Procter & Gamble (
) is the world's largest personal care and consumer products
company recently posted a 6.8% decline in FY 2010-11 first quarter
earnings. It competes with
), Clorox (
) in the consumer products businesses and companies like
), Avon (AVP) and Estee Lauder (EL) in the
personal care and beauty segments.
Continuing high levels of unemployment and a difficult economic
environment have weighed on the company's US earnings, which is its
largest market.Declines in disposable income levels have led
consumers to shift their purchases to lower-priced products in
products such as detergents and oral care according to the
The two biggest products segments within Procter & Gamble -
Detergents & Household Cleaning Products, and Gillette
(Grooming segment) contribute close to 24% and 17% to our $84
Trefis price estimate of Procter& Gamble.
Market Share Gains On the Way
With decline in disposable income levels, consumers in general
have traded to lower priced products. This is highlighted by a 4%
organic growth (excluding the impact of foreign exchange and
acquisitions/divestitures) in net sales, which is well behind the
8% growth in volumes. However, the market share data reveals a more
robust strategy in play and a promising outlook for Procter &
Gamble. As per the latest quarterly reports, Procter & Gamble's
market share increased in 13 of the top 17 countries.
Growth in Emerging Markets
While Procter & Gamble continues to expand its consumer base
to realize it goal of reaching an additional one billion consumers
by 2014-15 by expanding into emerging markets of India, China and
Brazil, it in no way has lost focus of its core US market.
The US share of total business within Procter & Gamble's
portfolio declined from 41% in 2009 to 38% in 2010, but this was
primarily on account of double-digit growth in emerging markets. It
has been expanding its market share in the developed markets, which
currently have lower value growth but present an equally promising
upside with recovery in macroeconomic conditions. Offering lower
priced products to consumers has maintained a robust growth in
volumes thereby gaining market share during the recessionary
We estimate that despite a continuing difficult macroeconomic
outlook in the US, a rise in market share in the two largest
products segments - Detergents & Household Cleaning Products
and Gillette (Grooming segment) in the developed markets alone
could lead to upside to our current Trefis price estimate.
You can view our detailed analysis of
$84 Trefis price estimate of Procter & Gamble'