Procter & Gamble Co.
Founder: William Procter and James Gamble.
Distinction: Made its name in soaps; invented soap operas to
Primary Products: Cleaning, paper, beauty, food, health-care
Annual Sales: $38.125 billion.
Number of Employees: 110,000.
Major Competitors: Johnson & Johnson, Kimberly-Clark,
Chairman: John E. Pepper; President and CEO: Alan G. Lafley.
Headquarters: Cincinnati, Ohio.
Year founded: 1837.
Since Andrew Jackson was president, Procter & Gamble has been
ubiquitous. Today, the world's dominant consumer-products company
peddles a dizzying array of household goods under 300 brand names in
140 countries—and an astounding number are truly household names:
Tide, Camay, Crest, Scope, Secret, Clearasil, Folgers, Crisco, Pringles,
Pepto-Bismol, Vicks VapoRub, Old Spice, Oil of Olay, Head & Shoulders,
Spic and Span, Pampers, Tampax, Charmin….The list goes on. And on.
Founded on the production of soap and candles by two immigrants
from the British Isles who landed in Cincinnati, P&G long ago abandoned
the latter in favor of paper, beauty, healthcare, food and beverage
products. It continues focusing, though, on the laundry and cleaning items
that evolved from its first widespread success: Ivory soap. And always the
innovator—the company was first to offer synthetic detergent, fluoride
toothpaste, and disposable diapers—it forged into the 21st century with an
abundance of new-and-improved variations on its now familiar themes.
Products such as an at-home dry cleaning kit, low-fat snack foods, and a
cleanser for fruits and vegetables regularly spring from its laboratories.
P&G became number-one in such items in the United States, and
expanded globally so that half of all sales are now derived abroad. They
prevail by designing products (and a corporation itself) that are distinctive.
Nearly as important, it utilized omnipresent and often original marketing
programs to consistently spread their word. P&G, after all, has spent
lavishly on print ads for more than a century, and it began airing television
commercials only five months after that medium's debut. It also used
radio to push products as early as 1923. And 10 years later produced the
first "soap opera" to exclusively hawk Oxydol—creating a programming
staple it later transferred successfully to TV, where its Guiding Light and
As the World Turns serials remain popular.
But the company has not initially found its third century as inviting
as its first two. Like many other Old Economy pioneers, it has been slow to
embrace the Internet. And when revenues were not as strong as expected,
its market value plummeted &36 billion in one horrendous day. Rightly or
wrongly, observers feared that P&G's streak of innovation and growth may
finally have hit a wall.
Much like a surprising number of their contemporaries, candlemaker
William Procter and soapmaker James Gamble came to create a lasting
business by serendipitous accident. Procter, from England, and Gamble,
from Ireland, were each on their way out West when they stopped in the
busy commercial and industrial center of Cincinnati to tend to personal
matters. The two eventually married sisters, and their mutual father-inlaw
suggested that the young men start a business. In 1937, they signed a
formal partnership agreement, kicked in $3,596.47 apiece, and opened the
Procter & Gamble soap and candle company.
Despite shaky economic times and more than a dozen competitors in
Cincinnati alone, the business boomed. By 1859 it employed 80 and
recorded its first million in sales. To meet demand it built a new plant even
as the Civil War approached, which paid off handsomely when it helped
fulfill a contract to supply Union armies with its two main products. It paid
off yet again when soldiers took positive memories of P&G home with the
company's signature product and first big hit. Harley Procter the other
founder's son, dubbed it "Ivory" when a Biblical passage he came across
seemed to sum up its qualities. He then convinced the partners to shell out
$11,000—a preposterous sum at the time—to advertise its purity and
buoyant properties across the country, P&G's business again skyrocketed,
and additional facilities were again needed.
Unlike all but a few businesses of the day, this company additionally
recognized that its welfare was directly linked to that of its workforce.
Accordingly, in 1885 it began giving employees Saturday afternoons off—
with pay. In 1886, it opened its new Ivorydale factory with the latest
technological advances designed to improve the working environment. In
1887 it instituted a profit-sharing plan. Ultimately, it also became one of
the first firms to provide its personnel with comprehensive insurance
By the end of the 19th century, P&G was selling 30 varieties of soap.
The partners incorporated to finance even more expansion. Although the
imminent arrival of the light bulb would soon spell doom for the candle
trade, additional manufacturing facilities were constructed in Kansas City
and Ontario, Canada. A newly opened research lab developed items such
as Dreft, the first synthetic detergent, and Crisco, the first all-vegetable
shortening. Color print ads were used to market the soaps, and a
nationwide cooking show on radio was used to market the shortening. To
maintain momentum, P&G formed one of the business world's first
Between the two World Wars, Procter & Gamble prospered as much
as any American firm. It regularly unveiled a new products that constantly
struck a chord with the buying public, established on overseas subsidiary
in England and expanded into Asia. It sponsored its first radio serial (Ma
Perkins), entered the hair-care business with its first shampoo, and aired a
TV commercial during the very first televised major league baseball game.
Around the time of its 100th anniversary, it also reached $230 million in
The following period was marked by even more impressive growth.
Much of it was funded by the success of Tide laundry detergent, which was
introduced in 1946. Within four years, it became the runaway best-seller
in its burgeoning category. Prell shampoo, Crest toothpaste, Duncan Hines
cake mixes, and Charmin toilet tissue, towels, and napkins were also
added to the corporate roster around that time. In 1961, P&G really shook
up the consumer world with Pampers, the first-ever disposable diaper.
During the next few years existing categories were strengthened with the
acquisition of Folgers coffee, the invention of Bounce fabric-softening
sheets, and the development of successful pharmaceutical products. P&G
also began building new manufacturing facilities in Mexico, Europe, and
By 1980, as it approached its 150th anniversary, the company was
doing business in 23 countries and recording nearly $11 billion in annual
sales. Cosmetics and fragrances entered the picture in a big way through
the acquisitions of Max Factor and Noxell's Cover Girl, Noxzema, and
Clarion lines. The healthcare division expanded with the purchase of
Norwich Eaton Pharmaceuticals and Richardson-Vicks. Overseas business
was bolstered in Eastern Europe and China. By the time sales hit $30
billion in 1993, more than 50 percent of sales were generated outside the
Procter & Gamble also continued its long-time people- and
community-friendly ways, regularly racking up awards for its socially
conscious behavior even as it grew to its huge multinational status. Its
many accolades include a Johns Hopkins-School of Public Health
acknowledgment for using alternatives to animal research; recognition by
various specialized magazines as a top employment environment for
Hispanics, executive women, and working mothers; a World Environment
Center Gold Medal for international corporate environmental achievement;
and the U.S. Labor Department's Opportunity 2000 Award for its
commitment to equal employment and a diverse workforce.
But despite even more strategic acquisitions (such as Tambrands
and its category-leading Tampax tampon) and innovative introductions
(such as salty snacks fried in fat-free, calorie-free Olean cooking oil),
nearly 17 decades of consistent success came to a crashing halt on March
7, 2000, when P&G stock dropped 31 percent in a single day.
The news stunned Wall Street: within minutes of the New York Stock
Exchange opening bell, Procter & Gamble fell $27.0625 to $60.375—and
that came on top of its ongoing collapse from a high of $117 just six
months earlier. The bluest of blue chips, the oldest of the biggest in the
Fortune 500, P&G had announced a 10-percent drop in profits after
earnings forecasters predicted a 7- to 9 -percent increase. Management
blamed rising prices for raw materials, such as petroleum and wood pulp,
belated results from reorganization the year before, and higher costs
related to federal approvals in its pharmaceuticals division. Wondering why
none of this was anticipated earlier, investors worried that another shoe
could yet drop.
Not since Phillip Morris' stock slid 23 percent in 1993 had a major
company collapsed so dramatically and so decisively. Many blamed P&G's
newly appointed top executive, Durk Jager, who had perhaps bitten off
more than he could chew by trying simultaneously to change the
company's notoriously insular culture, introduce a slew of new products,
and initiate even more acquisitions.
P&G was also scored for moving slow to the Internet, and for its
tardiness in hooking up with major retailers to develop popular privatelabel
brands of detergent and other products. Some analysts and investors
expressed continuing fears about the company's future, and when weak
earnings were again projected for the fourth quarter of 2000, Jager
suddenly and unexpectedly announced his retirement effective July 1. He
was replaced as president and chief executive by Alan Lafley, president of
P&Gs divisions for global beauty care in North America. John Pepper, who
ran the company before Jager, was named chairman.
Citing P&G's considerable strengths—the fact that it virtually
invented the now-hot concepts of branding and brand marketing, for
instance, and its unparalleled stable of worldwide household names—many
observer say it's far too early to count this bellwether corporation out of
the game. Recovery will take work, they note, but nearly 180 years of
experience should count for something.