THE WINNING GAME STRATEGY AT PROCTER & GAMBLE

Procter & Gamble seems to be leaving rivals in the dust as they employ new strategies for their products.

The company reported Tuesday that organic sales (sales minus currency moves and portfolio changes) rose 7% from a year earlier, an excellent growth report, (ref WSJ).    Kimberly-Clark reported a respectable 4% growth, but U.K.’s Reckitt Benckiser (makers of Woolite, Lysol and others) reported just 1.6%.  Part of the difficulty at that company has been the $17 billion acquisition of Mead Johnson in 2017, which saddled them with a baby food business without previous experience in that arena and the integration difficulties that accompany such an acquisition.  In speaking about P&G’s success, CFO Jon  Moeller proclaimed that the company’s sales growth was the payoff for past investments in product quality, packaging, marketing and retail execution.  You see – we knew that it could be done – with a little bit of dedication and imagination, plus some devoted expenditures that weren’t just aimed at acquisitions posited as the great hopes for the future.   Interestingly, Reckitt’s new CEO criticized the company’s prior management for failing to invest sufficiently in all the areas where P&G did. P&G also managed to prune its portfolio by selling its Clairol line to Coty, while keeping its higher-end brands like Olay and SK-II which are now leading in the Japanese and Chinese markets. The Journal reports that a few years ago, these three companies all traded at similar valuations.  Now, P&G is valued at 25 times forward earnings, while it’s 18 times FEs for Kimberly-Clark, and 17, for Reckitt.  The takeaway, with which we concur, is that “only the most focused companies, willing and able to sped on innovation, quality and marketing, can prosper.”  Hear, hear!

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