The Global Demographic Tailwind

[DewDiligence]

PG, up 4% today on this news, is one of the better investment
plays on The Global Demographic Tailwind. Surely, the emerging
middle class in many countries will increase the global demand
for the health and beauty aides and the household products such
as detergents that PG sells.

PG will account for the pharma business as a “discontinued operation”
for GAAP purposes, which will help its year-over-year quarterly
comparisons by taking the prior year’s pharma income out of the
calculation. (This is what I expect MON to do with its Roundup
business in due course!) PG’s own PR today, which includes a
reconciliation of the prior EPS guidance with the new (ex-pharma)
EPS guidance, is at: http://finance.yahoo.com/news/PampG-Updates-Fiscal-Year-prnews-319878250.html?x=0&.v=1 .

http://online.wsj.com/article/SB125258933720499429.html

›P&G Plots Course to Turn Lackluster Tide

New Chief McDonald Plans Price Cuts, Expansion Abroad and Repositioning Cheer as a Low-Price Detergent

SEPTEMBER 11, 2009
By ELLEN BYRON

Procter & Gamble Co.'s chief executive on Thursday laid out measures to address lackluster profits and sagging market share, including price cuts, overseas expansion and plans to reposition the Cheer brand as a low-price detergent.

Robert McDonald, who assumed the post of CEO in July, offered his most detailed plan yet on how to reignite flagging sales as cash-strapped shoppers forgo the company's premium products for less-expensive options. Speaking at a conference, he assured investors that P&G was "in touch with reality," and had "a sense of urgency."

In a rare admission that P&G's performance has fallen behind its competitors', Mr. McDonald conceded that the consumer-products titan had underperformed by measures including organic sales growth, which excludes the effects of foreign exchange, acquisitions and divestitures. "We've been lagging the competitive average for some time," he said. "That is unacceptable."

His frank, detailed presentation shifted sentiment among some P&G watchers and helped send the company's shares up 4.2% to $56.04 in 4 p.m. composite trading on the New York Stock Exchange.

P&G "has taken the gloves off," said Deutsche Bank analyst Bill Schmitz. "People thought they had become complacent, waiting for the economy to turn, but this is a change in rhetoric for sure."

The Cincinnati-based company also issued a forecast for organic sales for the fiscal second quarter. For the period, which ends in December, it predicted a gain of 1% to 4% from a year earlier. P&G also confirmed its previously issued guidance that the current quarter's [i.e. FY1Q10, which ends 9/30/09] organic sales will be flat to down 3%. [“Organic sales” are sales in constant currencies excluding the effects of acquisitions and divestitures.]

"We acted with urgency to protect the structural economics of our business last year, and we are acting with urgency this year to deliver profitable market share growth," Mr. McDonald said in a prepared statement.

P&G has resisted cutting prices because of factors such as high commodity costs and a fear of hurting its brands' image of superiority. But throughout the recession, less-expensive versions of household staples have dented the dominant market share that P&G's products have long held. To narrow the price differences with competitors, the company said it would reduce prices or increase promotional spending on about 10% of its business.

Tide and Cheer laundry detergents are among the brands targeted for reductions. Tide, which can cost more than twice as much as private-label detergents, will have "targeted interventions" on its larger sizes, the company said.

P&G also is testing Tide Basic, a version that costs about 20% less than regular Tide. Meanwhile, P&G plans to reposition Cheer as a value brand, cutting its price by about 13%.

In addition, P&G plans to accelerate its international expansion [nothing new about this]. With about four billion of the world's consumers using P&G products, Mr. McDonald wants to reach an additional billion people by 2015.

Some analysts remain skeptical of P&G's plans. "The company is broadly losing share across its portfolio in the core U.S. market, and emerging-market sales have lagged peers," Goldman Sachs analyst Andrew Sawyer wrote in a research note. "Although the company is clearly devoting more resources to brand support, many of its key competitors are doing the same on a proportionate basis."‹