Cincinnati: Developing markets like China, India, Saudi Arabia, Brazil and Russia account for half of Procter & Gamble’s sales growth . According to Robert A. McDonald, this will help the consumer product company to maintain healthy sales during the US crisis.
The company which makes Tide detergent and Pampers diapers is seeing double-digit increases in countries from India to Saudi Arabia. Sales in emerging markets have jumped from $8 billion in 2001 to $21 billion in 2007, when P&G had $76.5 billion total, and McDonald said the company expects them to comprise 30% of all sales by 2010.
“We are excited about all developing markets,” said McDonald, as P&G sees big opportunities for building on strong sales growth in China and India. “Our business is booming in both geographies,” McDonald said, adding that P&G is also increasing sales in countries such as Brazil and Russia, and in oil-rich Middle East markets.
Increasing buying power for consumers in emerging markets has helped US companies with big overseas presence even as American household budgets are tightening amid a credit crunch and housing slump.
Consumer products rival Colgate-Palmolive Co. recently credited strong overseas sales growth with helping boost fourth-quarter profit by 3% and quarterly revenues by 13% over the prior year. Ian Cook, its chief executive, told analysts 31January the company wasn’t seeing any signs that consumer spending was slowing in emerging markets.
P&G reported that earnings rose 14% and revenues 9% for its second fiscal quarter, with double-digit sales and volume growth in developing markets. “We think the emerging component is a good source of growth; it’s lifting sales and profits and should be an important source of growth for a long time to come,” said David Brady, who heads Chicago-area Brady Investment Counsel.
McDonald said having worldwide business helps provide overall growth and “a natural hedge” against currency fluctuations. He said, “When you buy P&G stock, in many ways, you’re buying a global index fund. This is also a good place to invest because of that economy of scale and cushioning effect.”
McDonald, a veteran of P&G’s Asian business who also served as vice chair for global operations, became CEO last year in a realignment of top executives. Susan Arnold, who was vice chair of the beauty and health unit, became president of global business units, among other changes.
“Our restructuring, which is a continuing evolution for us, is all about becoming more and more deliberate,” he said. “You’ve got to be very deliberate about your growth and your strategies and your execution of those strategies. You can’t allow anything to just be serendipitous.”