PROCTER & GAMBLE OUT TO SIMPLIFY ITS PRODUCT LINES;TESTING, RESEARCH PARADOXICALLY BOTH LEVERAGE PRODUCTS, IMPEDE MARKETER

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When Procter & Gamble Co. President Durk Jager shops for cat food, he's befuddled by the enormity of choices in supermarket aisles.

"Simplify" is the motto of Mr. Jager, who worries that too much choice results in dazed, not dazzled, consumers. And the consequence of confusion is a loss of brand equity and loyalty.

The question is, can P&G sell fewer, larger brands and still meet its sales goal of $50 billion by fiscal 2000? Sales must grow 9% annually to reach that mark, but rose just 5.4% to $35.3 billion in fiscal 1996, ended June 30, and only 0.9% in that fiscal year's final quarter.

ON TRACK TO DOUBLE

At its current pace, P&G is on track to meet its goal of doubling unit volume and earnings in 10 years.

"We want to ensure that every P&G product on the shelf is serving the consumer," Chairman-CEO John Pepper said. "Our expectation is every new P&G stock-keeping unit will be in the top half to top third of its category in unit sales."

So, while P&G introduced 81 products either into test markets or expanded areas from January through mid-August of 1996-up from 74 in the year-earlier period, according to Marketing Intelligence Service-that doesn't mean a majority will turn up nationally.

What Mr. Pepper is looking for is bigger impact from bigger ideas, and fewer line extensions and "flavors of the month."

RESEARCH, TESTING TO BLAME

"As we go through the history of the company and see where our strengths are-Tide, Pampers, Crest-it's grown out of genuine technological advantage," Mr. Pepper said. "The expectation is by focusing on technical superiority, we're going to have leadership brands and be able to drive superior rates of growth."

P&G's successful product launches in recent years have leveraged such technological advantages. However, the company's rigorous approach to product research and consumer testing has caused it to miss a few big opportunities, too.

Technologically sexy brands already in test include Febreeze, a fabric and carpet deodorizer spray that clings to odoriferous particles and neutralizes them on fabric.

In late August, P&G began test marketing a Pantene Pro-V hair spray it said will revolutionize that category since it leaves hair neither stiff nor sticky.

And P&G just launched its first market test of Fat-Free Pringles, made with Olean, in Columbus, Ohio.

More mundane line extensions are still a big part of the testing mix at the company, however.

Flagship Tide, for instance, is testing Mountain Spring Tide in Los Angeles; San Diego; Phoenix and Tucson, Ariz.

P&G, Mr. Pepper said, has "more research and development projects going on that represent more new categories than I think we've ever had before."

In Mr. Pepper's first year at the helm since succeeding Edwin L. Artzt, corporate R&D spending increased 6% as most other costs were cut. P&G filed for 17,000 patents in 1995, up 35% from 1994.

"They are by far the leader in the industry," said Smith Barney analyst Holly Becker. "In R&D, Procter is the only company in most categories that still does the `R.' "

LACK OF INNOVATION?

Even so, New England Consulting principal Gary Stibel isn't enthusiastic about the current new efforts.

"They have simply not rung the bell," Mr. Stibel said. "They've bought more of their new businesses than they've created from scratch. A company the size of Procter & Gamble has to be creating new categories."

P&G's reluctance to do that was evident when in the late 1980s it decided training pants wouldn't work, leaving Kimberly-Clark Corp. to turn them into a $400 million segment.

More recently, its nosedive in U.S. toothpaste share-now at 28%-has been blamed on market research that incorrectly concluded consumers didn't want baking soda and peroxide toothpastes.

The legendary thoroughness of P&G's market research can also work against it. Right now, P&G is approaching its fourth year of testing Folgers concentrated coffee formulations.

Even on less revolutionary products, P&G is often painfully slow. While P&G tested its Tide Treatments line over the past year, Unilever rolled a similar brand extension of its Wisk brand nationally.

Mr. Pepper's globalization strategy, some say, makes conventional new-product success less vital.

SOME HITS ON THE WAY

"Historically, a new product would be something introduced in the U.S. that either extended an existing category, increased market share or moved them into a new category. That's less meaningful to P&G and more risky than taking something they're already good at and running with it" globally, said Jay Freedman, portfolio manager at Lincoln Capital Management, a P&G shareholder.

One potential global hit is Fat-Free Pringles with Olean, the brand name for its olestra fat substitute. And there is a possible global launch of Oil of Olay cosmetics and the expected national launch of at least one new Crest toothpaste, to be preceded this fall by a $30 million introduction of Crest Deep Sweep, a new toothbrush.

The toothpaste, the company hopes, will make up for its failure to join the baking soda and peroxide fray, as well as compete with Colgate-Palmolive Co.'s upcoming U.S. introduction of its Total brand.

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