Factors
driving market expansion include new product formats, gener-specific products
and technological developments. Companies are focusing on new products and
extending established product lines, with innovative offerings for product
applications and formulations. An example of an emerging company is the
household products industry, is JHS Svengaard Laboratories Ltd., the country’s
largest oral care products manufacturing company, has tied up with Proctor
& Gamble, the world’s largest FMCG manufacturer, to manufacture detergent
exclusively for it. JHS Svengaard is currently one of the top financial
performers. Indian personal care products are making a recent emergence in the
industry. India has faced a revolution literally
in all wakes. With the rise in dispensable income, there is high consumerism in
the country. With opening up of the emerging markets, the cosmetic companies
are broadening in response to the vast diversity of populations. The Indian
face wants to look good. The Indian Women are no longer limited to their homes,
but have come out & are walking with the same pace as the men. Hence they
are more conscious of their looks & are widely opting for the cosmetics
that is available in the market. It is not only the female section of the
society, who use beauty & cosmetic range but the Indian men too are worried
about their looks. There are lot of products specially designed for men too.
The cosmetic companies not only produce the traditional makeup items like
compact, mascara or lipsticks, but are rapidly adapting themselves to the
changing demands of its customers. Today the markets offer a wide range of
cosmetic products to choose from. There are smart products like anti-aging
solutions, concealers which has taken a lady’s beauty to a new level.
Fragrances, body lotions, hair products, hand & foot care products, you
name it & you have it. Some emerging Indian companies include
Ayur, a Herbal Cosmetics business since 1984. Ayur provides a wide range of
beauty cosmetics strictly prepared with herbal components. The products are
made from herbals. The cosmetic products range from hair oil, shampoo, natural
henna & conditioner to sunscreen, face pack & cleansing milk. The
popular products are Tulsi neem soap, rose water, fairness bleach, wax, body
lotion, cold cream, face pack & scrub, moisturizer, skin toner, hand care
& foot care products. Shahnaz Hussain, India’s leading company in the field
of natural beauty and anti-aging treatments. It started in the 1970s by Shahnaz
Husain in New Delhi. It has a chain of over 400 beauty centers worldwide. The
group has activities as diverse as beauty training institutes, herb
plantations, retail stores & products. The company is very popular for its
specialized clinical treatments and therapeutic products for specific problems
like acne, pigmentation, scars and blemishes, skin-sensitivity, dandruff, hair
loss and alopecia. The product range has over 350 products in 20 different
categories for skin, hair & body care. All the products are sold under the
brand name of Shahnaz Hussain.
Thursday, March 29, 2012
Wednesday, March 28, 2012
Who have been some influential leaders (Founders, CEOs) in the industry over the past 20 years?
To discuss this question, I have chosen two different leaders within the industry. The first is Bob McDonald, the CEO of the leading company within the industry, Procter and Gamble. The other, Bobbi Brown, is the founder/CEO of a sub-brand of Estee Lauder, one of the industry's leading companies.
Bob McDonald CEO and Chairman of the Board of Procter & Gamble
Bob McDonald began his career as CEO and Chairman of the Board at P&G in July 2009. Since assuming his position, he has strived to to achieve the strategy of, "touching and improving more consumers' lives, in more parts of the world, more completely." During his time as CEO, the company has experienced significant gains in its sales, despite the economic downturn.
His goal of extending the presence of P&G into new markets is exactly what P&G needs to accomplish to stay on top of the industry. The well-established markets of the United States and Europe are stable and not experiencing significant growth. Targeting new customers in new markets, like those in Asia, Africa, and South America, coincides with McDonald's vision.
McDonald is currently in the stages of making this vision a more immediate reality. Recently, McDonald announced a $10 billion spending cut. The cut includes laying off 4,000 workers, reducing spending for their maketing budget and packaging, and developing a more efficient supply chain. This spending cut save the industry giant exorbitant amounts of money and will allow the company to allocate that money to penetrating into new markets.
Bobbi Brown Founder and CEO of Bobbi Brown Cosmetics
Bobbi Brown Cosmetics began simply because Brown, a make-up artist, believed that women want make-up that makes them look natural and fresh. Her make-up line began in 1991 as a collection of 10 lipstick shades only being sold at Bergdorf Goodman. Four years later Bobbi Brown Cosmetics was acquired by Estee Lauder Companies in 1995. The cosmetic brand is now sold in 56 countries and territories all over the world.
What makes Bobbi Brown unique as a founder and CEO of her own company is the hands on involvement with her brand. She is continually working on developing new products that would enhance the natural beauty of women. She still also works as a make-up artist for high-end fashion shoots and events, further helping her understand what consumers are looking for trend-wise.
In addition, she also has two prominent causes that her company strongly advocates. The Bobbi Brown Cosmetics company places a strong emphasis on its mission to, "do what we can to help improve the lives of those in our community and beyond." The two selected causes are Dress for Success and the Broome Street Academy. Not only is this a great reflection of CSR on Bobbi Brown Cosmetics, but both of Brown's causes are highly promoted, showing her dedication and passion for this vision.
On another completely unrelated note I wanted to share, an interesting trend I noticed while researching the major players of the Household and Personal Products Industry. I noticed that the majority of the CEOs were appointed around the years 2008 and 2009, coinciding with the United States' economic downturn and recession. For example, Bob McDonald of P&G was appointed in 2009, Kasper Rorsted of Henkel in 2008, Paul Polman of Unilever in 2009, and Fabrizio Freda of Estee Lauder in 2009. I found this to be interesting because it surprised me that each of these companies had a change in leadership all approximately around the same time and during the recession.
In what areas of the industry are there opportunities for innovation?
In
one area of the Household and Personal Products Industry where there is
opportunity for innovation is in understanding and developing the type of
relationship buyers has with a brand. This includes the ways used to attract
costumers. For example, Lancôme has a particular relationship with costumers in
comparison with it main competitors such as Avon, Estee Lauder and Clinique.
Lancôme relationship with costumers is based on exploration and
experimentation. This means that this relationship makes women to discover
their selves with creativity making them put aside the ordinary elements and
have adventure in their lives. Lancôme products make women want to explore
their self-identity with originality.
This
video is an example of a Lancôme advertisement based on exploration and
creativity calling the attention of women.
In another area of the Household and Personal Products Industry where
there is opportunity for innovation is in the large-scale application of digital technology and
advanced analytics across every aspect of a company operations and activities.
In a
third area of the Household and Personal Products Industry where there is
opportunity for innovation is in the marketplace. It consists in expanding to
new markets. “Marketplace Innovation is all about developing new ways to reach and
delight the customer in engaging new ways.” This can include everything
from reaching new costumers to developing new methods of operation. “By coming
up with unique modifications for products, services, and delivery methods, its
aim is to have a positive impact on people’s lives.” Most of the key players of
this industry have began to expand to new markets. Expansions have been
beneficial for the key players in capturing the market. Although companies in this industry are
already doing this. There are going to be more opportunities for them to
continue to do this and to modify their operations to success and increase costumers.
How has the competitive landscape changed as a result of leading entrepreneurs in the industry?
In general entering into the Household and Personal
Products industry is tough. Reason being, as most of the products are soap,
detergent, toothpaste, and cosmetics; consumers have long been purchasing these
products so there is little incentive to actively seek out different products
from purchase to purchase. Additionally, the barriers to entry within
the industry are rated medium but increasing. This keeps competition from
entrepreneurs low because of the difficulty in entering the market. One of the
largest barriers is the high costs entering the Household and Personal Products
Industry. Though it is easy to launch small businesses
within the industry because of the minor technological skills and financial
resources required and because the ingredients used to produce the products are
common, the costs of manufacturing, marketing and distribution are high. This
results in large corporations dominating the industry. Specifically, cosmetic
and beauty products manufacturing requires a factory and production equipment,
which can add up to a substantial cost. Acquiring the financial means to start production
and continue at a profit is increasingly difficult. Clorox Company states that
newly introduced products face intense established competition and, as such,
requires substantial advertising and promotional resources. This is very true
with the most well-known brand names belonging to this industry which serves as
a large deterrent for new entries.
Recently, however, there is hope for more entrepreneurs
to enter into the industry. This is due to the new “green” trend. The search
for more environmentally friendly products with natural ingredients is
increasing in demand. A great example of a successful entrepreneurial entry
into the
industry is Rockin' Green, a maker of
eco-friendly laundry detergent and cleaning products . The company’s founder, Kimberly Webb, was named “Best
Entrepreneur” and the company named the “Fastest-Growing Company of the Year.”
Though there are some instances of entrepreneurial success the numbers are
small. The development of new innovative products,
the maintenance and improvement of existing products or the extension of an
existing product range are the major demands within this industry thus it is
very hard to accomplish for new entrepreneurs who lack capital to mass produce,
market, and distribute. Therefore the competitive landscape has not changed
much due to leading entrepreneurs.
Sources:
Tuesday, March 27, 2012
What workforce trends is the industry experiencing?
The household and personal products industry relies heavily on innovation as well as cheap manufacturing to keep companies competitive. As a result, a good portion of the industries will invest in Research & Development as a major part of their annual spending. Innovation becomes a critical part of household and personal products industry, largely because research is not something that is allotted within one year. Research can take anywhere from five to fifteen years. As a result, companies need to constantly be investing and evaluating projects throughout the years while maintaining spending. Innovation also becomes a way to keep developed markets growing.
The emphasis on research and development is most evident in companies annual reports as well as in their letters to stockholders. For example, just looking at P&G, in the notes of their annual report, they mentioned spending approximately $2 billion on research and development alone. In their annual letter to stockholders, they emphasized the fact that they spend close to 60% more than their competitors on research and development. The evidence of their constant dedication to innovation is clear in their constant need to create new products. Just recently, their new Tide Pods line of detergent was launched after eight years of development. In addition to that, in 2008, four of the top ten new consumer products were launched by P&G. By constantly trying to stay ahead of the competition, they lose the risk of becoming irrelevant, which means greater profits in the long run. It also keeps their brand names in the spotlight, which is important for a large industry such as household and personal products.
On the cosmetics side of the industry, L'Oreal also puts huge emphasis on the need for innovation and creation. In their 2011 annual report, they announced a total 613 new patents since 2010. They also reported investing approximately €721 million ($961 million) in research. What makes L'Oreal innovation unique is the fact that even though their main selling point is cosmetics, they make innovations in the field of science as well. The 2011 report discussed the discovery of the LR2412 molecule, which helps prevent aging. This then become a selling point when the products containing this molecule hit the market because it's something only L'Oreal can claim to have. They have 17 patents regarding this discovery alone, leaving other companies in the dust.
The emphasis on research and development is most evident in companies annual reports as well as in their letters to stockholders. For example, just looking at P&G, in the notes of their annual report, they mentioned spending approximately $2 billion on research and development alone. In their annual letter to stockholders, they emphasized the fact that they spend close to 60% more than their competitors on research and development. The evidence of their constant dedication to innovation is clear in their constant need to create new products. Just recently, their new Tide Pods line of detergent was launched after eight years of development. In addition to that, in 2008, four of the top ten new consumer products were launched by P&G. By constantly trying to stay ahead of the competition, they lose the risk of becoming irrelevant, which means greater profits in the long run. It also keeps their brand names in the spotlight, which is important for a large industry such as household and personal products.
On the cosmetics side of the industry, L'Oreal also puts huge emphasis on the need for innovation and creation. In their 2011 annual report, they announced a total 613 new patents since 2010. They also reported investing approximately €721 million ($961 million) in research. What makes L'Oreal innovation unique is the fact that even though their main selling point is cosmetics, they make innovations in the field of science as well. The 2011 report discussed the discovery of the LR2412 molecule, which helps prevent aging. This then become a selling point when the products containing this molecule hit the market because it's something only L'Oreal can claim to have. They have 17 patents regarding this discovery alone, leaving other companies in the dust.
Thursday, March 22, 2012
The profit and loss
statements of a company and the balance sheet must be prepared in order to
arrive at a clear picture of the company’s financial stability. It is vital to
note that the two refer to very different statements of financial information,
with significant differences in the data recorded in each. However, the two are
related to in each other in that the balances recorded in the balance sheet are
directly affected by changes in the financial information recorded in the
profit and loss statement. The
balance sheet is a statement of financial position. Sales in North America
increased 2.3%, declined 4.6% in Western Europe, and increased 6% in the rest
of the world year over year. Sales in all divisions except consumer products
decreased. Consumer product sales increased 1.5% to €8.5 billion. Active Cosmetics
reported the steepest decrease in sales of 4.3% from 2008. Western
Europe experienced -6.3% like for like growth as a result of poor performance
in Spain and in retail travel. North America reported -3.4% like for like
growth due to tough economic conditions. The professional products division did
have a good year in gaining market share in the region. The Rest of World
regional segment experienced strong growth with double digit growth in China,
South Korea, Argentina, Chile, India, and South Africa. Of all L'Oreal's
divisions, consumer products had the biggest sales increase of 3.2%. This was
due to larger invoices in skin care and in particular by the Garnier and
Maybelline brands. Luxury products was the worst performing division with -9.0%
like for like growth. The weakness of the perfume market and the economic
conditions in Western European market in which the division's brands are
leaders affected performance. The Body Shops ended the year with 0.7% like for
like growth with retail sales growing by 1%. Comparable store sales were down
0.6%.
Current Events in Accounting
A
little over a month ago, key player Procter & Gamble announced their new
plan to cut costs and reach $10 billion in savings by 2016. The plan calls for
a major overhaul and restructuring of many of the company’s various
departments. To shave $10 billion off of their bottom line P&G CEO Bob
McDonald laid out the multi-faceted plan, affecting many areas of the balance
sheet, in late February 2012.
The first order of the plan calls
for approximately 5,700 jobs to be cut from its nonmanufacturing work force by
June 2013. These cuts will initially lead to savings of $800 million by 2014,
rising to savings of $1 billion by 2016. The company plans to make adjustments
to their marketing budget to save another $1 billion. To save $6 billion in
their expenditures, P&G also plans on using less expensive materials for
packaging, developing a more efficient supply chain, and altering products to
be more concentrated. To achieve this multistep plan of $10 billion in savings
will eventually cost the company close to $3.5 billion in restructuring costs.
In addition to the cuts within more
their more stable markets, P&G is setting its sights on expansion in
emerging markets in Africa, Asia, and South America. Expansion into these new
markets includes opening 20 new manufacturing plants by 2015. Overall, the main
goal of expansion is to increase revenues and add to their bottom line, while
simultaneous cutting costs to create a larger profit margin.
Investors and analysts welcomed
these extensive cuts to P&G’s budget. Many investors had been deterred by
P&G’s inability to operate at more efficient costs, especially when sales
growth in well-established markets, like the United States and Europe, has not
been as strong as it once was. Upon announcement of the plan, stock rose 3%.
P&G’s budget cuts and new
market expansion represents the company’s repositioning within the industry’s
market, affecting its competitors. As P&G attempts to increase its market
share by earning more, it inevitably takes away from fellow companies in the
industry. This strategy also demonstrates what’s expected of a company from
investors. Investors are looking for efficiency and future expansion. P&G
is catering to what investors expect through the implementation of their
four-year plan.
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:
Wednesday, March 21, 2012
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:
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.
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.
Monday, March 5, 2012
• 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.
Sunday, March 4, 2012
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
•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:
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.
How do companies in this industry differentiate themselves from one another?
A lot of the main companies in the Households and Personal Products industry have a variety of different products they sell. One company could hold as many as twenty products or more, each with a specific and different purpose. As a result, these companies differentiate themselves in two ways. The first begins at a corporate level with outreach. Second is brand name and packaging.
Corporate Outreach
One method that companies use involves actually extending a hand to the public when times are rough. P&G is one company that has no problems donating diapers, toothpaste, and whatever else they can spare to disaster areas. Although it's also a way to help the needy, it also doubles as a way for the company to get it's brand names out there. When people are in a pinch and can only get their hands on a certain brand, when they can finally afford to purchase their own products again, it could have created new brand loyalty to their companies products. Not to diminish what P&G is doing, but it has the double effect of benefiting the company in the long run.
Kimberly-Clark, on the other hand, has a different outreach method. Although they also have their own commitment to social responsibility, they also promote their products through different means. For example, the Huggies brand contest. Basically, parents are encouraged to film how their child moves for a Huggies commercial. Not only does this make the target market aware of the brand, but it also pushes the idea behind the product, which is that the diaper moves with the child. It's a method of promotion that really focuses on who Kimberly-Clark wants to buy their products.
Brand Name/Packaging
On the shelf, it's a different story for companies. When doing corporate outreach, it's largely just the company, but in the store different brands are competing directly against each other. It then becomes incredibly important for names to stand out. One example is P&G's new Tide Pods. After doing extensive market research, P&G found that many consumers dreaded doing laundry, and so they starting doing research in how to fill that need. Eventually they came up with the Tide Pod, which is light and easy to use. They even took care in designing the packaging. The pods themselves have detergent, fabric softener, and brightener in the signature colors of Tide (Orange, Blue, and White). Additionally, they made the packaging clear so that among the sea of regular detergent, it stands out. As a company with a huge brand name recognition and a reputation for innovation, this is one way they try to stand out.
Corporate Outreach
One method that companies use involves actually extending a hand to the public when times are rough. P&G is one company that has no problems donating diapers, toothpaste, and whatever else they can spare to disaster areas. Although it's also a way to help the needy, it also doubles as a way for the company to get it's brand names out there. When people are in a pinch and can only get their hands on a certain brand, when they can finally afford to purchase their own products again, it could have created new brand loyalty to their companies products. Not to diminish what P&G is doing, but it has the double effect of benefiting the company in the long run.
Kimberly-Clark, on the other hand, has a different outreach method. Although they also have their own commitment to social responsibility, they also promote their products through different means. For example, the Huggies brand contest. Basically, parents are encouraged to film how their child moves for a Huggies commercial. Not only does this make the target market aware of the brand, but it also pushes the idea behind the product, which is that the diaper moves with the child. It's a method of promotion that really focuses on who Kimberly-Clark wants to buy their products.
Brand Name/Packaging
On the shelf, it's a different story for companies. When doing corporate outreach, it's largely just the company, but in the store different brands are competing directly against each other. It then becomes incredibly important for names to stand out. One example is P&G's new Tide Pods. After doing extensive market research, P&G found that many consumers dreaded doing laundry, and so they starting doing research in how to fill that need. Eventually they came up with the Tide Pod, which is light and easy to use. They even took care in designing the packaging. The pods themselves have detergent, fabric softener, and brightener in the signature colors of Tide (Orange, Blue, and White). Additionally, they made the packaging clear so that among the sea of regular detergent, it stands out. As a company with a huge brand name recognition and a reputation for innovation, this is one way they try to stand out.
Tide Pods Packaging
Another area in which there is fierce competition for a consumer's eye is in the Shampoo aisle. While companies know that plastering their name on the bottle is important, everything from the color of the packaging, to the placement of conditioner next to the bottle can make a difference. An advertisement research blog demonstrated the use of eye tracking software on a shampoo shelf.
Eye tracking results
In areas where there were large blocks of color, like Garnier's (L'Oreal) signature green bottles and Head and Shoulders's (P&G) white bottles. However, this could lead to confusion and potentially frustration if someone is searching for a specific part of the brand (like shampoo and conditioner for people with curly hair), and they can't find it easily. Head and Shoulders addresses this to an extent by having mostly white bottles with splashes of color to indicate what kind of shampoo/conditioner the bottle is. In this aisle, it's important to be able to have an extremely strong presence and a wide variety of product to display.
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