Procter & Gamble's launch of a Crest 3D oral care line extension reflects product initiatives that will dominate its portfolio following a "SKU simplification," the firm says.

"We're targeting to get 50% bigger, better and faster initiatives and 50% fewer, smaller initiatives," P&G President and CEO Bob McDonald said during the firm's 2010 analyst meeting in Cincinnati Dec. 16.

The firm's small SKUs drain money and resources from marketing more profitable items, he said, adding that P&G's $23 billion brands account for 90% of sales and almost as much of its profit.

"Today, we've over 50,000 unique SKUs globally. However, 40% of these SKUs contribute less than 1% of volume," McDonald said. "We believe that eliminating even half of these smaller SKUs will result in over $200 million in savings."

A reduction in smaller SKUs also enables the firm to focus more resources in executing larger initiatives "with excellence," the CEO said.

McDonald warned brand optimization may have a "modest" impact on category growth trends in the short term, but over time the effort will result in "faster growth and improved efficiency."

He said to help optimize its portfolio changes, P&G used tools that revealed "in certain categories, shoppers actually believe they have more choices after category offerings are reduced."

P&G's SKU initiative will be welcomed by retailers targeting duplicative line extensions and low-selling products as they prune shelves in order to keep and attract more customers. In addition to in-demand products, those that inspire consumer loyalty and help fulfill retailers' commitment to wellness most likely will remain in stores (Also see "Retailers Rationalize Products That Cannot "Earn Their Keep"" - Pink Sheet, 14 June, 2010.).

"Most Advanced" Whitening

In the U.S. and other North American markets, P&G is introducing its "most advanced" tooth whitening technology with the launch of Crest 3D White 2-Hour Express Whitestrips.

The product provides a "noticeably whiter smile after wearing just one strip for two hours," said Robert Steele, Global Health and Well-Being vice chairman.

The launch builds on the debut of Crest 3D White kits with whitening strips, toothpastes and rinses, which have gained a 6% share of the U.S. whitening market since debuting in March (Also see "P&G's 3D White Package Offers "Just One Day" Results" - Pink Sheet, 15 March, 2010.).

The 2-Hour Express line extension is the fastest-working and easiest to use Crest 3D product, the firm says. The single-use product is promoted as delivering a whiter smile two hours after use and keeping teeth whiter for three months. A kit contains four strips, giving users a full-year supply.

Other 3D White kits – Enamel Safe, Vivid White and Professional – require once-a-day use of the strips for 30 minutes for a period of 10 days, and take about a day to show an improvement in teeth and two weeks to show full results.

P&G says 2-Hour Express is available through online retailers including Walgreens.com, drugstore.com and Amazon.com for around $53.99 during the launch period.

Double Developing Regions Presence

The firm's Personal Health Care segment expects global growth as it overcomes regulatory challenges and strengthens its presence in the pharmacy channel.

While P&G has strong personal health brands such as Vicks cough remedies and Pepto-Bismol antacid and solid "consumer insights" into various regions, the business is hobbled by challenges, Steele suggested.

"You need to have strong regulatory capability in each country to gain approval for your products," as well as solid pharmacy distribution capability, he said. "We're not where we want to be on this yet, but we are working hard to get there."

Pepto-Bismol is marketed only in three countries while Vicks is marketed in 25 of P&G's top 50 countries.

"Even in the countries where Vicks is present, we do not have a full product portfolio available for consumers," Steele said.

P&G executives reaffirmed the firm's commitment to emerging markets, with plans to double its presence in developing regions within the next few years, particularly large markets such as China and Brazil.

During the next 10 years, sales in developing markets – which reached about $27 billion in 2010 – will grow to almost 50% of total sales, according to P&G.

The company will achieve those targets by looking to seize "white space opportunities" to grow across "categories, countries, price tiers and channels," Chief Financial Officer Jon Moeller said.

For example, P&G participates on average in 19 product categories across its top 50 markets, but plans to boost the average to 24 categories over the next few years.

Addressing P&G products' presence in retail channels, Moeller said the company identified "seven distinct" retail channels, though its products are in only four of them.

"We have plans to increase our presence in all channels," to ultimately place the firm's products in "56% of the buyable channels for our categories across our top 50 countries," Moeller said.

By Eileen Francis

P&G Simplifies SKU Portfolio To Drive Growth

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