Why Procter & Gamble Needs to Shave More Indians

Betting on internal growth, it wants to persuade more people in more places to use its brands

In India, only half of men shave at home, something P&G hopes to change YouTube

By Lauren Coleman-Lochner

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Every Monday morning, Procter & Gamble (PG) Chief Executive Officer Bob McDonald gathers with a half dozen executives around a football-shaped table at company headquarters in Cincinnati. He and his team gaze up at a 360-degree digital map of the world and plot their next moves. Red areas of the map signal regions where P&G is being challenged by Unilever, Kimberly-Clark (KMB), and others. Areas where the company is meeting or beating goals are highlighted in green.

McDonald, a graduate of the U.S. Military Academy at West Point, is crafting P&G's strategy as he would a military campaign. After taking P&G's helm two years ago, McDonald, 57, bet he could build the consumer-products giant the hard way—by systematically converting more of the world's people into P&G customers. Unlike his predecessor, A.G. Lafley, who spent $57 billion in 2005 to acquire Gillette—which last year accounted for more than 10 percent of P&G's $78.9 billion in revenue—McDonald isn't hunting for a big acquisition. Instead, he's counting on myriad extensions of existing brands. That means persuading men in India to shave with disposable razors, convincing African women of the benefits of Western feminine hygiene products, and selling more teeth whiteners to Americans.

"It's my and other executives' responsibility to figure out how to get our growth goals without an acquisition," says McDonald, who spent eight of his 31 years at P&G working in Asia, with additional postings in Canada and Europe. "If one comes along, it's serendipitous." Still, he says the bar would be high. "We have so much opportunity that, any acquisition that would come along, we've got to measure the value of that acquisition against, for example, [the potential of] entering oral care in Brazil."

That's why McDonald has adopted a plan of "serving more customers in more parts of the world at both higher and lower price tiers." To do this, McDonald walks the aisles of drugstores and supermarkets as he travels around the world to make sure P&G products are prominently displayed. He regularly e-mails the company's largest retail customers, whether in Boston or Bangalore, as well as ordinary shoppers. And he endlessly analyzes data gleaned from P&G's proprietary computerized marketing information systems, which can crunch up to 10,000 scenarios simultaneously and predict, say, whether premium-priced diapers will be a bust in Morocco or the impact a toothpaste promotion could have in Brazil.

McDonald's focus on internal growth carries plenty of risks. First, P&G's sheer size means it needs a massive flow of new sales—more than the total revenue of competitor Church & Dwight (CHD), maker of Arm & Hammer products—just to achieve the 4 percent sales growth analysts forecast for this year. The current strategy of expanding further into markets outside the U.S.—already the source of 60 percent of P&G sales—also means the company will have a harder time increasing profits because its foreign margins are lower than those for its American businesses. That's why some investors worry that McDonald's organic growth focus may not be sufficient to jog the company's stock price, which now hovers around $65 a share, well below the $73 mark it hit in December 2007.

"We haven't seen an obvious short-term catalyst that would help them blast through," says Peter Kwiatkowski, a portfolio manager at Fifth Third Asset Management, which owns 1.9 million P&G shares. "It's difficult at this point to say, 'Wow, this is going to move the needle.' "