Inside This Issue - News
P&G aims to ‘play big’ in consumer health care
July 20th, 2009
The Vicks family of products is among the well-known brands that will receive more focus from P&G as it ramps up its consumer health care growth strategy.
CINCINNATI – At first glance, Procter & Gamble Co.’s new Align brand looks like just the latest entry in the hot probiotics category. But on closer inspection, the product actually marks a key step in the supplier’s game plan to become the leading consumer health care company in the world.
Of course, Procter & Gamble has been a player in the health care arena for decades. But health care has been a smaller business for the company best known for such brands as Tide and Pampers. Now P&G has a new focus: consumer health care, which it sees as a “new engine of growth.”
New Corporate Focus
That new focus was first articulated by P&G chairman A.G. Lafley last December at the company’s biannual meeting for investors.
“We will now focus R&D and our licensing and acquisition resources on building consumer health care businesses — oral care and feminine care and, of course, personal health care,” he said. “Our changing health care strategy is a good example of how we continually assess and strengthen the company’s business portfolio.”
Health and Well-Being
For P&G, consumer health care is part of a broader global business unit called Health and Well-Being (H&WB). It represents 20% of the company sales and profits and comprises six product categories: oral care, feminine care, personal health care, pharmaceuticals, pet care and snacks.
Together, oral care, feminine care and personal health care make up what P&G calls “consumer health care.”
Vice chairman Robert Steele leads the company’s global H&WB business. He has spent his entire 33-year career with P&G, including leading the company’s North American operations from 1998 to 2006.
Steele and members of his team outlined their strategy in a recent meeting at the company’s Mason Business Center (MBC) near P&G’s global headquarters in Cincinnati.
At 1.7 million square feet, the MBC is situated on a 350-acre campus. It is the center of global operations for several P&G businesses, including oral care, personal health care and pharmaceuticals, and, soon, pet care. More than 2,000 P&G employees work at the center.
Consumer Health Care
During the meeting Steele and his team focused on P&G’s consumer health care businesses. Steele began by explaining why consumer health care is so attractive.
“First, it’s a huge market: $240 billion in retail sales,” he said. “By far, consumer health care is the largest business in which P&G competes.
“It is growing at 5% to 6% year, and the global megatrends — aging population, focus on wellness and greater consumer involvement — will only fuel this growth.”
Steele added that P&G can succeed in consumer health care by leveraging the company’s proven strengths.
“We believe our ability to understand consumers, lead innovation, build trusted brands and go to market globally will enable us to win in this business,” he said.
Personal Health Care
The supplier is already a leader in oral care and feminine care, through such major brands as Crest, Oral-B, Always and Tampax.
Steele said P&G’s strategies for these large categories are clear. The company has invested heavily in building them over the years, both organically and through licensing and acquisitions. As a result, the categories have become key growth drivers.
Lately, P&G has been putting renewed focus on its personal health care business. This portfolio of brands includes Vicks, Metamucil, Pepto-Bismol, Prilosec OTC, PUR (water filters) and, most recently, Align.
Tom Finn leads personal health care for P&G. He has spent his entire 25-year career working on the company’s health care businesses.
Finn said P&G has a simple vision for its personal health care business. “We want to empower the world’s consumers to live healthier, more vibrant lives,” he noted. “We want to add life to their years.”
To do this, Finn said, P&G has developed a strategy that includes building its larger brands, such as Vicks, and entering new categories.
For example, the company has taken an equity stake in Swiss Precision Diagnostics, which markets at-home diagnostics under the Clearblue Easy brand name.
With the recent launch of Align in the United States, P&G is hoping to build a large new brand in a fast-growing segment of a category where the company has developed significant expertise — digestive wellness.
Align is a daily supplement that uses a proprietary probiotic called Bifantis to address common digestive symptoms. Over the past few years Align has been very well received by consumers online and in test markets in three cities. In March P&G launched the brand at retail nationally.
Based on its success in the United States, Align has the potential to become a global “megabrand” in the digestive wellness category, according to Finn.
Vicks and PUR
While Align is a new brand with a lot of potential, Vicks is a venerable brand that also has tremendous growth potential, Finn said.
“We acquired Vicks in the mid-1980s,” he noted. “But it has not really been an investment priority. Our innovation has been light, and we’ve not tapped into P&G’s global scale.”
Now that consumer health care has become a priority, the company is putting a prime focus on Vicks.
Finn’s team has developed a plan to accelerate the growth of the brand and build it into the clear global leader in the respiratory health category.
Likewise, P&G’s PUR water filter brand has a lot of room to grow, Finn said.
The company purchased PUR 10 years ago. In the United States the brand is still available in only two forms: faucet mounts and pitchers.
Outside the United States, PUR is available in packets of powder that is used to purify drinking water, mainly in countries in crisis, such as after natural disasters. P&G provides the packets at cost through a range of public health and government agencies.
To date, the company has delivered 1.5 billion liters of safe drinking water that way. In fact, the initiative is the cornerstone of P&G’s corporate philanthropic program, called “Live, Learn and Thrive.”
Now P&G has a plan to build PUR into a megabrand worldwide while continuing to provide it at cost to low-income consumers. “Traditional health care companies would not necessarily consider water filtration,” Finn explained. “We see it as an area where P&G can make a big contribution to improving the health of the world’s consumers.”
Joint Value Creation
Steele pointed out that the supplier will be working closely with its retail customers to fully leverage insights that the company has gained from its years of consumer research to develop compelling shopper propositions.
“Ultimately, the winners in consumer health care will create better value for shoppers,” he said. “We’re doing this consistently in categories like oral care and feminine care, which we’ve declared to be strategic for P&G. Now it’s time for us to do this in personal health care.
“As we do this, we’re committed to also enhancing the already attractive margins in these categories for our retail customers.”
Innovative and Trusted Brands
Steele added that one of the reasons that he is so confident in P&G’s success in consumer health care is the company’s ability to bring forward major innovation that consumers will find meaningful for the brands they trust.
“Innovation and brand building go hand in hand,” he said. “Innovation is worthwhile only if consumers benefit from it. And they are more inclined to do that through brands they know and trust.”
Steele pointed to Crest Whitestrips as an example.
“Today, using thin plastic strips to enable consumers to whiten their teeth at home seems like a no-brainer,” he said. “But this was what we call a ‘disruptive’ innovation. Consumers had never seen anything like it.”
“They liked the idea but needed to know they could trust it. The Crest brand name instantly conveyed quality and trust.”
To bolster P&G’s innovation and marketing capabilities in consumer health care, Steele has recruited some of the company’s leading experts in those areas.
He said they are already bringing relevant experience and fresh thinking from other P&G categories, including skin care and home care.
Ready To Win
When it comes to consumer health care, Steele acknowledged that “it’s a journey. We have a long way to go.”
But he quickly added: “We now have great strategies, strong plans, a superb team and, of course, a terrific portfolio of brands.
“We’re ready to play big and win in consumer health care.”