P&G CEO

Challenge 2020KEY DATES & FAQ

STRATEGIC CASE STUDYAPAC

P&G CEO Challenge 2019-2020: Online Case

Study (VIETNAM)
01h 03m 56s

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Show Instructions
Case Study: Introduction
From: <sam@pg.com>

To: <intern@pg.com>

Hey!
Welcome to P&G! I'm so glad that more and more young and ambitious
people like you are joining our team!

My name is Sam, and I will be your mentor during your internship. I'm so
excited that you're joining our Hair Care team! You can ask me any questions
concerning working at P&G in general and the work we do in Hair Care, which
is one of the Beauty and Personal Care categories and one of the highest
revenue generating segments of the company.

The plan is that you'll join the Pantene team and will help your colleagues
work on a significant marketing challenge to reposition Pantene in order to
attract a younger audience (15-25 years old) and therefore increase the sales
value by 2020. I do hope that you'll enjoy it.

Unfortunately, I'm out of office today because I'm taking part in a major
International Brand Management conference. But please don't worry! I've got
some really exciting tasks planned for you, which will allow you to immerse
yourself into our world and get prepared for the big challenge we must handle
at Pantene. Meanwhile, you can dive into the topic and look through some
market insights.

You certainly know that Procter & Gamble is the world's second largest
Beauty and Personal Care company, accounting for 8% of the global market
value share. Beauty is the company's second leading business portfolio after
Fabric and Home Care. You may also know that P&G has the largest lineup of
leading brands in its industry, with 23 brands with over $1 billion in annual
sales (our so-called “billion-dollar brands”). There are 2 “billion-dollar brands”
that belong to the Hair Care portfolio. Those are Head & Shoulders and
Pantene.

P&G reshaped its global Beauty and Personal Care landscape when it
divested more than 40 brands to a rival group in 2016. Two years later, P&G
is rationalizing its portfolio by capitalizing on its major brands and acquiring
niche challengers, thus increasing the sales growth rate. But its market share
is still falling in some categories.
Expanding is a daunting task when one is already a major player. Procter &
Gamble is currently experiencing this challenge in its pursuit of a new growth
dynamic. Developed markets with slow growth are still the company's key
markets. P&G's BPC1 share in North America and Europe has reduced from
27.4% to 25.5%, mainly due to slowing sales in the US. P&G's share in
developed markets tends to rely on well-established brands with high unit
prices, giving few immediate opportunities for growth to the company.

The Beauty segment of the Company is currently facing strong competition

from indie (independently funded) brands. Young consumers are not loyal,
they want a more personalized approach, which indie brands can provide
since they have more possibilities to launch new and expensive products with
higher speed of market entry. Indie brands make more use of social media,
while Pantene and other more traditional hair care brands' preferred
advertising channel is TV. For indie brands this choice is also influenced by
budget whilst TV for established brands ensures high reach in the total
population. Finally, Pantene relies on traditional offline sales channels.

With this in mind, what I'd like you to do is to review the data and find possible
solutions for the challenges the company, and the Pantene brand in particular,
are currently facing. On Monday, we will have a team meeting where we will
discuss findings, and I'm looking forward to hearing your ideas.

In order to immerse you in the subject, I'd like to share some information on
the key market trends and the Pantene brand's key strengths and current
challenges. Please e-mail me if you have any questions!

See you!

Sam Miles

Pantene Regional Sales Manager

Question 1 (Sales): According to Sam’s letter, which assumption is definitely

right for P&G? Choose all answers that apply.

(Required)
  Acquiring niche brands is a winning strategy in terms of boosting sales
 The company has chosen a strategy to shift from developed markets to
emerging markets because they have more potential
 P&G's traditional hair care brands lack a personalized approach that
young consumers want

 P&G has more billion-dollar brands than any FMCG company in the
industry

About P&G
The Procter & Gamble Company is focused on providing branded consumer
packaged goods of superior quality and value to improve the lives of the
world's consumers. The company was incorporated in Ohio in 1905, having
been built from a business founded in 1837 by William Procter and James
Gamble.

The company's purpose to improve the lives of its consumers today delivers
this for 5 billion consumers in 180 countries through its leading, billion-dollar
brands.

The company's 65 individual brands are organized into 5 business segments:

 Fabric & Home Care

 Baby, Feminine, and Family Care
 Beauty
 Health Care
 Grooming

The business model relies on the continued growth and success of existing
brands and products, as well as the creation of new innovative products. The
markets and industry segments in which P&G offers products are highly
competitive. P&G products are sold in more than 180 countries and territories
primarily through mass merchandisers, e-commerce, grocery stores,
membership club stores, drug stores, department stores, distributors,
wholesalers, baby stores, specialty beauty stores, high-frequency stores and
pharmacies. P&G's top ten customers accounted for approximately 36% of
total sales in 2018 and 35% in both 2017 and 2016. Its growth strategy is to
deliver meaningful and noticeable superiority in all elements of P&G's value
proposition - product, packaging, brand communication, retail execution and
value equation.
P&G Today
The 2019 fiscal year met or exceeded each of the core financial goals —
organic sales growth, core earnings per share growth and adjusted free cash
flow productivity. Organic sales grew 5% which was above expectations.

The company focused on growing where consumers shop — whether that's

in-store or online. This year, P&G grew its organic sales by 25% in e-
commerce, the fastest-growing retail channel around the world. Online sales
now account for about 8% of P&G total sales.

P&G also provides a superior experience in-store. An independent

benchmarking survey that measures retailer perceptions of manufacturers
across seven key focus areas ranked P&G #1 for the fourth year in a row.

In 2019 core earnings per share were $4.52, a 7% increase and toward the
high end of the target range.

P&G delivered strong free cash flow results, generating $15.2 billion of
operating cash flow. All six of P&G regions had organic sales growth. In the
US, sales grew 4%, including 7% in the last quarter, after averaging about 1%
over the past three fiscal years. In Greater China, the company grew 10% with
double-digit across Fabric Care, Feminine Care, and Skin & Personal Care
categories.

The company improved market share trends in eight of 10 global product

categories throughout the year.

P&G is one of only 10 US companies to pay a dividend for more than 120
consecutive years. The company had 63 years of dividend increases.
P&G makes major investments to ensure its supply chain remains a
competitive advantage. A synchronized network based on real-time demand
signals is serving the evolving needs of consumers and customers.

To deliver productivity across supply chain P&G makes improvements in four

ways:
Multi-Category Manufacturing Sites. P&G plants supply several categories
of goods, in accordance with the demand for them. Consumer purchases
trigger updates to our manufacturing schedules in plants and orders of
materials to suppliers. Robotics and digitization make savings. For example,
automated loading and unloading enables lower inventory. All these
technologies used at the newest P&G plants are globally scalable.

Digitized Planning. P&G reduced the number of planning sites to eight vs.

300 sites eight years ago. They become much more effective and now can
support a new request from a customer for an incremental order in less than
one hour, which once required 24 hours or more.

Supplier Integration. Co-locating suppliers in plants reduces truck traffic and

distribution cost. Increased synchronization of P&G's operations with our
suppliers leads to lower inventory and other costs.

Customer Collaboration. The newest U.S. mixing centers put 80% of

shipments within 24 hours of retailers. It leads to higher in-stock levels and
lower cost of goods.

Question 2 (Finance): What is TRUE about P&G sales in 2019?

(Required)
 Sales in Asia Pacific were 2% lower than sales in IMEA (India, Middle
East & Africa)
 Sales in North America were almost equal to sales in Europe, Asia Pacific
and Greater China together
 Net Sales of Europe in 2019 were about $18 billion

 Regardless of the similar number of brands, Net Sales in the Beauty

segment for 2019 were 7% lower than that of Baby, Feminine & Family Care

Question 3 (Finance): Which segment accounted for the biggest % of Net

Sales?
(Required)
 Fabric & Home Care
 Beauty
 Baby, Feminine and Family Care

 Hair Care

Question 4 (Logistics): Which of the following is TRUE about P&G's

distribution model?

(Required)
 The company is planning to get rid of the intermediaries and gradually
shift to direct-to-consumer model in e-commerce
 Customers such as mass merchandisers, grocery stores, drug stores
carry the shipping and handling costs when purchasing goods from P&G,
since P&G is their #1 manufacturer
 Customers can get finished goods for sale directly from the manufacturing
site

 Consumers bring revenue streams both to customers and P&G

Question 5 (Logistics): Which of these statements is TRUE about P&G

Supply Chain?

(Required)
 Multi-Category Manufacturing Sites are top notch technologies developed
by P&G and are scalable for other regions
 Even though the number of planning sites has grown over the past two
years, digitized planning technology has helped the company optimize its
usability
 Lower cost of goods has been achieved through the implementation of
digitized planning
  Consumer purchases trigger updates to P&G manufacturing schedules in
plants and orders of materials to suppliers. Used at its Multi-Category
Manufacturing Sites it helps the company supply goods according to actual
demand

P&G Major Hair Care Brands

P&G is the global market leader in the retail hair care market with almost 15%
of the global market share, primarily through the Pantene and Head &
Shoulders brands.

Pantene

Pantene is a global hair care brand, which includes a full line of protein-
enriched hair products. Pantene got its name from “panthenol” (pro-vitamin B-
5), which was developed in 1940 in Switzerland and was used to treat burns
during WWII. Pantene shampoo first launched in Europe in 1945.

Pantene provides one-stop service offerings for all issues related to hair.
Pantene recognizes that the hair shampoo market is crowded so it
differentiates by investing in consumer satisfaction by providing professional
care solutions.

Pantene is sold in around 100 countries all over the globe and wherever it's
sold, the brand features a different product depending on the needs of that
specific consumer base. Pantene also has a money-back guarantee, offering
refunds to those consumers who are not satisfied with the product.

Pantene targets people looking for affordable hair care and has product
offerings for the middle and upper-class groups. It also has come up with
products using behavioral segmentation with the benefits sought, for instance,
they have created a product range known as “oil replacement” for the
segment of people who find importance in oiling their hair and it is exclusively
targeted towards the Indian market.
Also, shampoo ranges like Deep Cleanse, Curl Perfection, and Repair &
Protect have been created through the understanding of different buyer types.
Pantene's current target audience is women from 20 to 49 years old who are
proactive in living a healthy lifestyle and also feel confident when their hair
looks good. It positions itself as a product that is an affordable alternative to
salon brands. In 2006, it repositioned itself as a brand that helps women
'shine'. Aproduct that helps bring out a woman's inner shine, with the help of
her outer shine that the shampoo provides. Over the years Pantene has
launched many specialized product series like Intense Rescue Shots, Pro-V
Blends, Waterless collection, etc.

Pantene aims at superior retail execution. With the store coverage, right
product forms, sizes, price points, shelving and merchandising Pantene wins
offline, and with the right content, assortment, ratings, reviews, search and
subscription offerings Pantene wins online. In 2019, Pantene was leveraging
shelf sets that have been successful in Latin America, featuring hair
treatments and conditioners in golden bottles to encourage a regimen. Where
executed, category growth has nearly doubled.

Currently, Pantene is widely available in much of the world. Priyanka Chopra

and Selena Gomez are the current global ambassadors for Pantene. There
are Pantene ambassadors for specific countries like France, India, Thailand,
Korea, Russia, etc.

Head & Shoulders

Head & Shoulders launched in 1961 with a proprietary formula clinically

proven to reduce dandruff.

Head & Shoulders has been able to gain consumer trust due to the quality of
its products. The brand deals in products targeted at the anti-dandruff
segment keeping smooth and beautiful hair. It offers products for men, women
and products that can be used by everyone irrespective of gender. These are
for dry, itchy and sensitive scalps, for relief against dandruff and also for
severe scalp conditions.
Head & Shoulders has always been on the brink of a price war with rival
companies. It faces stiff competition with several competitors and hence has
kept its prices on par through adopting a competitive pricing strategy. It has
also kept a penetration policy so that it can reach towards new markets and
gain further consumers. Head & Shoulders relies on its reasonable pricing
strategy to attract and maintain the loyalty of its consumers as its products are
affordable. Moreover, they are available in different sizes so that a person can
easily make purchases according to their personal needs. The brand also
advocates a promotional pricing strategy during the summer season by
offering discounts and incentives. As sales during that time are higher, it
results in larger volumes and greater revenues.

Question 6 (Marketing): According to the data above, which idea will be the

MOST appealing to Head & Shoulders team in terms of strategic
development?

(Required)
 Increase the prices and reposition the brand as premium
 Introduce a product for shiny hair
 Optimize the shipping costs

 Switch to men as primary target audience

Question 7 (CMK): You have several consumer profiles. Whom would you

choose to target Pantene ads? You can choose several answers.

(Required)
 An active, looks-conscious 55-year old woman suffering from dandruff
 A 25-year old man suffering from oily scalp
 An active, looks-conscious 30-year old man who needs to have his hair
shiny and smooth

 A 40-year old woman who wants to recover her damaged hair

Global Hair Care Market
Market Dynamics

The hair care market is part of the Beauty and Personal Care market. It
contains such segments as shampoos, conditioners, oils, sprays, hair colors,
etc.

Since its products are always in high demand, Hair Care remains one of the
most competitive segments of the Beauty and Personal Care market.
Characterized by the significant role of minor players (companies with less
than 1% of total sales), it is very volatile. The considerable number of players
that enter and leave the market every year, combined with the dependence on
health issues and regional conditions, contribute a lot to heavy fluctuations –
especially regarding non-premium segments.

An example is the mass segment plunge that took place in 2015. Primarily
due to the unstable environment in Latin America (where sales in one year
have reduced by 20% over one year), this fall was also an aftermath of the
European consumers' changing attitudes towards hair care. These reasons
were widely different, but they both had a strong influence on the market,
triggering a $7.7 billion slump.
Source: Euromonitor International

In 2018, the value of sales reached $77.3 billion. The market is rapidly gaining
momentum, which converts into positive forecasts for the nearest five years.
Market analysts predict that during this period, global sales of hair care
products will rise by 5% every year (given the current situation), which roughly
matches the current rate of recovery.

Market Trends

Among the main trends observed in the hair care market over recent years,
three tendencies may be distinguished: a growing share of the premium
segment, the increasing popularity of indie brands, and the rising number of
products sold online.

It is easy to agree that the diminished sales of mass products observed in

2015 became the main driver of the premium segment's enlarging market
share. Still, it is not the only reason why premium hair care started to prevail
over mass products. Above all, it is strongly connected with the modern
lifestyle. People are starting to pay more attention to their health and to put a
lot of money towards making themselves feel and look good. As proof, in the
past four years, sales of hair care products generated through health and
beauty retailers (drugstores, pharmacies, etc.) have been on the rise and
amounted to $22.3 billion in 2018, while in 2015, it was $20.9 billion. This
increase, together with the rising number of sales through grocery channels,
may be considered as indirect evidence of the fact that people try to use more
sophisticated, non-supermarket offered, hair care products. Apart from health-
consciousness, the rising share of premium products can be explained as a
consequence of a sustainable increase inglobal welfare, which provides
people with money to buy products that are more expensive. Therefore, hair
care market forecasts predict a steady development of the premium segment.
Source: Euromonitor International

The next two trends are highly interconnected. From the definition, indie
brands are small independently funded enterprises, which concentrate on one
specific segment of a particular market. Due to financial limitations, indie
brands often look for innovations – whether they are in manufacturing or any
other field of operation. As for marketing, such companies target the audience
via the internet, mostly using advertising on social networks. Hence, they have
a significant reason to sell their products online – as their prospective
consumers are online too.

Source: Euromonitor International

It is easy to notice that between 2014 and 2016 indie brands' share of the
global market was reducing, so it may appear that there was no indication that
these smaller brands would gain popularity. However, the market decline in
2015 in fact had a much worse influence on indie brands than on major
market players – mainly because of their undiversified portfolio and the
impossibility of benefiting from the economy of scale. The number of
companies plummeted, and it took some time for the indie segment to
recover.
Source: Euromonitor International

As indie brands mostly work online, they have a competitive advantage when
compared to other market players. The fact is that online sales have become
the only distribution channel to show stable annual growth. Over six years,
they have risen from $2.2 billion in 2013 to $5.7 billion in 2018. Nevertheless,
for some products the online channel is not very convenient. For example, not
many people will purchase premium hair care products from internet retailers,
as they are not able to check the product before delivery.

Question 8 (Sales): Approximate the difference between the global sales

volumes of premium hair care in 2013 and 2018.
(Required)
 $0.5 billion
 $0.8 billion
 $1.1 billion

 $1.4 billion

Question 9 (Marketing): Given the data, calculate the forecasted value for

the size of hair care market in 2020 in $ billion. Round it off to one decimal
place.

(Required)

Question 10 (Logistics): Regarding the global hair care market for the period
2013-2018, which of the following facts are true? You can choose either one
or several answers.

(Required)
 The online channel is possibly the best option for small brands
 Sales through grocery channels increased by 4–7%
 Traditional sales showed better results than e-commerce

 Pharmacies improved their sales performance

Question 11 (CMK): Market analysts enlisted the grounds for enhancing the

market share of premium hair care. Find a logical mistake they made.

(Required)
 People have purchased fewer mass products
  People began to take control of their health
 People bought more from indie brands

 People started to earn and spend more money

Regional Hair Care Markets

There are different approaches for distinguishing particular regional markets.
As for P&G, the company operates in six regions, which are: Asia Pacific,
IMEA, Europe, Greater China, Latin America, and North America.

Source: Euromonitor International

Source: Euromonitor International

Asia Pacific includes big Asian markets such as Japan, South Korea, etc.,
along with Australia and New Zealand. With $13.8 billion generated in sales
through the hair care market in 2018, it holds a leading position on the global
hair care market. As grocery retailers are still the dominating power on the
market, with lesser influence from other channels, Asia Pacific stands out as a
region where large companies prevail over small businesses due to well-
developed distribution networks.

IMEA, is a region that has a fast-growing hair care market. Although it

currently has the second smallest sales value out of all the regions ($9.1
billion in 2018), it has a lot of potential and, according to forecasts, by 2023 it
may have almost doubled and become equal to the North American market.
One interesting feature of IMEA is that seasoned companies are less
competitive in the region, since local conditions require market players to
provide personalized services. For instance, this is relevant to the Middle East
and Africa where consumers need products designed for harsh weather
conditions. Therefore, this market is more suitable for smaller manufacturers,
giving them almost 1/3 of the whole market. This is the best result globally.

Europe includes both Western and Eastern Europe, with the largest markets
being Germany, France, the United Kingdom, Russia, Italy and Spain. Once
the perfect place for the promotion of hair care products, the region is now
experiencing issues with shifts in consumer preferences. The trend for natural
ingredients has sparked arguments about the chemical components used in
hair care manufacturing and has made people refuse some mass products
such as low- and medium-priced shampoos. As a result, sales in the region
dropped from $22.3 billion in 2013 to $17.6 billion in 2016. In 2018, sales
amounted to $18.9 billion.

Greater China includes China and some neighboring territories. China is such
a large market that it is comparable to whole regions made up of several
countries. However, it is the smallest of all in terms of market sales with $8.8
billion in 2018, though it is projected to grow faster over the next 5 years. A
characteristic of this market is premiumization: along with growing income,
consumers are showing higher interest in premium products and salon
professional hair care. Chinese consumers are increasing their hair routine
and the product range for them is extending.

Latin America is the most mysterious region in terms of market dynamics. In

spite of a clear tendency to deal with large corporations, consumers are often
disappointed with their services and may turn to local manufacturers.
Therefore, the ratio between locals (especially, indie brands) and
multinationals is highly volatile. As for actual values, the market has not
recovered from the crash of 2015 when sales collapsed from $16.5 billion to
$12.9 billion. The recent figures (2018) are $12.1 billion.

North America, with its sales volume of $14.4 billion, remains the most stable
market out of all six. It slightly grows almost every year, with rare declines not
exceeding 1-2% of total sales. This region is particularly interesting, as
consumers' preference for natural components goes hand in hand with their
craving for technological innovations. As not many small enterprises can meet
both needs, the market is mostly loyal to major players.

Question 12 (Sales): Based on the provided data, choose the region where

P&G had the lowest market share in 2018.

(Required)
 Latin America
 IMEA
 North America

 Europe

Question 13 (CMK): Choose all true statements from the list below, based on
the text.

(Required)
 Asia Pacific and North America provide the best market conditions for
large companies
 In the next 5 years, IMEA will be the fastest-growing market in the world
 Consumers in Europe and North America have the same requirements for
hair care products

 The markets in both Latin America and Europe suffered from drastic falls
and still cannot recover
Question 14 (Marketing): Select the market with the lowest growth rate for
2019–2023, based on the forecasts.

(Required)
 Greater China
 Europe
 Latin America

 North America

Question 15 (Logistics): Imagine you are making a strategic decision for the

construction of a new Pantene plant. Based on the data above, where would it
be?

(Required)
 IMEA
 Latin America
 North America

 Europe

Open Questions
WARNING: Depending on your browser settings, using the 'backspace' key
can cause you to switch pages without saving your results. We recommend
working on the following essays using any text editor and then copy-pasting it
into the test form.

Question 16: You are taking part in a meeting devoted to P&G's strategic

development in view of growing indie brands. Come up with ideas for
achieving long-term competitive advantages.
 (Required)

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Question 17: You have been asked to brainstorm the issue of strengthening

P&G's position in one of the regional hair care markets. Choose any market
you want and write at least 3 suggestions about how the company could
change its approach in order to ensure sustainable growth.

(Required)

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Additional Information
Team Information

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(Required)
 
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(Required)

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Team member #2 university:

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"none"):

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(Required)

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(Required)

Team member #3 internship experience (if you don't have any, please type
"none"):
 (Required)

Is there anything else you would like to add to your submission?

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