ProgCast - JULY 2010  

P&G's Skin Care Line Strategies - Selected Highlights From A 2010 Face and Body Conference Trends Track Presentation (July 18, 2010)

"Masstige" is displacing prestige products, as consumers opt for "budget beauty" alternatives. The opening session of the Trends Track presentations at the 2010 Face & Body Conference delivered case study and market research findings that described consumer demand, industry responses, and market growth.[1] 

Streamlined product offerings and tiered pricing are two of the short-term changes manufacturers have implemented to weather tough economic times. Over the long-term, however, innovation generates the greatest rewards. Procter & Gamble (P&G; Cincinnati OH) was highlighted as an example of how such strategies can be successfully integrated.  Retail re-pricing has helped the Olay line ($8.49 to $62.00) meet a range of consumers' needs, while P&G's re-positioning tactic has resulted in a high-end mass brand that appears to be eroding department store products' market share.

A detailed review of financial results and the R&D component ("innovation factor") provide a mixed message. For the first nine months of fiscal 2010 (through March 31, 2010), P&G reported net "Beauty" sales of $14.8 billion compared to $14.5 billion for the same period in 2009. "Grooming" net sales remained stable ($5.7 billion).

On the other hand, P&G's corporate Research and Development (R&D) investments fluctuated slightly, from $2.1 billion in 2007 to $2.2 billion in 2008 and $2.0 billion in 2009. Sales, General, and Administrative (SGA) expense (which includes R&D) is trending upward (from approximately $5.2 billion during the third quarter of fiscal 2009 to nearly $6.0 billion in the third quarter of 2010). Full-year results in the next annual report may give us a clearer picture.

[1] "Trends That Affect The Skin Care Industry," Phil Fox, Euromonitor International, 2010 Face & Body Conference, July 17, 2010.