There is a lot of talk about how oversaturated Western economies are with consumer goods and how it's tough for stalwarts like Procter & Gamble
How P&G is growing at home
Ten years ago, Tide was the most well-known laundry detergent. Today, it is still the most well-known laundry detergent. Not much has changed in those 10 years, except that P&G doubled Tide's annual revenue. Keep in mind this is a nearly 60-year-old laundry detergent we're talking about.
How does something like this happen? Part of the reason is that Procter & Gamble takes innovation very seriously. It spends $2 billion a year on research and development, almost 50% more than its closest competition. For perspective, Clorox
Take Tide Dry Cleaners, for example. Hoping to capitalize on that solid Tide brand, P&G opened a dry cleaning operation outside of Kansas City. The result for the pilot store was $1 million in annual sales, almost four times the industry average. Not bad, Tide.
Obviously, doing business in the developing world calls for a different model. Though many will try, it takes a special company to be strong enough and smart enough to succeed in both markets.
Procter & Gamble has been criticized for its approach to India, a country where consumer goods foe Unilever
To investors' delight, P&G has set ambitious goals in India, planning to double the number of Indians who use its products and quadruple net sales over the next four years. P&G has consistently grown sales in India by 20% annually, but this still seems like an ambitious goal. To achieve it, the company plans to focus on distribution. Right now, Unilever reaches 1.6 million outlets, while Procter & Gamble only reaches 1.3 million. By pushing its products deep into rural villages and stepping up community-led programs, P&G hopes to increase brand awareness and thereby increase sales.
We all know companies can say whatever they want, but what they actually do, on the other hand, is another story. Procter & Gamble's history of success and its commitment to R&D are two reasons that give me faith the company will continue to perform domestically and be able to reach its goals in India and in other developing markets.
Fool contributor Aimee Duffy doesn't own shares of the companies mentioned in this article. The Motley Fool owns shares of Clorox. Motley Fool newsletter services have recommended buying shares of Procter & Gamble and Clorox. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.