Proctor and Gamble 2008 Annual Report Download - page 47

Management’sDiscussionandAnalysis TheProcter&GambleCompany 45
higherthansegmentaverageunitsellingprices.Thismorethanoffset
theimpactofdisproportionategrowthindevelopingregions,which
havelowersellingpricesthanthesegmentaverage.Skincarevolume
wasupmid-singledigitsdrivenbygrowthonOlaybehindtheDenity
andRegeneristinitiatives.Ourglobalskincaremarketsharewasup
slightly,drivenprimarilybyabouta1pointincreaseinourU.S.market
share.Prestigefragrancesvolumewasuplow-singledigitsandorganic
volumewasuphigh-singledigitsbehindnewproductlauncheson
Dolce&GabbanaandHugoBoss.Retailhaircarevolumewasup
mid-singledigits,ledbyhigh-single-digitgrowthindevelopingmarkets.
Retailhaircarevolumeindevelopedregionswasatasadouble-digit
volumeincreaseonHead&Shoulderswasoffsetbyadouble-digit
volumedeclineonPanteneinNorthAmerica.Haircolorvolume
increasedlow-singledigitsasgrowthonNice‘NEasybehindthe
Perfect10launchmorethanoffsetdeclinesonothercolorbrands.
Professionalhaircarevolumedeclinedmid-singledigitsasgrowth
fromcolorwasmorethanoffsetbydeclinesincareandstyling.
Overall,globalhaircaremarketsharewasinlinewiththeprioryear
level.Volumeindeodorantswasdownlow-singledigitsprimarilydue
tocompetitiveactivityandmarketsoftnessinWesternEurope.
NetearningsinBeautyincreased5%to$2.7billionin2008asthe
impactofhighersaleswaspartiallyoffsetbyalowernetearnings
margin.Netearningsmarginwasdown60-basispointsaslowergross
marginandtheimpactofbaseperioddivestituregainsonminorbrands
morethanoffsetthebenetofalowertaxrateduetogeographic
mix.Grossmarginwasdownduetohighercommoditycosts,which
morethanoffsetthebenetofincreasedvolumescaleleverageand
manufacturingcostsavingsprojects.SG&Aincreasedslightlyas
highermarketingspendingasapercentageofnetsaleswaspartially
offsetbyloweroverheadspendingasapercentageofnetsales.
In2007,Beautynetsalesincreased7%to$17.9billionbehind4%
unitvolumegrowth.Volumegrowthwasdrivenbyinitiativeactivity
acrosscategoriesandcontinuedexpansionindevelopingregions,
wherevolumeincreasedhigh-singledigits.Prestigefragrancesvolume
wasupdouble-digitsbehindTheOne,BossSelectionandBossFemme
fragranceinitiativesandtheadditionofDolce&Gabbana.Skincare
volumewasuphigh-singledigitsbehindtheOlayDenityand
Regeneristproductinitiatives.Haircarevolumegrewmid-singledigits
asaresultofproductinitiativesonPantene,Head&Shouldersand
HerbalEssencesandcontinuedexpansionindevelopingregions.
Beautysalesbenetedfroma1%positivemiximpactprimarilydue
todisproportionategrowthinprestigefragrances,whichhasahigher
thansegmentaverageunitsellingprice.Thiswasoffsetbyhigher
levelsofpromotionalactivity,whichresultedinanegative1%pricing
impact.Favorableforeignexchangecontributed3%tonetsales.Net
earningsincreased8%in2007to$2.6billionprimarilybehindnet
salesgrowth.Earningsmarginincreased15basispointsprimarilydue
tolowerSG&Aasapercentageofnetsalesanddivestituregainson
severalminorBeautybrands,partiallyoffsetbythenegativemiximpact
fromlowerSK-IIshipments.SG&Aimprovedashighermarketing
spendingasapercentageofnetsalestosupportinitiativeactivitywas
morethanoffsetbyloweroverheadexpensesasapercentageofnet
salesresultingfromthebenetofvolumescaleleverageandGillette-
relatedsynergysavings.SK-IIshipmentsweredownin2007dueto
thesalesdisruptioninAsiaresultingfromthevoluntarytemporary
suspensionofSK-IIshipmentsinChinaearlyinthe2007scalyear.

   Changevs.  Changevs.
(inmillionsofdollars)  PriorYear 2007 PriorYear*
Volume  +5% n/a +36%
Netsales  +11% $7,437 +45%
Netearnings  +21% $1,383 +63%
*TheGillettebusinesswasacquiredonOctober1,2005.Therefore,thescal2007growth
ratesareversusabaseperiodthatincludedonly9monthsofGilletteGroomingresults.
Groomingnetsalesincreased11%to$8.3billionin2008.Netsales
wereupbehind5%volumegrowth,a7%favorableforeignexchange
impactanda2%positivepricingimpactdrivenbypriceincreaseson
premiumshavingsystems.Productmixhadanegative3%impacton
netsalesaspositiveproductmixfromgrowthonthepremium-priced
Fusionbrandwasmorethanoffsetbytheimpactofdisproportionate
growthindevelopingregions,wheresellingpricesarebelowthe
segmentaverage.Bladesandrazorsvolumeincreasedhigh-singledigits
behinddouble-digitgrowthindevelopingregionsdrivenprimarilyby
       Volume
      Volumewith Excluding
      Acquisitions Acquisitions Foreign   NetSales
NetSalesChangeDriversvs.YearAgo(2008vs.2007)    &Divestitures &Divestitures Exchange Price Mix/Other Growth

Beauty     2% 3% 6% 0% 1% 9%
Grooming     5% 6% 7% 2% -3% 11%

HealthCare     4% 4% 5% 1% -1% 9%
Snacks,CoffeeandPetCare     2% 2% 3% 3% -1% 7%

FabricCareandHomeCare     6% 6% 5% 1% -1% 11%
BabyCareandFamilyCare     4% 8% 4% 1% 0% 9%
     4% 5% 5% 1% -1% 9%
Salespercentagechangesareapproximationsbasedonquantitativeformulasthatareconsistentlyapplied.