Innovation doesn’t only happen in the tech world; just ask The Procter & Gamble Company (NYSE:PG), the “stodgy” consumer products giant that has been around for over a hundred years. Innovation is actually a key component of its strategy to grow and return value to shareholders.
Recent improvements in “diaper technology” might allow the Ohio-based company to boost the profit it makes from its most valuable brand by using a tried and true business practice known as “downsizing.”
Starting in mid-September, The Procter & Gamble Company (NYSE:PG) will put fewer but more absorbent diapers in its packages. Pampers, the number one selling brand for the company, targets the premium portion of the market. This will please all those moms and dads out there, as their babies will not have to be changed as often, and they probably won’t notice that they are buying fewer diapers. The company plans to keep the retail price steady so revenue will not be adversely affected. And recurring costs will decline as less material is used per package at the same price. The bottom line is that the Pampers bottom line may actually improve and contribute to overall growth.
The company could use some help. The Procter & Gamble Company (NYSE:PG) has been reporting relatively sub-par performance over the past few years , including a modest 4.6% increase in earnings per share over the past year.
In 2012 the company innovated within another of its billion dollar brands, Tide, by releasing a completely new product. The Pod packet was targeted for the high end of the laundry detergent market, and The Procter & Gamble Company (NYSE:PG) reported higher sales and a dominant market share after it was released.
The Procter & Gamble Company (NYSE:PG) competitor Kimberly Clark Corp (NYSE:KMB) has no plans to reduce the number of Huggies, its diaper brand, or raise prices to jump-start growth. However, it does intend to roll out a new initiative on social media designed to increase revenue, which hasn’t grown much lately .
The platform is called Pick Up The Values. The company will provide suggestions to shoppers and steer them toward the many consumer products it sells, such as Scott paper towels and Kleenex tissues.
In spite of that slow revenue growth, Kimberly Clark Corp (NYSE:KMB) still manages to pay and increase its dividend year after year, something that The Procter & Gamble Company (NYSE:PG) also does.