Proctor and Gamble 2009 Annual Report Download - page 35

Management’s Discussion and Analysis The Procter & Gamble Company 33
Fiscal year 2010 changes to Global Business Unit structure
We recently announced a number of changes to our organization
structure for the Beauty GBU, which resulted in changes to the
components of its segment structure. Effective July 1, 2009, the
Beauty GBU will become the Beauty and Grooming GBU and
reportable segments under the GBU will move to a new consumer-
oriented alignment. The reportable segment formally known as
Beauty will become Female Beauty and the Grooming reportable
segment will change to Male Grooming. As a result, Female blades
and razors will transition from Male Grooming to Female Beauty. In
addition, certain male-focused brands and businesses, such as Old
Spice and Gillette personal care, will move from Female Beauty to
Male Grooming.
These changes will be reflected in our segment reporting beginning
in fiscal year 2010, at which time our historical segment reporting will
also be restated to reflect the new structure. The GBU and segment
discussions in the MD&A and accompanying Consolidated Financial
Statements reflect the organizational structure that existed through
June30, 2009.
GLOBAL OPERATIONS
Global Operations is comprised of our Market Development
Organization (MDO), which is responsible for developing go-to-market
plans at the local level. The MDO includes dedicated retail customer,
trade channel and country-specific teams. It is organized along five
geographic units: North America, Western Europe, Central & Eastern
Europe/Middle East/Africa (CEEMEA), Latin America and Asia, which
is comprised of Japan, Greater China and ASEAN/Australia/India/
Korea (AAIK). Throughout MD&A, we reference business results in
developing markets, which we define as the aggregate of CEEMEA,
Latin America, AAIK and Greater China, and developed markets,
which are comprised of North America, Western Europe and Japan.
GLOBAL BUSINESS SERVICES
GBS provides technology,processes and standard data tools to enable
the GBUs and the MDO to better understand the business and better
serve consumers and customers. The GBS organization is responsible
for providing world-class solutions at a low cost and with minimal
capital investment.
CORPORATE FUNCTIONS
CF provides the Company-level strategy and portfolio analysis, corporate
accounting, treasury, external relations, governance, human resources
and legal, as well as other centralized functional support.
Strategic Focus
P&G is focused on strategies that we believe are right for the long-term
health of the Company and will increase returns for our shareholders.
The Company’s long-term financial targets are:
ō Organic sales growth of 4% to 6%. This is comprised of:
– 3% to 4% of market growth, plus
–1% to 2% of share growth
º0% to 1% of mix enhancement and whitespace expansion, plus
º1% of growth acceleration behind revenue synergies associated
with the Gillette acquisition.
ō Operating margin expansion of 50 to 75 basis points.
ō Diluted net earnings per share (EPS) growth of 10%.
ō Free cash flow productivity of 90% or greater (defined as the ratio
of operating cash flow less capital expenditures to net earnings).
– Capital spending at or below 4% of net sales annually.
As a result of the recent global economic downturn, market growth
rates have slowed and for 2010 are expected to be below the
range that underpins our long-term financial growth targets. We are
continuing to monitor market growth and may reassess our long-
term targets in the future.
In order to achieve these targets, we will focus on three primary areas:
ō Grow our leading, global brands and core categories. Our
portfolio includes 23 brands that generate over $1billion in annual
sales and 20 brands that generate approximately $500million or
more in annual sales. Combined, these 43 brands account for 85% or
more of our sales and profits. These brands are platforms for future
innovations that will drive sales growth, expand categories for
retail customers and differentiate brands in the minds of consumers.
Our core categories, Baby Care, Blades and Razors, Fabric Care, Family
Care, Feminine Care, Home Care, Oral Care, Prestige Fragrances,
Retail Hair Care and Skin Care, have opportunities for continued
growth. We will focus on profitable share growth across all of our
businesses by leveraging our core strengths in innovation and
brand-building.
ō Build business with underserved and unserved consumers. We
are increasing our presence in developing markets, where 86% of
the world’s population lives. We will increase the amount of sales
from these markets by focusing on affordability, accessibility and
awareness of our brands. We are extending our distribution systems
to reach more consumers through underserved retail channels such
as e-commerce and high frequency stores. And, we are creating a
broader and deeper product portfolio. Our initiative pipeline has new
and improved products that extend and strengthen our category
and brand portfolios vertically and horizontally.