In a crowded, competitive world where time is an ever-scarcer resource, people desire filters that can help them save time or identify potential collaborators. By creating belief networks that connect their brands to certain characteristics, consumer products companies provide consumers with valuable filtering tools. Procter & Gamble has created one of the largest collections of consumer product belief networks ever. Through savvy marketing, innovative design, a strong heritage, and brilliant acquisitions, Procter & Gamble has assembled and cultivated a collection of brands that stand for everything from quality to beauty to consistency. This stable of iconic brands, which literally numbers in the dozens, includes industry powerhouses such as Head & Shoulders, Pantene, Tide, Gillette, Pampers, Febreze, Olay, and Crest. The strength of Procter & Gamble’s brand portfolio is evidenced by both its size and scope. Many of the company’s brands are globally recognized and span a variety of disparate product areas, everything from shampoo to laundry detergent to diapers to skin care, each of which is a large and growing revenue generator for the company. Moreover, the company’s brands have strong heritages and deeply-entrenched mindshare, with many of the brands having established meaningful market share in many geographies well over a hundred years ago. This heritage aspect is particularly important since new brands can’t go back in time and create a heritage, putting them at a disadvantage versus incumbent brands such as those in Procter & Gamble’s portfolio. As a result of the social signaling value of some of the company’s brands in addition to the low-cost information filtering functions they provide (they’re quite cheap relative to most people’s incomes), we believe Procter & Gamble is likely to grow both its volume and pricing over time.
To read a more detailed description on PG as discussed in a prior investment letter, click here.
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