Sunday, December 26, 1999

P&G, Jergens ride wave of growth

Local manufacturers should see profits rise

The Cincinnati Enquirer

        A healthy U.S. economy and steady demand for low-ticket, basic consumer goods should continue to boost sales and profits for local manufacturers, analysts say.

        Packaged goods makers, including Cincinnati's Andrew Jergens and the industry's 800-pound gorilla, Procter & Gamble, are expected to continue to improve their core product lines through innovation. The result: increased spending on research and development.

        Jergens, for example, plans to add new formulations to its highly successful Biore skin-care line, which has sold more than $180 million worth of products since its introduction in 1997.

        And P&G is working on line extensions for several of its most popular brands.

        In addition to “new and improved” versions of the most familiar brands, consumers all over the world are also likely to see a plethora of new products on store shelves next year.

        P&G alone has promised to introduce at least 20 new products by 2001. It is already off to a blazing start, with the launch this summer of two new blockbuster products — Swiffer electrostatic cleaning cloths and the Dryel home dry-cleaning kit.

        Swiffer already has racked up $200 million in worldwide sales in less than six months on the market, making it one of the hottest selling new products this year.

        “These multinational companies generally offset the volatility risk of selling products in the developing world with wide diversity in terms of both product mix and geography,” said Alice Longley, an industry analyst with Donaldson, Lufkin & Jenrette in New York.

        Consumer goods manufacturers are among the few multinational companies that derive a large share of their profits from the developing world, Ms. Longley said.

        P&G, for example, sells more than 300 product brands in more than 140 countries and generates about half its profits outside the United States.

        Although economic and political turmoil in many parts of the world — particularly Russia and Latin America — have hurt sales and earnings in recent months, the outlook is now much brighter, Ms. Longley said.

        “We continue to remain enthusiastic about rebounds in countries of the developing world as a major source of growth” for consumer-goods manufacturers, she said.

        Companies with ample cash flow, such as P&G, also are expected to continue to grow their businesses through acquisition of local brands throughout the world.

        The acquisitions will be those that “are fairly easily and quickly expanded through international (distribution) networks already in place,” Ms. Longley said.


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