Proctor and Gamble 1999 Annual Report Download - page 21

The Procter & Gamble Company and Subsidiaries 17
Unit volume in the beauty care sector grew
1% during the year, led by cosmetics and
fragrances, on the basis of the launch of Oil of
Olay Cosmetics; and deodorants, behind a
strong performance by Old Spice and the intro-
duction of Secret Platinum. The introduction of
Oil of Olay Cosmetics exceeded expectations and
resulted in strong share performance. Net earn-
ings for the sector increased versus the prior year,
behind the success of a strategic pricing and
initiative platform, partially offset by higher
marketing costs for new product introductions as
well as competitive defense in the hair care cate-
gory. In 1998, unit volume gains were driven by
hair care and deodorants. Earnings progress in
1998 was driven by the skin care and personal
cleansing and cosmetics and fragrances categories,
partially offset by spending against intense
competition and for product initiatives.
The food and beverage sector experienced a
5% unit volume decline in the current year, due to
competition in the snacks market and divestitures.
In addition, the June 1998 launch of Fat Free
Pringles created pipeline volume in the last fiscal
year, depressing the current year comparison.
Coffee performed well as a result of commodity-
based price decreases, which were passed on to the
consumer. Excluding the impact of acquisitions
and divestitures, volume was up 1%. Current year
sector earnings were negatively impacted by the
loss of profit contribution from divested brands
and lower volumes. In 1998, unit volume growth
was led by the snacks category, behind the launch
of Fat Free Pringles. In the prior year, sector earn-
ings were negatively affected by the Duncan Hines
divestiture and by investments in new initiatives.
EUROPE, MIDDLE EAST AND AFRICA REGION
Results in the Europe, Middle East and Africa
region were mixed, as progress on cost control,
premium products and improved pricing were
partially offset by impacts from the financial crisis
in Russia and neighboring countries.
The region was able to hold sales flat at
$11.88 billion, despite a 3% decline in unit vol-
ume. Volume declines were driven by the Russian
economic crisis and competitive activity, primarily
in laundry and hair care. Sales outpaced volume
due primarily to improved pricing. During the
prior year, sales increased 2% to $11.84 billion,
which trailed the 8% unit volume growth rate due
to unfavorable exchange rate impacts.
The region’s net earnings progress continued
in the current year, growing 11% to $1.21 billion.
Net earnings in 1998 were $1.09 billion, a 14%
increase over 1997. Current year earnings growth
was driven by contributions from premium prod-
uct introductions, pricing strategies and cost
reductions, which more than offset the negative
impacts in Russia. Progress in the net earnings
margin also continued, increasing to 10.2% in the
current year, up from 9.2% and 8.3%, in 1998
and 1997, respectively. Importantly, margins in
Western Europe reached their highest levels, as
the region continued to focus on developing even
more productive relationships with customers.
Middle East, Africa and General Export,
which includes the region’s snack business,
increased unit volume 9% over the prior year
base period, which generated a double-digit
increase over 1997. Increased snack sales across
the region and expansion of core categories into
developing markets drove volume gains.
Although volume fell off the high rate of growth
achieved in prior years, unit volume improve-
ments were notable in the midst of weak oil
markets and political uncertainty in the area.
Prior year results were also fueled by snack sales.
Earnings in 1999 improved ahead of volume,
behind cost reductions and economies of scale.
Western Europe unit volume decreased
2%, reflecting divestitures of non-strategic local
beauty care and juice brands, and strong compet-
itive activity in laundry and hair care. Sunny
Delight continued performing well in its first full
year after launch, achieving a tie for the number
two position in the United Kingdom soft drinks
market during the last half of the year. Net earn-
ings increased in the double digits due to cost
savings, efficiencies in promotional spending and
pricing. In the prior year, volume also grew
behind the acquisition of Tambrands. Prior year
earnings were boosted by volume increases, cost
savings and lower tax rates, partially offset by
increased promotional spending.
2,253
2,474
2,710
’97 ’98 ’99
NORTH AMERICA
NET EARNINGS
Millions of Dollars
11.6
11.8
11.9
’97 ’98 ’99
EUROPE, MIDDLE EAST
AND AFRICA NET SALES
Billions of Dollars
956
1,092
1,214
’97 ’98 ’99
EUROPE, MIDDLE EAST
AND AFRICA
NET EARNINGS
Millions of Dollars