Proctor and Gamble 2011 Annual Report Download - page 43

Management’s Discussion and AnalysisThe Procter & Gamble Company 41
Net Sales Change Drivers vs. Year Ago (011 vs. 2010)
Volume with
Acquisitions
& Divestitures
Volume
Excluding
Acquisitions
& Divestitures 
Foreign
Exchange Price Mix/Other
Net Sales
Growth
Beauty 4%4%1%0%-2%3%
Grooming 3%3%0%2%0%5%
Health Care5%5%0%0%0%5%
Snacks and Pet Care1%-2%1%-1%0%1%
Fabric Care and Home Care7%5%-1%0%-2%4%
Baby Care and Family Care8%8%-1%1%-2%6%
TOTAL COMPANY6%5%0%1%-2%5%
Net sales percentage changes are approximations based on quantitative formulas that are consistently applied.
Net sales increased 3% in 2010 to $19.5billion on unit volume growth
of 3%. Price increases added 1% to net sales growth as earlier price
increases taken in developing regions to offset currency devaluations
more than offset price reductions in Hair Care. Unfavorable geographic
mix reduced net sales 1% due to disproportionate growth in develop-
ing regions, which have lower than segment average selling prices.
Organic sales were up 3% on a 4% increase in organic volume. Volume
growth was driven by high single-digit growth in developing regions,
with developed region volume in line with the prior year. Hair Care
volume grew mid-single digits behind growth of Pantene, Head&
Shoulders and Rejoice primarily in Asia and Latin America. Global share
of the hair care market was in line with 2009. Female Beauty volume
was up low single digits as higher shipments of female skin care and
personal cleansing products in developing regions were partially offset
by the discontinuation of Max Factor in North America, the fiscal 2009
divestiture of Noxzema and volume share losses on non-strategic
personal cleansing brands in developed regions. Salon Professional
volume was down double digits mainly due to the exit of non-strategic
businesses and continued market contractions. Prestige volume declined
low single digits due to continued contraction of the fragrance market.
Net earnings increased 2% in 2010 to $2.7billion driven by net sales
growth, partially offset by a 20-basis point reduction in net earnings
margin. Net earnings margin declined due to higher SG&A as a
percentage of net sales, the impact of divestiture gains in the prior
year and a higher tax rate, partially offset by gross margin expansion.
SG&A as a percentage of net sales was up due to increased marketing
spending and higher foreign currency exchange costs. The tax rate
increase was due to a shift in the geographic mix of earnings to
countries with higher statutory tax rates. Gross margin expansion was
driven primarily by price increases and manufacturing costs savings.
GROOMING
($ millions) 2011
Changevs.
Prior Year 2010
Changevs.
Prior Year
Volume n/a +3% n/a +1%
Net sales $8,025 +5%$7,631 +3%
Net earnings $1,631 +10%$1,477 +9%
BEAUTY
($ millions) 2011
Changevs.
Prior Year 2010
Changevs.
Prior Year
Volume n/a +4% n/a +3%
Net sales $20,157 +3% $19,491 +3%
Net earnings $2,686 -1%$2,712 +2%
Beauty net sales increased 3% to $20.2billion on unit volume growth
of 4%. Organic sales also grew 3%. Mix negatively impacted net sales
by 2% behind disproportionate growth in developing regions, which
have lower than segment average selling prices, and declines in the
premium-priced Prestige Products and Salon Professional categories.
Favorable foreign exchange positively impacted net sales growth by 1%.
Volume in developing regions increased double digits, while volume
in developed regions declined low single digits. Volume in Retail Hair
Care grew mid-single digits behind growth in all regions except North
America. Developing regions grew double digits behind initiative activity
on Pantene, Head & Shoulders and Rejoice, distribution expansions
and market growth, which were partially offset by a mid-single-digit
decline in North America due to competitive activity. Global market
share of the hair care category was up slightly. Volume in Female
Beauty was up low single digits primarily due to higher shipments of
Olay, Venus and Safeguard behind initiative activity, and distribution
expansion and market growth in developing markets. Volume in Salon
Professional was down high single digits mainly due to the planned exit
of non-strategic businesses and market size contractions in developed
regions. Volume in Prestige Products declined low single digits primarily
due to the divestiture ofminor brands and lower shipments in Western
Europe. Excluding the minor brand divestitures, volume increased low
single digits due to growth of Dolce & Gabbana and Gucci fragrance
brands behind initiative activity.
Net earnings decreased 1% in 2011 to $2.7billion, as higher net sales
were more than offset by a 60-basis point decrease in net earnings
margin. Net earnings margin decreased due to gross margin contraction
and higher SG&A as a percentage of net sales. Gross margin decreased
primarily due to an increase in commodity costs, partially offset by
manufacturing cost savings and pricing. SG&A as a percentage of net
sales increased due to higher marketing spending, partially offset by
lower overhead spending as a percentage of net sales and reduced
foreign currency exchange costs.