Proctor and Gamble 2002 Annual Report Download - page 13

Retailers as Partners and Competitors
The second “new reality” is the changing nature of retailing. Increasingly, we have a dual
relationship with retail customers: we are strong partners and sometimes competitors.
In concept, the need for tighter relationships between manufacturers and retailers is obvious:
we both serve the same consumer, we both want to build consumer loyalty to our brands,
we’re both trying to grow sales faster and more profitably. But, in practice, retailers and
manufacturers can work at cross purposes. Energy, resources and time that could be devoted to
creating a delightful “first moment of truth” shopping experience can be spent in unproductive
discussions over shelf space, pricing, discounts and terms.
Together with retail partners, we are working hard to change this practice. For example, we
know consumers are often frustrated when buying hair care products. They find it hard to
locate everything they want and are often left confused and searching for product information.
We’re working with more than 30 retailers to enhance the performance of their hair care
departments. We’ve simplified the shopping experience, provided more consumer education
and made it easier for consumers to find and ultimately use the products that best meet their
needs. Shoppers are spending half the time finding products and more time in the aisle
browsing and discovering products – all of which leads to increased volume, sales and profits
for P&G and our retail partners. These changes are delivering department growth ranges
between 10% and 44% for retailers and P&G.
Retailers are sometimes competitors as well as partners. Their own brands are growing as the
retailers, themselves, grow. Private labels or store brands strive to match innovation quickly and
try to present a compelling value alternative in many categories. This is healthy, in my opinion.
It requires that we continue to lead innovation and to price P&G products competitively.
Further, the growing strength of store brands underscores the importance of always being the
#1 or #2 brand in any category. Brands that can’t maintain this leadership stature will find it
difficult to compete effectively with the best store brands. Based on our internal global share
measures, we have the #1 or #2 brand in 17 of our 19 key global categories – categories that
account for about 70% of sales and earnings. P&G is in a strong position, and ready to become
an even better retail partner.
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