New-product blitz opens P&G wallet

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Procter & Gamble Co. is scrapping its Marketing Breakthrough 2000 program, aimed at bringing marketing spending down from 25% of net sales to 20%, in order to finance what one analyst calls the company's "most aggressive new-product cycle in history."

The package-goods giant is planning 100 product launches in the next few years, including five to six totally new brand names, said Salomon Smith Barney analyst Holly Becker.

New P&G products likely to surface later this year include a new shampoo brand plus improved versions of P&G's flagship Tide detergent and Mr. Clean and Comet household cleaners.

A test of a revived Eagle Snacks brand, possibly with P&G's fat-replacer Olean, also is expected within the next few months.


A P&G spokeswoman confirmed that the company has "disengaged" from Marketing Breakthrough 2000 in North America, but said that doesn't indicate a failure of P&G's TV buying reorganization launched last year, results of which won't start to be felt until the new broadcast deals take hold in September.

"Every indication is that it's going to deliver the intended benefit," she said of the consolidation that landed P&G's TV buying at MacManus Group's TeleVest.

The new products include a new powdered Tide already in test in Colorado, Wyoming and parts of Nebraska and South Dakota, containing activated hydrogen peroxide. Ms. Becker anticipates similar improvements in Tide liquid will roll out before yearend.

The P&G spokesman wouldn't comment on that.

The coming products would follow rollouts earlier this year that include Fat-Free Pringles, Febreze fabric deodorizer and Oil of Olay Pro Vital. And in test markets are Dryel fabric conditioner and ThermaCare disposable heat pads.


The P&G spokeswoman said although the marketer is ending Marketing Breakthrough 2000, it hasn't lost focus on streamlining to get more impact from its marketing dollars.

"We're always looking for ways to make our investment work as hard for us as we can," she said. "But in terms of formally tracking expenditures and formally . . . driving toward that target, I wouldn't say we're expending that kind of effort."

Indeed, the company is going ahead with its "agency renewal" program designed to wring the costs out of its marketing expenses (AA, Feb. 2). Agency executives continue to believe that program will eventually end in compensation cuts.


Some may come earlier than expected. While the company plans to pump up budgets for new products, at least one P&G agency executive said the marketer will pare U.S. ad budgets for existing ones to make up for revenue shortfalls caused by the Asian economic crisis.

"They're ripping and slashing budgets as we speak," said the executive.

P&G wouldn't comment on its ad spending plans.

Ms. Becker said she expects P&G's earnings to fall below her initial expectations in the second half of 1998 because of Asia and the cost of supporting this year's Olean rollout.

She expects the company to make up the shortfall in the first half of '99.


P&G's expenditures for Olean seem to be paying off, however. The marketer told Ms. Becker that shipments of Olean are 25% ahead of plan, indicating Frito-Lay and P&G fat-free products are "flying off the shelves."

Marketing Breakthrough 2000 was launched in December 1995 with a memo to agencies from Robert Wehling, senior-VP advertising, market research and government relations. But for the fiscal year ended June 1997, P&G's marketing spending as a percentage of net sales actually rose slightly to 24.3% from 24.1% a year earlier.

Ms. Becker's estimates show P&G marketing expenses falling to about 23% of sales for the current fiscal year and fiscal 2000, well short of the 20% goal.

Copyright May 1998, Crain Communications Inc.

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