The Procter & Gamble Company (PG) Under Serious Pressure: Unilever plc (ADR) (UL)

Strategy going forward

Given that beauty products contribute close to 25% to the total revenue of P&G, investors and several other analysts expect the company to make a few changes in order to avoid losing further ground to competitors.

Aggressive pricing – It is essential for P&G to address the issue of losing market share on the basis of price positioning. The company operates on higher price per unit relative to Unilever, and it is evident it will continue to lose ground to competitors if it shows rigidness to compete on prices. During the final quarter of 2012, the average prices in the beauty segment of P&G grew by 3%, on the contrary prices in Unilever’s personal care grew by 3.3%. The Procter & Gamble Company (NYSE:PG) seems to be realizing the importance of price wars which may lead to squeezed margins, nonetheless it can be made up by a deeper market penetration.

Strategic packaging – Responsiveness to price sensitive markets underpins Unilever’s success. Unilever responded strategically to the current price sensitive nature of the developed regions by offering products in lesser quantities for consumers with weaker purchasing power. P&G has exhibited some interest in implementing this strategy in few product categories; however it still remains to be seen if the company inculcates this strategy across all product categories

Differentiation through Innovation – Incremental Innovation still remains the nucleus of consumer goods industry. Frequently, coming up with new innovative products is a pre-requisite to survival in the industry. Going forward, coming up with diverse and better positioned product lines will allow it to remain competitive against the likes of Unilever.

Investors must keep a close eye on how The Procter & Gamble Company (NYSE:PG) addresses these issues, as any long-term organic growth will only be witnessed once these problems are resolved.

The article Procter & Gamble (NYSE:PG) Under Serious Pressure originally appeared on Fool.com and is written by Ashit Gulati.

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