Green Practices On P&g.docx

A Project Study Report on “A study on Green Practices in Proctor & Gamble” Submitted in Partial Fulfillment for the Degree of Bachelor of Business Administration

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S.S. JAIN SUBODH P.G. COLLEGE JAIPUR (2016-17)

SUBMITTED BY

SUBMITTED To

Vineet Gangwal

Ms. Shravasti Jain

B.B.A. IV Sem.

Lecturer

1641172

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TO WHOM SO EVER IT MAY CONCERN

This is to certify that Vineet Gangwal student of BBA II from S.S.Jain Subodh P.G. College; Jaipur has successfully completed the Project.

His research is very beneficial for the company. His work was excellent. We wish all success for his future Endeavour’s.

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CERTIFICATE

Certified that this project report entitled A study on Green accounting in Proctor & Gamble is a record of project work done independently by Ms. Shravasti Jain Under

my guidance and

supervision and that it has not previously formed the basis for the award of any degree, fellowship or associate ship to her.

MS. Shravasti Jain S.S.Jain Subodh P.G.College

Jaipur

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DECLARATION

I hereby declare that this project report entitled is A study on Green accounting in Proctor & Gamble a bonafide record of work done by me and that it has not previously formed the basis for the award to me for any degree/diploma, associate ship, fellowship or other similar title of any other institute/society.

Vineet Gangwal S.S.Jain Subodh P.G.College Jaipur

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ACKNOWLEDGEMENT It is not often in life that you get a chance of appreciating and expressing your feelings in black and white to thank the people who have been a crucial part of your successes, your accomplishments, and your being what you are today. I take this opportunity to first of all thank the Faculty at S.S. Jain Subodh P.G.College, especially Dr. K.B.Sharma, Principal, and Dr. Rita Jain for inculcating and instilling in me the knowledge, learning, will-power, values and the competitiveness and professionalism required by me as a management student. I would like to give special thanks to Ms. Shravasti Jain for educating me silver lining in every dark cloud. Her enduring efforts, guidance, patience and enthusiasm have given a sense of direction and purposefulness to this project and ultimately made it a success. Foremost with great respect and esteem, I wish to forward my deep sense of gratitude to Ms. Shravasti Jain for providing me the opportunity. Last but not the least; I would like to thank my family: my parents, for supporting me spiritually throughout my life. The errors and inconsistencies remain my own.

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CONTENT Chapter: 1 – Introduction

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 Introduction of Green Practices  Introduction of the company  Role of the environment professional

Chapter: 2 – Company Profile

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 Green Practices in P&G

Chapter: 3 – Research & Methodology

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 Define Research & Methodology  Objective of the Study  Methodology  Limitations of the study

Chapter: 4-Analysis and Interpretation

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 Swot Analysis  Financial Analysis  Market Analysis  Technical Analysis

Chapter: 5- Summary of Findings  Result of the Study  Conclusion & Recommendations  Scope of further Study  Suggestions  Reference 6

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Chapter-1 Introduction  Introduction of Green Practices Green Practices-A business functioning in a capacity where no negative impact is made on the local or global environment, the community, or the economy. A green business will also engage in forward-thinking policies for environmental concerns and policies affecting human rights.

The aforementioned “genetic” link of the green business ideology with that of sustainable development explains why it is often perceived – explicitly or implicitly – as being synonymous with the notion of “sustainable business”. For instance, Brown and Ratledge adopt quite a narrow definition of green business as “an establishment that produces green output” (Brown, Ratledge, 2011). Meanwhile, Makower and Pyke, in a broadbrush way, state that “a green Business requires a balanced commitment to profitability, sustainability and humanity” (Makower, Pyke, 2009). The Business Dictionary indicates that green business is “a business functioning in a capacity where no negative impact is made on the local or global environment, the community, or the economy”, and further adds that “green business will also engage in forward-thinking policies for environmental concerns and policies affecting human rights” (Business Dictionary, n.d.). Similarly, G. Croston states that “Green Businesses have more sustainable business practices than competitors, benefiting natural systems and helping people live well today and tomorrow while making money and contributing to the economy”. K. Slovik proposes an amalgamation of environmental sustainability demand with that of social responsibility: “A “green business” can be defined as an organization that uses renewable resources (environmentally sustainable) and holds itself accountable for the human resource aspect of their activities (socially responsible)”

 Introduction of the Company

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P

rocter & Gamble Co., also known as P&G, is an American consumer goods corporation headquartered in downtown Cincinnati, Ohio, United States of America, founded in 1837 by William Procter and James Gamble . It primarily specializes in a wide range of cleaning agents, personal care and hygienic products. Before the sale of Pringles to the Kellogg Company, its product portfolio also included foods, snacks and beverages. In 2014, P&G recorded $83.1 billion in sales. On August 1, 2014, P&G announced it was streamlining the company, dropping and selling off around 100 brands from its product portfolio in order to focus on the remaining 65 brands, which produced the bulk, i.e. 95%, of the company's profits. A.G. Lafley, the company's chairman, president, and CEO until October 31, 2015, said the future P&G would be "a much simpler, much less complex company of leading brands that's easier to manage and operate". David Taylor is the current president and CEO of Procter & Gamble.

Green Practices    

As the biggest food and consumer goods company in the world, P&G (formerly Procter & Gamble) have gargantuan environmental footprints. But the sheer size of this company also means that if they really carry through their sustainability visions, they have the power to bring about significant changes – from their own supply chain to consumer behavior. P&G have upped the ante on their sustainability ambitions in the past few months, seeing it as a central issue in growth plans. P&G – whose brands include Ariel, Gillette and Pringles – in September 2010. The company pledged to use only renewable or recycled materials in products and packaging, and stop all manufacturing and consumer waste going to landfill.

Two views of sustainability Peter White, P&G’s director for global sustainability, explains that the company has had a sustainability strategy since 1999, but this was boosted in 2007 when it added a specific principle incorporating sustainability into its products, packaging and operations to its mission statement. “Up until then it had always been the concept of doing the right thing, but in 2007 we used the ‘s’ word and put it specifically into the purpose, value and principles of the company,” he says. 9

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P&G sees sustainability in terms of business opportunity, not just responsibility to the environment. Sustainability can protect the business and save money, but can also help build the business through new products that save consumers money too, such as concentrated washing liquid, he explains. With the global population expected to grow to nine billion by 2050 and the corresponding rise in resource demand, the company needs to look for a new way to respond, she explains. “We’ve set ourselves a vision to decouple business growth from our environmental impact and really use sustainability as a key driver for our business growth.” Hamilton believes that Unilever’s plan is different to those of other corporations as it does not distinguish between various parts of the business or geographical locations, but covers all 400 of its brands in the 170 countries where it operates.

On target P&G have already made significant progress on previous targets. P&G said in 2007 that it would reduce energy, waste and CO2 by 20% by 2012. So far, White reports that energy and CO2 are down 14% and 11% respectively, while waste has been slashed by 50% and water reduced by 16%. Although the 20% target refers to each unit of production, rather than “absolute” or overall figures, P&G’s sustainability report reveals that it has achieved an absolute cut in all these areas.  

“P&G’s biggest energy footprint over the life cycle of a product is heating water to wash clothes. It’s very clear that the energy use in P&G plants is very small compared to that used in people’s homes.” In an effort to reduce their own environmental footprints, company are therefore targeting one of the most tricky issues of all – that of consumer behavior. P&G has developed Ariel Cool-Clean,

Making progress Of course, the difficulty with targeting consumer behavior change is how to measure progress. Government bodies and NGOs have also had campaigns to wash at lower temperatures, so it will be hard for P&G to claim that their product or campaign has had a significant effect. White admits that this is tricky, but that there are ways of sampling consumer behavior. “This is an area we can influence, but it’s also where we need to work with other partners in industry and stakeholders such as NGOs and government agencies.” 

P&G’s own data show that, in 2002, only 2% of the UK population were washing at 30°C or less, but by 2007, it was up to 27%. White is adamant that P&G can decouple growth from environmental impact despite the reliance of this particular ambition on changing consumer behavior.

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It has plans to run plants on renewable energy, ensuring the water that leaves its plants is as clean, if not cleaner, than that entering them and wants to see zero manufacturing waste going to landfill. P&G has more than 140 manufacturing plants globally so it will take some time to see these standards at all of them, but it has made a start. Last year it built its Milenio facility in Mexico, with more than one million square feet of manufacturing space. The water from this plant is 100% recycled, with wastewater and rooftop rainwater collected and treated by an on-site water-treatment plant. It is building 19 new plants over the next four years, all of which will use a 77-point tool that assesses sitting, transport, water and energy sources. Renewable-energy technology has been installed at several plants, including solar panels on a plant in Oxnard, California and a wind turbine at Coervorden in the Netherlands. P&G has also come up with ways of reusing waste substances produced in the manufacturing of its products. This has enabled it to achieve a 50% reduction in solid waste from manufacturing, against a target set in 2007 to reduce it by 20% by 2020. White says that P&G has achieved this through a very systematic approach. It has identified all waste material from each plant and worked out ways to use it. For example, the waste oil that comes from cooking Pringles is now sold to make biodiesel. Sludge and fibers left over from making paper are sold to a local construction company that makes low-cost roofing tiles. This makes business sense too, as previously the company had to pay for these waste products to be taken away. “This is industrial ecology essentially, you’re taking the negative away and providing a second value,” White says.

 Role of the environment professional A huge part of making a company sustainable is making sure all employees understand the aims of the strategy and work the principles into their job. P&G has environment professionals employed mainly in two areas of its business. A team of more than 700 employees works to ensure that products are safe for human beings and the environment, while site environment leaders head up sustainability programmers at its manufacturing sites. A global sustainability department leads overall development of its strategy. P&G also aims to spread the word throughout the company so that those employees whose job is not specifically related to the environment are on board. It publishes articles about sustainability on its intranet and has a sustainable ambassadors’ network. All employees who either work in sustainability, or have an interest in it, can link together virtually to share best practice and ideas of what solutions can be applied at site or project levels. There are around 500 ambassadors globally, White reports. The company marks annual Earth Day by asking all employees to make a personal pledge on how they are going to incorporate sustainability into their work, and has volunteer events where employees can get involved in local environmental projects.P&G also has a three-year 11

partnership with WWF to increase awareness and training on sustainability. Some employees, such as plant managers, have sustainability goals integrated into their incentive programme. “I think this is quite radical actually because we’re asking for an analysis on a quantitative level which gives us a view on whether people are moving innovations in the right direction,” Hamilton says. Outside those main teams of environment professionals, it has focused on the employees it considers most important in furthering the company’s sustainability vision. These are the scientists involved in research and development, the marketing team and the procurement managers who buy the raw materials. Company’s 10 product categories have a sustainability champion and it has a specialist team of agronomists who assist the procurement team. Environment professionals will be central to the companies’ focus on sustainability in years to come. With global population soaring, most companies’ business plans are aiming to expand to meet increased demand , P&G are no exception, despite warm words and ambitious targets.

Doing business 

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While White acknowledges that the anticipation of more environmental regulation in the future is a driver for P&G’s sustainability plans, he stresses that regulation merely sets the minimum acceptable standard. There are huge opportunities in going beyond the minimum, he believes. “By 2050 there will be nine billion people on the planet and we want to reach all of them,” White says. “We can only do that if we take a sustainable approach.”

International expansion The company moved into other countries, both in terms of manufacturing and product sales, becoming an international corporation with its 1930 acquisition of the Thomas Hedley Co., based in Newcastle upon Tyne, England. After this acquisition, Procter & Gamble had their UK Headquarters at 'Hedley House' in Newcastle upon Tyne, until quite recently. Numerous new products and brand names were introduced over time, and Procter & Gamble began branching out into new areas. The company introduced Tide laundry detergent in 1946 and Prell shampoo in 1947. In 1955, Procter & Gamble began selling the first toothpaste to contain fluoride, known as Crest. Branching out once again in 1957, the company purchased Charmin paper mills and began manufacturing toilet paper and other tissue paper products. Once again focusing on laundry, Procter & Gamble began making Downy fabric softener in 1960 and Bounce fabric softener sheets in 1972. One of the most revolutionary products to come out on the market was the company's disposable Pampers diaper, first test-marketed in 1961, the same year Procter & Gamble came out with Head & Shoulders. Prior to this point, disposable diapers were not popular, although Johnson & Johnson had developed a product called Chux. Babies always wore cloth 12

diapers, which were leaky and labor-intensive to wash. Pampers provided a convenient alternative, albeit at the environmental cost of more waste requiring landfilling

Operations As of July 1, 2016, the company structure has been categorized into ten categories and six selling and market organizations. 

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Categories  Baby Care  Fabric Care  Family Care  Feminine Care  Grooming  Hair Care  Home Care  Oral Care  Personal Health Care  Skin & Personal Care Selling & Market Organizations  Asia Pacific  Europe  Greater China  India, the Middle East, and Africa (IMEA)  South America  North America

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Chapter-2 Profile of the Company Neither William Procter nor James Gamble ever intended to settle in Cincinnati. Although the city was a busy center of commerce and industry in the early nineteenth century, William, emigrating from England, and James, arriving from Ireland, were headed farther west. Despite their intentions, however, both men ended their travels when they arrived at the Queen City of the West – William, to care for his ailing wife Martha, who soon died, and James, to seek medical attention for himself. William Procter quickly established himself as a candle maker. James Gamble apprenticed himself to a soap maker. The two might never have met had they not married sisters, Olivia and Elizabeth Norris, whose father convinced his new sons-in-law to become business partners. In 1837, as a result of Alexander Norris’ suggestion, a bold new enterprise was born: Procter & Gamble.

 Green Practices in P&G 2016

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P&G introduces Tide pure clean™—the first bio-based detergent (65% bio-based) with the cleaning power of Tide.

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With the help of our more than 150 partners, P&G delivered P&G's Children's Safe Drinking Water Program's 10 billionth liter of clean drinking water through our Children's Safe Drinking Water Program.

2015

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P&G achieves its energy goal four years ahead of schedule.

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P&G introduces Tide pure clean™—the first bio-based detergent (65% bio-based) with the cleaning power of Tide.

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With the help of our more than 150 partners, P&G delivered P&G's Children's Safe Drinking Water Program's 10 billionth liter of clean drinking water through our Children's Safe Drinking Water Program.

2014

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P&G achieves its energy goal four years ahead of schedule.

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P&G introduces Tide pure clean™—the first bio-based detergent (65% bio-based) with the cleaning power of Tide.

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With the help of our more than 150 partners, P&G delivered P&G's Children's 15

Safe Drinking Water Program's 10 billionth liter of clean drinking water through our Children's Safe Drinking Water Program.

2013

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P&G achieves its energy goal four years ahead of schedule.

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The P&G Children’s Safe Drinking Water Program was recognized by the U.S. Department of Commerce as a winner of a U.S. Patent and Trademark Office Patents for Humanity program award.

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The Company announced during Earth Week, that 45 P&G sites around the world had achieved zero-manufacturing-waste-to-landfill status.

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Our Gillette Venus packaging was redesigned for Venus & Olay to be recyclable and is manufactured using 26% less plastic.

2012

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P&G became a founding member of the Plant PET Technology Collaborative to accelerate use of plant-based PET materials.

2011

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P&G became a founding member of the Plant PET Technology Collaborative to accelerate use of plant-based PET materials.

2010

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P&G implemented Supplier Environmental Sustainability Scorecard to reduce environmental footprint across the supply chain.

2009

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New commitment made to provide a total of 4 billion litters of safe drinking water in order to help prevent 160 million days of diarrheal illness and save 20,000 lives.

2008

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Won Presidential Green Chemistry Award for Sefose molecule.

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P&G named to Global 100 Most Sustainable Corporations in the World.

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EPA awarded P&G’s Cincinnati corporate headquarters with the Energy Star Certification.

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P&G received the European Business Award honouring commitment to corporate sustainability.

2007

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P&G awarded the Ron Brown Award for Corporate Leadership.

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P&G recognized by EPA for Children’s Safe Drinking Water Program.

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New commitment made to provide 40 million maternal and neonatal tetanus vaccines to UNICEF. COMPLETED

2006

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New commitment made at Clinton Global Initiative to reach one million children 16

in school programs and provide 135 million litters of safe drinking water over three years. COMPLETED 

P&G was National Inventor of the Year for the design and development of purification sachets.

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Downy Single Rinse introduced, offering water savings in critical regions.

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P&G awarded Stockholm Industry Water Prize for providing safe drinking water.

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Downy Single Rinse introduced, offering water savings in critical regions.

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P&G awarded Stockholm Industry Water Prize for providing safe drinking water.

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Downy Single Rinse introduced, offering water savings in critical regions.

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P&G awarded Stockholm Industry Water Prize for providing safe drinking water.

2001

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FTSE4Good launched; P&G listed every year since inception.

2000

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P&G ranked as a Sector Leader in Dow.

1999

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P&G formed a corporate sustainability department and was one of the first

2005

2004 2003

companies to publish an annual sustainability report. 1997

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Developed the Geo-referenced Regional Exposure Assessment tool for European rivers.

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P&G developed Japan’s first environmental exposure model for consumer products.

1995

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P&G pioneered use of Life Cycle Assessment to design Municipal Solid Waste Management.

1993

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The first P&G Annual Global Environmental Report was produced.

1992

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Received the United Nations World Environment Centre Gold Medal.

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P&G moved to elemental chlorine-free pulp for all of the Company’s paper products.

1990

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P&G articulated its Company-wide environmental quality policy.

1989

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P&G committed $20 million to assist the development of U.S. compost infrastructure.

1987

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P&G environmental stream facility began operation.

1983

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P&G environmental stream facility began operation.

1981

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P&G co-founded the Society of Environmental Toxicology and Chemistry.

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1977

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P&G Environmental safety organization formed in Brussels.

1973

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Publication of the “Sturm Test,” the forerunner of the Ready Biodegradability Test.

1971

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The P&G Corporate Environmental Safety Department was formed.

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P&G Safety and Regulatory was established as a separate entity from product development.

1970

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P&G implemented its first manufacturing plant environmental audit.

1969

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Instream biological monitoring program began.

1965

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P&G published its 10th environmental safety paper to support new biodegradability test methods.

1964

1956

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Switch to biodegradable anionic surfactant LAS began.

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The P&G Environmental Water Quality Laboratory was established.

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The first environmental safety publication was created at P&G measuring surfactants in rivers.

1952

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The first environmental safety publication was created at P&G measuring surfactants in rivers.

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Chapter-3 Research & Methodology Research can be defined as “an activity that involves finding out, in a more or less systematic way, things you did not know” “Methodology is the philosophical framework within which the research is conducted or the foundation upon which the research is based”  Objective of the study

The objectives of this research are to 

Study the green practices of P&G

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To study and evaluate the green practices of P&G

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To Study the factors which influence the effectiveness of green practices in the company?

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To know the acceptance of the green practices by employees of the company.

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 Methodology Methodology is the systematic, theoretical analysis of the methods applied to a field of study. It comprises the theoretical analysis of the body of methods and principles associated with a branch of knowledge. The process used to collect information and data for the purpose of making business decisions. The methodology may include publication research, interviews, surveys and other research techniques, and could include both present and historical information. 

RESERCH DESIGN -The research design is exploratory and discursive in nature.

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Source –The source that have been used to analyses and fulfill the objectives are completely secondary based. The data sources studies include magazines, books and manuals, reports, journals, research papers, etc.

 Limitations of the study 

The survey is subjected to the bias of the respondents; hence 100% accuracy can’t be assured.

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The researcher was carried out in a short span of time, where in the researcher could not widen the study.

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The study could not be generalized due to the fact that researcher adapted personal interview method.

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The source use are secondary so it subject to change and need more analyses

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and

prejudices

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Chapter-4 Analysis and Interpretation

ANALYSIS OF P&G ON VARIOUS HEADS  

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SWOT ANALYSIS FINANCIAL ANALYSIS

MARKET ANALYSIS TECHNICAL ANALYSIS

 SWOT ANALYSIS “SWOT is an acronym for the internal Strengths and Weaknesses of a firm and the environmental Opportunities and Threats facing that firm. SWOT analysis is a widely used technique through which managers create a quick overview of a company’s strategic situation. The technique is based on the assumption that an effective strategy derives from a sound “fit” between a firm’s internal resources (strengths and weaknesses) and its external situation (opportunities and threats). A good fit maximizes a firm’s strengths and opportunities and minimizes its weaknesses and threats. Accurately applied, this simple assumption has powerful implications for the design of a successful strategy.” Procter & Gamble P&G is the world's largest consumer goods company that markets more than 300 brands in over180 countries. The company is engaged in producing beauty, health, fabric, home, baby, family and personal care products. The company's product portfolio also includes pet health products and snacks. The company's leading market position along with its strong brand portfolio provides it with a significant competitive advantage. However, slowdown in global

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economic condition is making it increasingly difficult for branded product manufacturers like P&G to maintain their sales volume and revenue growth.

Strengths 

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The large scale, on which the P & G operates, is one of its strengths. It is a global leader for different product categories like fabric, home, baby, beauty, health and personal care in many countries. Its three hundred products are sold in over one hundred and eighty countries. The strong branding of P & G makes it one of the most successful brands in the world. The company has a vast experience in oral and personal hygiene products as they are working since... Also, it has an extensive experience in marketing in different market segments and is one of the best marketers in the world. P & G is tightly integrated with some of the largest retailers in United States of America as well as world around. and around the world Distribution channels all over the world Gross profit margin of the company is 15 times the industry average P & G is known for its diverse brand portfolio. The company is able to customize its global products and brands according to the local preferences. P & G invests greatly in its research and development to. About $2 billion are invested every year by P & G for improving and introducing new products. The end-consumer understanding of P & G and its large database of consumers make its research and development strong.

Weaknesses

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Many of the top brands of P & G are losing their market share rapidly. In online media leadership and presence P & G is lagging behind. The beauty and health products by P & G are mostly for women. P & G does not make and offer any private label products for the retail customers and is, missing an opportunity. The large scale operation of the company makes the culture heavy and processes slow. This also leads to quality control problems. P & G does not divest its weak or poor brands. The major customers of P & G are located at some of the places and it concentrates heavily as them. 24

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When P & G acquired Clairol business in year 2001, it was unable to grow this business. The Clairol Herbal Essence brand failed to enter new markets as the market had access to better and innovative products. This shows weakness of P & G in the beauty care division.

Opportunities     

An opportunity for P & G is health and beauty products for men. With the acquisition of Gillette, the company now has several growth opportunities in this market segment. P & G has doubled its Environmental Goals for the year 2012 and thus, promises more value for the environment concerned customers today. Using the online social networks and internet marketing techniques is also an opportunity for P & G. Divest brands that are not in accordance or do not meet P & G's long-term goals. Company is constantly trying to pursue growth overseas.

Threats 

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There is a cut throat competition in the fast moving consumer's goods markets today. Companies like Kimberly Clark, Unilever, Johnsons & Johnsons and Colgate-Palmolive etc pose a serious threat to its market share in different countries. The competitors are making their product portfolios diverse day b day and using different marketing and promotional strategies to increase their market share. In the market many substitutes are available for P & G products at cheaper prices. The private label growth is also a serious threat to the P & G's market share. Due to recession, the consumer spending has decreased globally. Also, the prices for raw materials are increasing so cost to the company is increasing.

 FINANCIAL ANALYSIS STRATEGY They are focused on strategies that the right for the long- term health of the Company and will deliver total shareholder return in the top one-third of their peer group.   

The Company’s long-term financial targets are: Grow organic sales 1% to 2% faster than market growth in the categories and geographies in which they compete, Deliver earnings per share (EPS) growth of high single digits to low double digits, and Generate free cash flow productivity of 90% or greater. 25

In order to achieve these targets, they are prioritizing the strategies and resources that will make P&G more focused and fit to win over the near- and long-terms.

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Improving productivity and creating a cost savings culture They have taken significant steps to accelerate cost savings and create a more cost focused culture within the Company, including a five-year, $10 billion cost savings initiative, which was announced in February 2012. The cost savings program is based on: The reduction of approximately 5,700 non-manufacturing overhead positions by the end of fiscal year 2013. Approximately $1.2 billion in annual cost of goods savings across raw materials, manufacturing and transportation and warehousing expenses. Generating efficiencies to enable us to grow marketing costs at a slightly slower rate than sales growth while still increasing consumer reach and effectiveness, saving approximately $1 billion over the five year period Procter and Gamble: Still a Champion Blue-Chip Procter and Gamble (NYSE: PG) is a worldwide consumer products company, and one of the largest companies in the world. The company has grown its dividend for well over 50 years, and has a market cap of almost $190 billion. -Seven Year Revenue Growth Rate: 5.7% -Seven Year EPS Growth Rate: 4.7% -Seven Year Dividend Growth Rate: 11% -Current Dividend Yield: 3.28% -Balance Sheet Strength: Strong, but with Goodwill The returns have been positive since, PG dividend stock report from 2011 when called the stock fairly valued and a “hold”, but the company seems to have a diminished moat and lackluster growth prospects. Over the long-run, earnings will begin inching up and the rate of return will be positive, but they don’t view the current valuation as appropriate for the stock performance with a margin of safety. They would desire a 10% pullback or more to invest. OVERVIEW Founded in 1837, Procter and Gamble (symbol: PG) is now one of the largest companies in the world. They sell their products in over 180 countries and currently have a market capitalization of over $180 billion. The company is known as one of the most solid blue chip dividend stocks with the history of more than five decades of consecutive annual dividend growth and large product diversification. The company operates in numerous segments, as outlined below: Beauty With brands like Head and Shoulders, Pantene, and Olay, Procter and Gamble brings in 24% of its sales and 22% of its earnings from its beauty segment. Grooming 26

Another 10% of sales and 16% of earnings come from the grooming segment, which includes brands like Braun, Fusion, and Gillette. Health Care Procter and Gamble offers a number of feminine care, oral care, and symptom-care products, including Oral-B, Vicks, and Always. The company generates 15% of sales and 17% of earnings from this segment. Fabric/Home Care The company has a variety of brands like Duracell batteries, Tide detergent, and Febreeze air care, from which it generates 32% of revenue and 26% of earnings. Baby/Family Care Through brands like Bounty, Charmin, and Pampers, Procter and Gamble generates 19% of sales and 19% of earnings from baby and family care products. In terms of geographic exposure, 39% of sales come from North America, 19% come from Western Europe, 18% come from Asia, 14% come from Africa, the Middle East, and Central/Eastern Europe, and 10% come from Latin America.

Ratios Price to Earnings: 22 Price to Free Cash Flow: 22 Price to Book: 3 Return on Equity: 17%

REVENUE CHART

Sales grew at an annualized rate of 5.7% over this period, but over a more recent period, sales growth has been flat. The company has restated numbers which are not shown here, and those points to mild growth. In some ways, the chart is not quite as bad as it looks, because the company was actively divesting brands over this period, including selling the large Folgers coffee brand to Smackers, rather than focusing on growth. Still, investors are broadly and correctly unimpressed by Procter and Gamble’s performance over this period.

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Earnings and Dividends

In terms of earnings per share, the company grew at an annualized rate of 4.7%. However, earnings have declined over the later period as part of the cost-cutting. The company has stated that it targets high single digit EPS growth. When combined with a dividend yield of over 3%, that would mean long-term low double-digit returns. As far as the dividend is concerned, it currently yields 3.28% with a payout ratio of under 60%. The dividend has grown by a rate of 11% annually, and the most recent increase was 7%.

BALANCE SHEET Total debt/equity for the company is under 50%, and the debt/income ratio is under 3 xs. However, over 80% of the existing shareholder equity consists of goodwill. Much of PG’s growth was due to acquisitions. The interest coverage ratio is very solid, at over 17. Taking everything into account, Procter and Gamble has a rather strong balance sheet, with manageable debt levels, a high interest coverage ratio, and good investment grades. The only real downside to the balance sheet is the large quantity of goodwill, but overall, it’s in good shape.

INVESTMENT THESIS Procter and Gamble is the largest company in the world at what it does, and has 25 billion-dollar brands. The company’s goals, as stated in their most recent annual report, were for an organic sales growth rate of 1-2% above global market growth rates, earnings growth in the high single digits or low double digits, and for free cash flow to be 90% of earnings. The company has pursued a global growth strategy, and has achieved 23% compound annual sales growth in Brazil, 25% compound annual sales growth in Russia, 27% compound annual sales growth in India, and 17% compound annual sales growth in China, over the last 10year period. For example, if a company can achieve 2% annual volume growth and 3% pricing growth on that volume (basically in line with a standard inflation rate), then the revenue growth is around 5%. If a company then buys back 3% of its market cap in stock buybacks each year and net profit margins remain static, then EPS growth is in the ballpark of 8%. Add a 3% dividend yield, and P&G got a good investment on your hands.

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But if margins deteriorate, or volume growth halts, then the picture can change. In addition, if the valuation of the stock is too high, it drives down the dividend yield and reduces the number of shares that the company can repurchase, which in turn reduces the EPS growth rate. That’s something that not everyone realizes: that for a company that does buybacks, a high stock valuation results in a measurable reduction in EPS growth compared to if the stock valuation were low. Slow and profitable growth works great when the valuation is low enough to provide double-digit returns. For Procter and Gamble, they announced earlier in 2012 a plan to save $10 billion in operations by the end of 2016. Specifically, they call for $6 billion in savings on cost of goods (which comes out to around $1.2 billion per year), $3 billion in savings on overhead (reducing the number of employees, at about $600 million per year), and then $1 billion in savings from marketing, or around $200 million per year. To do this and keep the top line intact means that these savings can go towards dividends, buybacks, or strengthening the balance sheet.

RISKS Procter and Gamble faces commodity cost risk and global currency risk. More specifically, they operate in a highly competitive industry, and if consumers are looking to reduce spending, they can switch and have switched to private label products. Plus, other branded companies with overlapping products, like Colgate, can fight for market share. If the company doesn’t make good use of its advertising, maintain pricing power, and continue to grow global volume, then their earnings growth rate won’t match their target rate of high single digits or better per year.

 MARKET ANALYSIS Porter five forces competitive analysis for P&G

Threat of New Entrants  

P&G possess a significant amount of market share around the world. To compete P&G, A competitor must have a large sum of capital for heavy marketing and R&D.

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

Firms That Specialize in nice market could possibly become a threat to P&G corresponding business segment.

Power of Buyers:  P&G is heavily dependent on wall mart and its affiliates for generating a major part of its revenue.  High dependence upon Wal-Mart could reduce the bargaining power of P&G. Power of Suppliers  Supplier of P&G need key customer for profitable revenue generation and will have little bargaining power.  Rising interest rate and declining availability of credit ultimately should not affect P&G’s relationship with its suppliers.

Threat of Substitutes  

There are substantial no of substitutes for all of P&G’s product offerings, creating an intense competitive environment. In order to differentiate itself P&G must continue to provide new and innovative products to the customer.

Intensity of Rivalry  P&G has several strong competitors in different markets like AMWAY corporation, Colgate-Palmolive Company, Johnson & Johnson, Revlon, HUL among big and medium size competitors.  Switching cost in this industry is quite low. Main competitors:  HUL  KIMBERLY CLARK LIVER PVT. LTD.  JOHNSON AND JOHNSON

COMPETITORS ON THE BASIS OF PRODUCT

PRODUCT NAME

COMPETITORS NAME

Vicks

Amirtanjan Bam, Zandu Bam, Cold Snap, Pharma’o cold

Pantene

Sunsilk, Clinic Plus

Ariel

Surf Excel, Rin

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Whisper

Kotex, Stayfree

Pamper

Huggies, Snuggy Baby Diapers

STRENGTH IN STRUCTURE Global Business Units (GBUs) Focus on consumers, brands and competitors in India. They are responsible for the innovation profitability from their businesses. Market Development Organizations (MDOs) are charged with knowing consumers and retailers in each market. Global Business Services (GBS) utilizes P&G talent and expert partners to provide best-inclass business support services at the lowest costs. Lean Corporate Functions ensure ongoing functional innovation and capability improvement.

Business level   

Efforts to build competitive advantage Collaborative partnership and strategic alliance Distribution channel

Functional level strategy  Human Resources Strategy  R&D Technology Strategy  Marketing and Sales Strategy Value Chain Analysis Analysis of Primary activity P&G developed extensile economies from its scale of operations in finance, logistics, marketing, Research, new product development, technology innovation and other function. Inbound and Outbound Logistics P&G’s goal has been to create adaptive, reactive supply networks that will link together sales and supply processes, inside and outside the organization, to improve product availability.

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Operations P&G organized into 3 business units  Beauty  Health and well-being  Household care The operation group consists of market development organization and global business services Sales and Marketing  The company markets more than 300 brands over 180 countries  23 of these brands are categorized by P&G as billion dollar brands.  Majority of sales now coming from promotional events, pull systems of efficient distributors of consumer and industrial product. Services  P&G emphasis on its principal business call of providing its customers with right products at right place all the time. Analysis and Support Activity Firm Infrastructure:     

Integrity Passion for Winning Leadership Trust Ownership

Product R&D P&G has strong commitment to find the best researchers, and retain them with cultural design to reward success, stimulate learning, challenges compliancy and nurture innovation.

Human resources Strategy  

Hire the best Challenges of P&G people from day1 32

  

Business and functional leaders activity recruiters, Teach and Coach Plan careers Never Stop Learning

Top 10 Developing Markets: Maintaining the strong growth momentum they have established in developing markets is critical to delivering their near- and long-term growth objectives. They are focusing resources first on the markets that offer the greatest growth opportunity. They will assess the potential for further portfolio expansions beyond the top 10 developing markets based on the top- and bottomline growth progress of the core business.

 TECHNICAL ANALYSIS Innovation Wins Decades Innovation is the driving force behind their strategy, as it always has been at P&G. Their experience has proven that price promotion may win a quarter here and there, but innovation wins decades. There are many examples to prove this. Take their Laundry business in the U.K., for instance. In the late 1970s, there were competing hard just to defend and maintain our 35% market share leadership position. They stepped up their innovation efforts. In the three decades since, they have introduced a series of game-changing innovations such as Daz automatic detergent, concentrated liquid detergent, and most recently, Liquitabs. They now enjoy around a 50% share. P&G seen the same dynamic in Oral Care. In the 1990s, P&G lost their historical lead versus their top competitor because they simply out-innovated us. They stepped up their innovation game once again and delivered a string of product breakthroughs including Crest White strips, Crest Pro-Health, and Crest 3D White. P&G’s leadership of the U.S. Dentifrice category, which is now enabling us to expand these innovative products around the world. The investment continues to pay off. P&G currently have the strongest innovation and global expansion program in P&G history. They are globalizing products such as Gillette Fusion ProGlide, Crest 3D White, Laundry additives, and the Pampers thinness and absorbency upgrade. P&G also expanding successful marketing innovation such as the SHIKSHA education program in India, in which P&G contributes a brick to build a school for each pack of product purchased, or the Pampers “One Pack Equals One Vaccine” campaign with its focus on eradicating maternal and neonatal tetanus. The Old Spice “Smell like a Man, Man” campaign generated consumer excitement and demand that catapulted the brand to market leadership. P&G’s global sponsorship of the Olympic Games provides an outstanding platform for integrated, multi-branded commercial innovation.

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Today, an Innovation Council made up of three members from P&G and three members from Accenture meets regularly to understand the business needs and explore how new virtual reality technologies can help. Both Accenture and P&G harvest and share innovative ideas from within the team and across their respective organizations. P&G ultimately governs the program, and projects are prioritized on the technology readiness and business impact. Core Strengths P&G focuses on five core strengths required to win in the consumer products industry. They are designed to lead in each of these areas.

Consumer Understanding No company in the world has invested more in market research than P&G. They interact with more than five million consumers each year in nearly 100 countries. They conduct over 15,000 research studies every year, and invest more than $350 million annually in consumer understanding. The insights they gain help us identify opportunities for innovation and better serve and communicate with our consumers. Innovation P&G is widely recognized as the industry’s global innovation leader. Nearly all organic sales growth over the past decade has come from new brands or improved products. They collaborate with a global network of research partners, and more than half of all product innovation coming from P&G today includes at least one major component from an external partner. Their contributions have consistently helped us earn honors from the Symphony IRI New Product Pacesetters Report—the annual list of the biggest innovations in our industry. Over the past 16 years, P&G has had 132 products on the top 25 Pacesetters list—more than our six largest competitors combined. P&G earned 5th place among Fortune’s 2011 list of the World’s Most Admired Companies. And as of April 2011, P&G has won 22 “Product of the Year” recognitions, as voted on by consumers in the US, UK, France, Holland, Italy, Spain, and South Africa

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Chapter-5 Summary of Findings  Result of the Study

Quality, safety and the environment Our goal is to provide products and services that make a positive impact on our consumers. As a result, we strive to improve the environmental quality of our products, packaging and operations worldwide. To carry out our Environmental Quality Policy, we pledge to:  











Ensure our products, packaging and operations are safe for our employees, consumers and the environment. Reduce or prevent the environmental impact of our products and packaging through their design, manufacture, distribution, use and disposal. We're passionate about innovative, practical solutions to environmental issues related to our business. We support the preservation of resources and actively encourage reuse, recycling and composting. We also partner and offer assistance to others who may contribute to progress in achieving environmental goals. Meet or exceed the requirements of all environmental laws and regulations. We use environmentally sound practices, even in the absence of governmental standards. We also cooperate with governments in analyzing environmental issues and developing costeffective, scientifically based solutions and standards. Continually assess our environmental technology and programs, and monitor progress toward environmental goals. We develop and use state-of-the-art science and product lifecycle tests to assess environmental quality. Provide our consumers, customers, employees, communities, public interest groups and others with relevant and appropriate factual information about the environmental quality of P&G products, packaging and operations. Ensure every employee understands and is responsible for incorporating environmental quality considerations in their daily business activities. We encourage, recognize and reward individual and team leadership efforts to improve environmental quality—in and outside of work. Keep operating policies, programs and resources in place to implement our Environmental Quality Policy.

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 Conclusion & Recommendations The case highlights P&G's dedication and constant devotion to cling to the idea of sustainable development to ensure that the resources of the planet is not only enjoyed by us- the current generation, but the same can be equally shared with the coming generation as well. P&G has received external recognition for its approach to sustainable development. For the second year running P&G holds first place within the Dow Jones Sustainability Index ‘non durable household products’ group and reports its work annually under the Global Reporting Initiative (GRI) guidelines. This case study illustrates how P&G has innovated to develop a range of products and services that are helping to provide a better quality of life for everyone, as well as business opportunities for itself. It demonstrates that it is perfectly possible for companies that take environmental protection, social responsibility and economic development seriously not only to survive, but to flourish. Hence if P&G can take initiative to serve the world population, anyone can do achieve the true meaning of Sustainable Development. 

As it was mentioned in the case that P&G is contributing towards sustainable development in terms of economic development, better quality of life and improving standard of living. But most of the people are not aware of the fact that what efforts the company is making to improve globally sound.



Now, in order making people aware P&G should go for communicating to the world through marketing channels like advertisements, bill boards, newspaper and word of mouth.



P&G must focus on building more research and development centers across various cities in order to ensure better quality of life for everyone so that sustainable development can be achieved.



Using less energy, water, and materials when we make our products and requiring fewer resources when they are used in the home.



Increasing the use of sustainably sourced, renewable materials and renewable energy in P&G’s products and operations.



Identifying ways to eliminate waste at the end of life, so that all manufacturing and consumer waste has value through recycling, reuse, or conversion to energy.

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 Scope of further Study We are working toward our long-term vision of: 

Powering all our plants with 100% renewable energy



Using 100% renewable or recycled materials for all products and packaging



Having zero consumer and manufacturing waste go to landfills



Designing products that delight consumers while maximizing the conservation of resources

We have established specific goals to demonstrate we are making progress against our long-term vision. The table below updates progress against our goals.

Climate 

Reduce energy use at P&G facilities by 20% per unit of production by 2020. ACHIEVED



Reduce absolute greenhouse gas emissions by 2020 by 30%.



Ensure 70% of all washing machine loads are low energy cycles.



Reduce truck transportation kilometers by 20% per unit of production. ACHIEVED



Double use of recycled resin in plastic packaging.



Ensure plants are powered by 30% renewable energy.



Create technologies by 2020 to substitute top petroleum-derived raw materials with renewable materials, as cost and scale permit.



Ensure traceability of palm oil and palm kernel oil to our supplier mills by December 31, 2015, and to plantations by 2020 to ensure zero deforestation in our palm oil supply chain, with a commitment to working with small farmers.

Waste 

Have 100% of the virgin wood fiber used in our tissue/towel and absorbent hygiene products be third-party certified by 2015. ACHIEVED 38



Have 100% of our paper packaging contain either recycled or third-party-certified virgin content by 2020.



Reduce packaging by 20% per consumer use.



Conduct pilot studies in both the developed and developing world to understand how to eliminate land filled /dumped solid waste.



Zero Manufacturing Waste to Landfill.



Ensure 90% of product packaging is either recyclable or programs are in place to create the ability to recycle it.

Water 

Provide 15 billion liters of clean drinking water by 2020.



Reduce water use in manufacturing facilities by 20% per unit of production. ACHIEVED



Provide 1 billion people access to water-efficient products.

 Suggestions 

As it was mentioned in the case that P&G is contributing towards sustainable development in terms of economic development, better quality of life and improving standard of living. But most of the people are not aware of the fact that what efforts the company is making to improve globally sound.



Now, in order making people aware P&G should go for communicating to the world through marketing channels like advertisements, bill boards, newspaper and word of mouth.



P&G must focus on building more research and development centers across various cities in order to ensure better quality of life for everyone so that sustainable development can be achieved.



Using less energy, water, and materials when we make our products and requiring fewer resources when they are used in the home.



Increasing the use of sustainably sourced, renewable materials and renewable energy in P&G’s products and operations.

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

Identifying ways to eliminate waste at the end of life, so that all manufacturing and consumer waste has value through recycling, reuse, or conversion to energy.

 References WWW.PG.COM WWW.WIKIPEDIA.COM WWW.FMCG.COM WWW.PG.COM/EN_IN/

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