Procter & Gamble's Tricky Ambitions

If you're not holed up in a remote compound in the forests of Montana, you've probably seen or heard someone talk about Old Spice's new popular viral marketing campaign. That's great news for parent company Procter & Gamble (NYSE: PG). However, P&G is about much more than a single brand, boasting the most impressive list of consumer goods brands in the world. When you're a $180 billion giant with unparalleled span across product categories, the real wins come from finding ways to reposition the entire product portfolio for greater success.

At the Jefferies Global Consumer Conference, Procter & Gamble discussed its plans for continuing expansion across its product lines. Leading the charge was international expansion. Some 60% of P&G's sales are international already, but there are still fantastic opportunities for expansion. For example, the company has seen great success in Russia with its Naturella product. Sales of that product in Russia have increased 2.5 times over the past three years while after tax margins increased 900 basis points and the company took segment share from competitors.

That kind of sales growth in BRIC-level emerging markets is heartening. Across geographies, P&G competes with other giants such as Unilever (NYSE: UL) and Colgate-Palmolive (NYSE: CL), and the somewhat smaller Clorox (NYSE: CLX). Margin strength is a key concern, as not only other major competitors could target market share at the price of lower margins, but local companies could exploit a lower cost structure to undercut larger multinationals. Margin concerns are particularly high in slow-growth economies.

While larger retailers like Wal-Mart (NYSE: WMT) have attempted to simplify their level of product offerings, P&G is taking the opposite course and aggressively expanding along "value-tiers." P&G repeatedly illustrated cases where it wants to leverage its products vertically, offering different price levels on the same underlying brand.

That's a tricky maneuver for any company. P&G risks diluting its brands or having consumers move downstream to its cheaper products, especially in hugely profitable segments such as its detergents, where value-focused competitors such as Church & Dwight (NYSE: CHD) are performing well. However, P&G also has initiatives to drastically simplify the amount of formulas and specifications in its products. If done correctly, that's an effective use of the company's scale and could reduce costs for each level of the value-tier for different brands.

For more information on P&G's tightrope act of moving into value while protecting its margins, click on the slideshow below: