Products

• Offer help in safety and environmental regulation compliance

• Provide maintenance services

Superior Customer Service

Industry Analysis

Customer Segment

Supermarket chains, mass merchandisers, drug stores, and warehouse clubs

Commercial Segment

Industrial and commercial laundries, hotels, restaurants, and healthcare providers

Costs

Producer

Ingredient costs 35-40% of the wholesale price

The price of surfactants and related chemicals can fluctuate and affect profitability

Consumer

Product Avg. Retail Price

Laundry Detergent $5

Dishwashing Detergent $2

Soap $2.50

ProducerProductionCost

ConsumerConsumptionCost

Employment

Due to the high level of automation at many manufacturing facilities, most production jobs require few skills

Average hourly wages are slightly lower than the national average

IndustryEmploymentGrowth

Average Hourly Earnings & Annual Wage Increase

Industry Trends

Low growth in market volume and wholesale pricing drives manufacturers to increase

productivity to cut costs

High levels of automation and improved manufacturing technology have allowed soap and detergent manufacturers to increase output

with fewer workers

Imports and Exports

The US is a net exporter of soaps and detergents; the value of exports is

about twice that of imports.

Main exports nations: Canada, Mexico, Japan, South Korea, the UK

Most large companies have plants throughout the world.

US soap and detergent exports increased more than 70% between 2005 and 2010.

Role of Government

Federal, state, local, and foreign environmental and safety laws regulate hazardous materials used or produced

Some large companies are actively involved in cleaning contaminated sites due to past operations

Some companies are reformulating products to meet demand for “green” products

Advertising Strategies

Why focus on P&G?

Advertising Expenditure

Highest Industry Market Share

Diverse Product Offerings

P&G Ad-Sales Ratio

2007 2008 2009 2010 20117.5

8

8.5

9

9.5

10

10.5

11

11.5

P&GPeer Avg.P

erc

en

t

P&G’s ad-sales ratio has continuously increased

Except for 2009 when it decreased by 0.79%

This probably seems to be related to the financial crisis that happened late 2008

However, the ad-sales ratio soon recovered and P&G’s ad-sales ratio is higher than ever, being 11.28% in 2011

Primary Advertising Methods

Informative

“Slice of Life”

Comedy

Comparative

Advertising Mediums

Television

Print

Magazine

Social Media

Facebook, Google, Youtube, etc

Social Campaigns

Advertising Mediums and Effectiveness

Newsp

aper

s

Mag

azin

es

Pam

phle

ts

Direct

Mai

ls

Outdo

or

Broc

hure

s TV

Radio

Cinem

a

Cyber

mal

ls

Win

dow

Exh

ibiti

on0

40

80

Effect of ad on product awareness

Perc

en

t

Newsp

aper

s

Mag

azin

es

Pam

phle

ts

Direct

Mai

ls

Displ

ays

Broc

hure

s TV

Radio

Cinem

a

Cyber

mal

ls

Win

dow

Exh

ibiti

on0

40

80

Effect of ad on knowledge

Perc

en

t

Effective Medium? Audio-visual media: TV, Exhibition, Window

Display Print media: Newspapers, Magazine

Television Advertising

Advertised Products

Advertised Products

Tide: Liquid Laundry Detergent• Count: 6,516 times• Total: $15 million• Average: $2,341

Tide Plus Bleach: Liquid Laundry Detergent• Count: 5,318 times• Total: $12 million• Average: $5,413

Ad Spending by Day of Week

SUN MON TUE WED THU FRI SAT $-

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

Sum of DOLS

This seems to show a sign of Pulsing strategy While P&G airs TV ads continuously throughout the

week, the most is spent on Tuesdays and Thursdays.

Ad Spending by Day Part

Prim

e

Overn

ight

Aftern

oon D

aytim

e 2

Mor

ning D

aytim

e 2

Early

Mor

ning 2

Late

Frin

ge0

2000400060008000

Number of Products Ad-vertised

Most products were aired: Prime time > overnight > Afternoon Daytime 2 Most spent on Prime time (both total & average) While total advertising expenditure of overnight time was high, the average cost of overnight time was relatively

low For afternoon daytime 2, it was rather consistent; all relatively high

Aftern

oon

Daytim

e 2

Early

Mor

ning

2

Late

Frin

ge

Morni

ng D

aytim

e 2

Overn

ight

Prim

e $-

$5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000

$-

$1,000

$2,000

$3,000

$4,000

$5,000

Ad Expenditure (Sum/Avg)

Sum of DOLS

Average of DOLS

Ad Spending by Network

Total advertising expenditure highest for Cable TV However, on average, Network TV is the most

expensive, then SLN TV, and Cable TV is the cheapest

Cable TV Network TV

SLN TV $-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

$45,000,000

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

Sum of DOLSAverage of DOLS2

Ad Spending by Program Types

SLIC

E-OF-

LIFE

FEATU

RE FIL

M

SITU

ATION C

OMEDY

DOCUMEN

TARY

INST

RUCTION/A

DVICE

DRAMA/ADVEN

TURE

VARIETY

- MUSI

CALTA

LK

NEWSC

AST

SOAP

OPERA

AWARD/C

ELEB

RATION

0

1000

2000

3000

4000

5000

6000

7000

8000

Number of Products Advertised

Focus mostly on Slice-of-Life, Soap Opera, Feature Film, and Situation Comedy

Award/Celebration? Average is highest; count and sum is very low

$-

$4,000,000

$8,000,000

$12,000,000

$-

$2,000

$4,000

$6,000

$8,000

$10,000

Ad Expenditure (Sum/Avg)

Sum of DOLSAverage of DOLS

AdImpact by Program Type

High Performance? Detergent: feature film,

general drama, and news

Specialty soaps: popular music, instruction/advice offerings

TV Ad Content Analysis83% 83% 83%

50%

11%1Sustainability

“My Tide” Campaign

“Tide Dad” “Dad’s Designer Jeans”

Informative adHighlighted attributes: preserves the original color of fabric, good on delicate fabric and high quality clothing

Informative adHighlighted attributes: good on children’s clothing, tough on stains and preserves the original look & feel of clothing

How is P&G Different?

Proctor & Gamble’s strategy of targeting several strategic niche markets

The power of storytelling

Strong brand value & brand equity

Print Advertising

Print Advertising

Medium With Reliable Metrics

Innovative Ad Campaigns

Shift in Spending Toward Magazine Ads

Benefits of Targeted Media

Coupons/Promotions

Social Campaigns

“Loads of Hope”

Disaster Strikes

“A disaster occurs making relief necessary for the families affected”

Help is Sent

“We send our mobile laundromat fleet to the location”

Laundry is Provided

“We spend multiple days at the disaster site washing, drying and folding clothes for the families affected”

Social Media

Social Media

“As we’ve said historically, the 9% to 11% range [for advertising as a percentage of sales] has been what we have spent. Actually, I believe that over time, we will see the increase in the cost of advertising moderate. There are just so many different media available today and we’re quickly moving more and more of our businesses into digital. And in that space, there are lots of different avenues available. In the digital space, with things like Facebook and Google and others, we find that the

return on investment of the advertising, when properly designed, when the big idea is there, can be much more efficient. One example is our Old Spice campaign,

where we had 1.8 billion free impressions and there are many other examples I can cite from all over the world.”

–Robert McDonald, CEO

“Future Friendly” Program/Sweepstakes

Facebook Based Sweepstakes

Celebrity Endorsement

Interactive Campaign

Special Events

Recommended

Advertising Strategies

Recommendations

Target Growing Hispanic Population

Focus on More Targeted Media

Innovative Use of Social Media

Investment Strategy

P&G: Great Long-term

InvestmentP&G has an aggressive global growth plan for the emerging markets in the years to come

Company Goal: 1 billion new customers by 2014-15

New Manufacturing facilities in Brazil, Eastern Europe, India, and China

P&G: How to Accomplish Future Growth

New plant in Luogang China

Up and running by 2013

$490 million in product revenue

Reducing Costs: phase out non-manufacturing jobs in the U.S

5700 layoffs helping the company reach its goal of 10 Billion in cost cutting measures by 2016

P&G: How to Accomplish Future Growth

The Market for the poor is not highly-saturated

Africa: To capture the market in Africa, P&G is selling “no frills”(non-essential features removed) versions of its products in smaller sizes that eventually will add up

Persuade people who live on $5 or less a day to buy P&G items

By locking up 10-20% of sales in "the company's top 30 emerging markets would add $5.9 billion in new sales in five years

Thank You

Q&A