Procter & Gamble Italy: The Pringles Launch
1. A brief introduction of the situation presented in the case
Procter and Gamble (P&G) was founded in 1837 in Cincinnati, Ohio, USA. The innovative strategy & intimate understanding of consumer needs, made this small family-run to become one of the world´s most important consumer goods businesses. In 1980 became a truly global company investing in news companies and expanding its presence internationally. Around 1999 more than 300 brands in 140 countries generating total sales more than 38 billion dollars and provide jobs to 110,000 employees, investing two billion dollars (4.5% of total sales) to research and development. The company is the leader in numerous market sectors which major capabilities was its ability to link multiple technologies in order to create innovative, highly original products. P&G serves approximately 4.4 billion people around the world with its brands. The company has one of the strongest portfolios of trusted, quality, leadership brands (see chart 1).
Chart 1 – P&G Brands
P&G started up business in Europe in 1924 with the acquisition of Thomas Hedley in Great Britain. In 1957 when American snack market promised a great growth potential, born Pringles. After 13 years P&G finally created a winning product. In 1999 the European market was 30% of P&G´s total sales, with more 28,000 employees, 35 manufacturing plants and 06 technical research and planning centers and 100 brands in 31 countries. In Italy, P&G´s employed 2,000 people and it’s headquarter is located in Rome with fourth factories and two research centers. In 1998 the brand manager of Pringles in P&G Italy, Emanuele Carando, believed in the ideas that the team had developed but is necessary to apply the strategy of GBU would mean a major change in direction. In anticipation of the competitive challenges of the global market dynamics in 2000, P&G launched a revolutionary company – restructuring project named “Organization 2005” the objective was “Stretch, Speed, and Innovation”. The new project divide P&G in four main organizational units (see chart 2). Moreover, seven Global Business Units (GBU) were established based on product categories and were responsible for strategy definition and new product development. Chart 2 – P&G Organization
2. A description of the problem
In 1990’s P&G top management decide to expand into Western Europe after achieving success in the American market and due to the decision to revitalize the food sector by taking advantage to the strong presence of P&G products. England was chosen due to its similarity to the USA market. Before entering into the market, tests were done in Ireland without promotional activities. The results encourage to continue and when enter England they achieve a significant share. After the United Kingdom experience, they target for Germany performing tests in Austria which results performs similar to England. Finally, P&G plan was to expand to Southern Europe, where patters were different. They decide to enter Spain and Greece and tests were carried out in Portugal. Results also were encouraging, so they target to enter the Italian market.
Chart 3 – Pringles Market Share in Europe
The Italian market was characterized by a lower degree of penetration of salty snacks than in other Europe countries. Furthermore, Frito Lay – an American colossus, part of the Pepsi Group- was already in some the countries, but not in Italy. This relative undervelopment of the salty snacks category derived from a series of factors: * Strong consumer preference for sweet sancks
* The perception that salty snacks were unhealthy
* Salty snacks consumption focused around the aperitif and parties * Little attention paid by...