Comment on revenue, profit and loss of key industry players

Revenue

Procter & Gamble is the company with the greatest revenue compared to its closed competitors. This company is generating significant revenues through licensing some of its brands and technologies to other firms. Procter & Gamble net revenue was of $9.8 billion over its trailing twelve months. Kimberly-Clark revenue over its trailing twelve months was of $ 1.5 billion. Johnson and Johnson revenue over its trailing twelve months was of $9.6 billion. The last company operates mainly in the health sector but has an assortment of family care, grooming and hygiene products to challenge Procter & Gamble and Kimberly-Clark.

Unilever has well balance sources of revenue. One third of its revenue comes from Europe. The second third comes from North and South America. The other third comes from Africa and Asia including Russia. 46% of Unilever’s revenue comes from developed countries and 56% comes from developing and emerging nations.

Profit

The gross profit margin for Johnson & Johnson is really high at 72.40%. Regardless of this company high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, Johnson and Johnson net profit margin of 1.30% is significantly lower than the same period one-year prior.

Unilever’s operating profit in 2011 was 6.4 billion Euros ($8.4 billion), up from 6.3 billion Euros ($8.3 billion) in 2010. Unilever's underlying operating margin for 2011 was 14.9 percent, down slightly from 15 percent in 2010. This decrease can be caused in part by inflation and the depressed consumer demand seen in developed countries.

Loss

Unilever shares fell 1.9 per cent to £20.50 being the number four company in the list of biggest fallers.

Avon’s North American sales fell 20 percent to $2.11 billion last year from 2007. The decline pushed the North American unit to an operating loss in 2011. The company is worth only  $8 billion today, down from $21.8 billion in June 2004. People say that the caused of this can be Avon’s direct sales model because in these days most Americans buy their cosmetics in stores.

Sources:

http://www.ft.com/intl/cms/s/0/4f271830-5ebe-11e1-a087-00144feabdc0.html#axzz1ppJqNXy4

http://seekingalpha.com/article/424031-procter-gamble-buy-now-for-profits-in-2013

http://www.thestreet.com/story/11460324/1/johnson-johnson-stock-downgraded-jnj.html

http://seekingalpha.com/article/444321-is-it-time-to-ditch-kimberly-clark

http://seekingalpha.com/article/439771-unilever-is-doing-interesting-things

http://www.chinadaily.com.cn/cndy/2012-03/16/content_14845685.htm

http://today.msnbc.msn.com/id/46761188/ns/today-money/#.T2riycxh57w

Which companies are sharing good news in their financial reporting?

Which companies are sharing good news in their financial reporting?

Procter & Gamble, Avon, Unilever, and L’Oreal are all companies sharing good new in their financial reports. Some highlights examined in the income statement and balance sheet of these companies show: low cost of sales, high shareholder equity, and increased debts.

Low Cost of Sales

Avon’s cost of sales are low while revenue remains high, expressing increased profits. The same can be said for P&G, who have record high net sales and comparatively low sales cost. Investors might want to pay close attention to L’Oreal, however. Currently, L’Oreal reports a negative cost of sales. This can be attributed to the fact that L’Oreal owns most of the supply chain thus the cost of sales comes from within the company itself. This is a great company to invest in because as a result of no cost in sales, total profits are very high and contributes to the high shareholders’ equity.

High Shareholder Equity

Shareholder equity is very important when considering investing. As you look at the income statement, comparing the shareholders’ equity to see if it is increasing or decreasing can make or break an investment deal. P&G has one of the best shareholder equity. In the last two years the equity has gone up over 10,000, as scaled on the income statement. Similarly, Unilever’s basic share earnings are 1.51 compared to two years ago when it was 1.21. The expansion of the companies in different countries brings in more revenue allowing the stock to increase giving more benefit to the shareholder. This same expansion that allows higher equity, however, is a factor in debts increasing that occurs in many of these companies.

Increased Debts

Increased debts may seem like an immediate turn-off to investors but learning why the debts are going up is important to look at. The main reasons debts in these companies are due to extensive improvements being made within the industry, which is positive. In regard to Avon, debt increased from 808,000 to 850,000. This may seem like a large increase but cash assets are up and the cost of raw materials are down. Additionally, land and building improvements are being made, expressing where the debt money as result of. Unilever’s overall debt is up but many of the short-term debts are being paid back and liabilities associated with assets held for sale account for other debts but will soon be gone as the assets are sold. L’Oreal has accumulated more debt because of an increase in employee retirement obligations and related benefits. This shows that L’Oreal not only observes its employees as assets but also ensures their benefits. Overall, despite the increase in debt the reasons are beneficial to the company thus encouraging other to invest.

Sources:

http://www.loreal-finance.com/_docs/us/2010-annual-report/LOREAL-2010-AR-volume2.pdf

http://finapps.forbes.com/finapps/jsp/finance/compinfo/IncomeStatement.jsp?tkr=avp&period=qtr

http://finapps.forbes.com/finapps/jsp/finance/compinfo/FinancialIndustrial.jsp?tkr=avp&period=qtr

http://www.pginvestor.com/phoenix.zhtml?c=104574&p=irol-fundIncomeA

http://www.pginvestor.com/phoenix.zhtml?c=104574&p=irol-fundBalanceA

http://www.unilever.com/images/consolidatedincomestatementAR11tcm13282765.xlsx

http://www.unilever.com/images/consolidatedbalancesheetAR11tcm13282761.xlsx

How has the recession (2008-2009) affected companies’ balance sheets?

In the Household and Personal Products industry, we see a wide range of products at a variety of prices. As a result, when the recession hit, we see a loss of profits and net income in the big brands. For this post, we will be looking at P&G and Clorox. These two companies sell similar products, have recognizable brand names, and are easily comparable.

P&G


2008 Report | 2009 Report |

First, looking at the the years 2008 and 2009, we see a few differences. First, looking at the assets, we see that in cash assets, P&G has increased them by about $1,000. Meaning that from 2008, they have gone from about $3,000 to about $4,000. In the same on the balance sheet, we see an decrease in inventories. Overall, total inventories decrease from $8,000 to $5,000 in that one year period. This is fairly important, because P&G is a distributor of their own products. Which means that if their inventories are decreasing, they might be trying to scale back. When we look at total current assets, largely because of this huge decrease, we see that current total assets have gone from $24,000 to $21,000. Another telling factor of the recession is in the decrease in property, plants, and equipment. Overall, it decreased by about $2,000, which could be worse. But since P&G owns quite a few plants, the fact that they may have had to sell some or have lost them affects their overall output. Finally, when we look at their total assets, there is a decrease of almost $10,000.

When we start looking at losses, one of the most telling factors is the fact that debt due within one year has gone from $13,000 to $16,000. This means that P&G is borrowing more, but when you look at total current liabilities from 2008 to 2009, they have stayed fairly consistent. Additionally, long term debt has gone down from P&G, which is overall better for the company. So even though the assets for P&G had decreased to respond to the recession and it appears that they are borrowing more, the company is trying to keep risk low.

Clorox Company


2009 Report


Much like P&G, we see a decrease in assets and liabilities. However, this one is not nearly as telling as P&G's report. Instead of a $10,000 loss, we see a lost of about $200. This is likely resulting from the fact that Clorox is simply not as big as P&G and thus has less to lose. From 2008 to 2009, there is about a $8 decrease in cash assets. Furthermore, their inventory decreases from $384 to $366. This means that like P&G, Clorox is scaling back on their inventory. When we look at Clorox's property, plants, and equipment, it remains fairly consistent from 2008 to 2009, with only about a $5 decrease. This means that even though they may be scaling back inventory production, they aren't closing very many plants.

When we start looking at liabilities, we first see a drop in notes and loans payable from $755 to $421. What this tells me is that the company is paying off their debts. On the other hand, just below, we see that long-term debts owed within the years goes up $500 from the nothing that was last year. So even though we see the company trying to pay off some of it's debts, it has long-term debt to account for. Clorox has reported a $300 increase in total current liabilities, which means that even as the company is scaling back slightly, they are still gaining debt. Total liabilities, on the other hand, have decreased about $300. This is likely due to the decrease in long-term debt. Clorox during the recession was basically trying to scale back production while simultaneously paying off more debt.

• What are some current events in your industry? What is the impact of these events on the industry?

P&G’s largest consumer market has always been the middle class, but with the recent recession the mass of the middle class market has begun placing growing emphasis on price and value. This change in consumer priorities has forced P&G, who has one of the largest consumer markets for household goods, to change the way it develops and sells food.  For the first time in 38 years, for example, the company launched a new dish soap in the U.S. at a bargain price.  A wide swath of American companies is convinced that the consumer market is bifurcating into high and low ends and eroding in the middle. They have begun to alter the way they research, develop and market their products. Because of this effect entities such as Citigroup, has urged investors to focus on companies best positioned to cater to the highest-income and lowest-income consumers. Calling the phenomenon of the squeezing out of the middle class, the “consumer hourglass theory”. Companies selling high-end products, for example Tiffany & Co, neiman and marcus, and so on have been hiking up prices to compensate for its diminishing middle-class consumer market, while bargain stores have been creating more low priced goods in order to keep up with the growing demand of the budgeting middle-class. During the early stages of the recession, P&G executives defended its long-time approach of making best-in-class products and charging a premium, expecting middle-class Americans to pay up. But cash-strapped shoppers, P&G learned, aren't as willing to splurge on household staples with extra features. Droves of consumers started switching to cheaper brands, slowing P&G's sales and profit gains and denting its dominant market share positions. In late 2008, unit sales gains of P&G's cheaper brands began beating out more high-end lines, though they received far less advertising. As the recession continued to weigh on U.S consumers, U.S. market-share gains for P&G's cheaper Luvs diapers and Gain detergent increased faster than its premium-priced Pampers and Tide brands. At the same time, lower-priced competitors stole market share from some of P&G's biggest brands. P&G’s compensation strategy for the change in the consumer market, is to respond the in the increase in the income gap by creating specific high-end goods, at steep prices, along with better developing their bargain brands.

What is the competitive landscape of this industry in the USA?

Mainly the largest American companies such as Colgate-Palmolive Company, Johnson & Johnson, Inc., Procter & Gamble and Kimberly Clark dominate the competitive landscape of the Household and Personal Products industry in the USA. Each of these companies dominates different categories of products in this industry. Although the companies that I mentioned before are the main ones there are other companies that dominate other categories of products in this industry such as The Sun Products Corporation, Philips Oral Healthcare, GlaxoSmithKline, Zero Odor, LLC and S.C. Johnson & Son, Inc.

The companies that I mentioned before dominate different categories of the industry according to the Product of the Year USA 2012 award. This is a consumer product award that is voted by consumers. Bellow are mentioned the companies with the specific products that won the award in each respective category.

•LAUNDRY – Wisk® Deep Clean™ Original, The Sun Products Corporation
•PERSONAL HYGIENE – Softsoap® Bar Soap Coconut Scrub – Colgate-Palmolive Company
•ORAL CARE – LISTERINE® TOTAL CARE ZERO – Johnson & Johnson, Inc.
•PROFESSIONAL ORAL CARE – Zoom NiteWhite & DayWhite – Philips Oral Healthcare
•WHITENING – Colgate® Optic White – Colgate-Palmolive Company
•BEAUTY CARE – Clairol® Nice ‘n Easy Color Blend Foam – Procter & Gamble
•BABY CARE – HUGGIES® Little Movers Slip-on Diapers – Kimberly-Clark Corporation
•TODDLER ORAL CARE – Aquafresh® Training Toothpaste – GlaxoSmithKline
•HOUSEHOLD CLEANING – Zero Odor® Eliminator – Zero Odor, LLC
•INSECT REPELLENT – OFF!® Deep Woods® Dry Insect Repellent – S.C. Johnson & Son, Inc.
•SKIN TREATMENT – RetinoSyn-45 – Beauty Bioscience

Starting this month (March 2012) the winning products are going to come with a seal of “Product of the Year.” As well stores will display which these products are. This is really important for the companies of the winning products to remain being key players in the industry. For example, 33% of young consumers (under 35 years) are more likely to buy a product if it won an award. Also consumers in general prefer to buy recommended products.

Source:

http://www.sacbee.com/2012/02/29/4300165/product-of-the-year-usa-unveils.html

How is your industry segmented (by customer, by geography, by cost, etc.)? Why?

The primary market segmentation is the differentiation between the household products and the personal care products. Household products account for 25.4% of the international market share, while personal care products account for 74.6%.

The household products and personal care markets are then subdivided. Both markets are segmented by the amount of different types of products sold.

The household products is segmented into six different product types. These six segmentations make up the 25.4%. The first is laundry detergent, which accounts for 32.2%. The second is general-purpose cleaners making up 7.7% of the market share. The next is dishwashing products holding 7.3% of the market. These are followed by air fresheners accounting for 4.5% and toilet care at 2.5%. The last and largest segmentation, accounting for 45.8% of the market are classified as other products.

The personal care products segmentation accounts for 74.6% of the market share for the entire international industry, which is obviously a vast majority. This market is also subdivided into six different product types. The first is over-the-counter healthcare accounting for 27.5%, which is then followed by skincare at 16.9% of the market. These are followed by hair care products, which account for 10.5%. The next two are fragrances making up 7.8% of the market and make-up accounting for 7.4%. Also like the household products market segmentation, products identified as other hold the largest market share of personal care products at 29.9%.

Another method for evaluating the market of this industry is to analyze various regions of the world and how much of each of these products they consume. Europe represents the largest share of the market at 34.4%. The next largest consumer of these goods is the Americas accounting for 29.4% of the industry’s market. The Asia-Pacific region closely follows with 29.3%, which leaves 6.9% to the rest of the world. 

Sources:
http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=d8275404-5467-4704-836b-1b4f288688df%40sessionmgr4&vid=2&hid=9
http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=015b7ad7-0054-46a3-aa1e-f1491eb9f7d8%40sessionmgr12&vid=2&hid=104
http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=423d4ffe-a198-46af-b7fe-9f70113468c2%40sessionmgr14&vid=2&hid=104

What are some recent consumer behavior trends that are influencing the industry?

What are some recent consumer behavior trends that are influencing the industry?

Within the Household and Personal Products industry consumer trends are a reflection of the occurrences of today. For example, the new health conscious consumers are demanding natural and organic products. Another trend, maybe the most obvious, is the use of social media. The leading companies in this industry are putting more money into their marketing strategies or meet these new consumer trends.

Avon, Colgate-Palmolive, Proctor and Gamble, Unilever, and more are among Advertising Age list of Top 100 global marketing companies. Listed below in the chart are companies in this industry’s spending on advertising as of 2009.

Rank	Company	Media Spending 2009
1	Procter and Gamble	$8,678.60
2	Unilever	$6,033.20
3	L’Oreal	$4,559.90
8	Johnson & Johnson	$2,250.80
38	Colgate-Palmolive Co.	$887.30
63	Clorox Co.	$515.40
85	Kimberly-Clark Corp.	$359.20
100	Avon Products	$249.80

L’Oreal

L’Oreal’s most successful marketing strategy is proving on-site and online activations. At the 2011 Toronto International Film Festival L’Oreal set this plan into action. They provided on-site make-up application tutorials, broadcast videos during the show, and set up stands to sell products. Additionally, L’Oreal is turning to social media to reach out to its consumers. On their Facebook page L’Oreal frequently post videos of products and how they can be used to get the new red carpet looks consumers are looking for. Also, several contests are advertised on their Facebook, offering many prices and incentives for customers. L’Oreal is meeting the trends of social media use and increased instruction in using their products.

P&G

Procter and Gamble are focusing on the chemistry aspect of their products to market to those favoring natural items. Tom Nelson, director of P&G Chemicals, stated that with the recovery from the recession things have changed that make their products higher in quality. These changes include: further optimizing fatty alcohol network, creating new uses and application for alcohol co-products, optimizing tertiary amine supply, expanding development of sustainable formulations, and stay ahead of regulatory compliances. P&G is devoted to creating high quality products to meet the consumer trend of natural and organic products.

Sources: http://www.happi.com/articles/2011/03/suppliers-remain-optimistic

http://strategyonline.ca/2011/08/24/tiff-loreal-follows-the-trends/

http://consumergoods.edgl.com/trends/P-G,-Unilever,-L-Oreal-Top-List-of-Global-Marketers-57037