In a year of transformation that designated Singapore as its new beauty headquarters and saw the departure of beauty executives Ed Shirley and Virginia Drosos, Procter & Gamble capped fiscal 2012 with fourth quarter net beauty sales down 4% to $4.8 billion. The company said organic sales (which exclude the impact of foreign exchange and acquisitions) rose 1%. Sales in developing markets continued to expand, now representing 40% of P&G’s total revenue, as many developed markets underperformed. To correct slipping sales of Olay and Pantene in the U.S., P&G plans to increase innovation, boost advertising and maintain a vertical approach. “It is still a strategy for us to have a full offering in every category,” said Bob McDonald, P&G’s CEO, speaking on a conference call Friday. “In skin care with Olay for example, you can buy an item for as much as $6 or a professional product for as much as $45.” And in a reversal of recent price hikes, the company is rolling back increases in select beauty businesses. P&G executives presented a corporate initiative to accelerate the momentum of new markets and jumpstart the old. Here are four main highlights from the call.
PHOTO: Bob McDonald at the 2012 London Olympics; P&G Beauty’s pop-up salon within Olympic Village.

1. The company is kicking off a strategy dubbed `40-20-10’ that first, will focus attention on 40 top market/category businesses, such as skin care in North America and hair care in North America. According to P&G, these top 40 businesses represent 50% of sales and 70% of profits. Next, there is emphasis on 20 innovation projects designed to introduce category-changing products, a la Crest White Strips. P&G expects the first of these innovations to hit market in 2014. Third, P&G plans to further exploit the 10 largest developing markets. China is now P&G’s second largest market.

2. In its skin care businesses, P&G reported North American skin care shipments fell in the double digits. Remedial measures include the introduction of mid-tier products to stem losses and gain new distribution. Asia skin care saw a slight decline too, despite strong growth in Indonesia and The Philippines, while skin care in China was flat although Total Effects boutique and ecommerce offered positive results. In prestige, SKII, a billion dollar brand, benefited from several whitening product launches.

3. In hair care, U.S. shipments slid in the low single digits with market share holding steady thanks to growth of Head & Shoulders and growing stability of Pantene. Globally, Head & Shoulders posted double digit increases. In Brazil, hair care was up 20% attributed to Head & Shoulders and the introduction of the affordable salon brand, Wella Pro Series. Asia grew in high single digits, with shipments to India up 30% and Pantene and Head & Shoulders both gaining share.

4. To get back on track financially, P&G has been trimming costs and tightening its operations and is already ahead of schedule on its previously announced 10% headcount reduction. On the management impact, Bob said he is pleased with his current leadership team and that he has taken layers out, including 50% of vice chair positions. The changes, he said, has made decision- making quicker. “We are less linear and more hands off.” Bonuses, he noted, are aligned with results and recent payouts have been cut accordingly. “It will take time to get on the trajectory we want,” said Bob. “We know what has to be done and we are taking the right steps to get it done.”