P and G would like to remind you that today's presentation includes a number of forward looking statements. If you will refer to P and G's most recent 10 ks, 10 Q and 8 ks reports, you will see a discussion of factors that could cause the company's actual results to differ materially from these projections. Also, as required by Regulation G, P and G needs to make you aware that during this presentation, the company will make references to several non GAAP and other financial measures. For completeness, we have posted on our website, www.pginvestor.com, a full reconciliation of non GAAP and other financial measures. Here is Chairman, President and Chief Executive Officer of the Procter and Gamble Company, David Taylor.
Good morning, everyone. Welcome to Cincinnati and welcome to all of you that are joining on the webcast. For those of you that were here last night for the reception, I hope you had the opportunity to meet many of our leadership team, most of whom are with us today. If you've listened to any of our investor presentations this year, you've hopefully taken away one key thing, a focus on balanced growth and value creation. It is the same thing in all our internal strategy discussions, leadership team meetings and global webcast.
We have one very clear objective, balanced top and bottom line growth and strong cash generation that delivers total shareholder return that returns P and G back to consistently in the top third of our peer group. Our long term growth algorithm is aimed at delivering organic sales growth modestly ahead of the underlying growth of the markets where we compete. Our markets today are growing somewhere between 3% and 3.5%. We want to do a bit better than that consistently. We're targeting core earnings per share growth of mid to high single digits, which requires annual margin expansion of 30 to 70 basis points each year.
We will aim for high single digits, but we feel the total range reflects the reality of a slow growth environment like we're currently facing. This range also reflects our intention to maintain strong investment in the business to support top line growth, including in periods when macro factors like foreign exchange or commodities are working against us. We expect to turn these earnings into strong levels of cash generation, delivering free cash flow productivity of 90% or better every year, consistent, sustainable, balanced growth and value creation. To deliver this objective, we've been focusing on big opportunities within our control. 1st, building and investing in business plans to grow our categories and attract more users to our brands to accelerate top line growth.
2nd, driving productivity improvement and cost savings to fuel investment and margin improvement 3rd, streamlining and strengthening our portfolio and 4th, transforming P and G's organization and culture. These four forces are mutually reinforcing. They enable and build upon each other. They will contribute to stronger balanced top line, bottom line and cash flow growth. Now looking at this morning, we have a full agenda.
John will lead us off with a brief overview of results and a recap of our outlook for the fiscal year. Then John and I will lead a discussion on the 4 focus areas and the progress we're making right now in each of those. We hope to bring the work we're doing to life with presentations from several of our business unit and selling and market operations leaders as well as leaders from our product supply and marketing organization. We will give you a chance in the middle to stretch your legs, then we'll come back and finish up with your questions. I thank you again for joining us for those of you did last night and today.
And now I'll hand it over to John.
Thanks, David. As you know, we recently announced our Q1 results, which mark a good start to fiscal 2007. 1 of our key priorities has been to reaccelerate growth. Organic sales for the quarter grew 3%. This includes about a 1 point drag from the combination of rationalization and strengthening work we're doing on the ongoing portfolio, and it includes the impact of reduced finished product imports into Venezuela.
Top line growth was broad based across categories and markets. Organic sales growth in the U. S. Progressed from 1% in the first half of last fiscal year to 2% in the second half to 3% in the quarter that we just completed. Growth in China, minus 8%, minus 2 to plus 2 over those same time periods.
We've been making sequential progress also in each of our 4 largest categories, baby care, minus 2, flat, plus 2, grooming, plus 2, plus 3 and plus 3, Fabric Care, +1, +1, plus 5 and Hair Care, -one, flat, plus 2. July September organic sales grew in each reporting segment and in all 10 product categories. Still, work and opportunity remain. Hair Care and Baby Care, 2 of our largest categories, were both up 2%, but below the rates of market growth in those categories. These businesses, along with the grooming business in the U.
S, represent notable opportunities for further top line improvement. On a geographic basis, organic sales grew in each region and in 9 of the 10 largest markets. And here too, opportunities remain. Sales in the UK, for example, which continues to be a very challenging highly promotional market were down 2%. Organic sales in China and Russia grew 2%, but again below the pace of market growth.
Progress, but more work to do. Sales growth in the quarter was volume driven. Organic volume was up 3%. All in sales for the company were in line with the prior year, including the 3 point headwind from foreign exchange. Moving now to the bottom line, core earnings per share were $1.03 which was up 5% versus the prior year.
Foreign exchange had a negative 7 point headwind on 1st quarter earnings. On a constant currency basis, core earnings per share grew 12%. Core gross margin increased 50 basis points. On a constant currency basis, core gross margin was up 130 basis points, including 190 basis points of productivity improvement. Commodities were a modest hurt to gross margin in the quarter.
Feedstocks for propylene, ethylene and tropical oils are up as much as mid teens since we put our plans together for fiscal 2017. And wage inflation is also an increasing challenge in many developing markets. Productivity improvements contributed 2 70 basis points of operating margin benefit. We reinvested a significant portion of those savings in product and packaging innovation, media reach and continuity, sampling, R and D, sales coverage and targeted consumer value adjustments in order to accelerate top line growth. So on a net basis, core operating margin was up 20 basis points for the quarter.
On a constant currency basis, up 120 basis points. All in GAAP earnings for the preferred share were $0.96 for the quarter, also up 5% versus the prior year. We generated $2,300,000,000 in free cash flow with 85 percent free cash flow productivity, returning 2 $900,000,000 to share owners, dollars 1,900,000,000 in dividends and $1,000,000,000 in share repurchase. Our share repurchase flexibility was somewhat limited in the Q1 due to the trading restrictions related to the CODI transaction. So again, all in, a good start to the year.
As we move forward, progress won't be a straight line. There will be quarter to quarter volatility. As you well know, comps get more difficult. We need to manage significant geopolitical and currency volatility across a number of our markets. In Egypt, the pound just devalued by 50% and new margin limits were set for the categories that we compete in.
The Philippines has just set pricing controls. Nigeria is experiencing an economic crisis resulted in very limited access to hard currency. There have been significant devaluations in the wake of the U. S. Elections.
Our competition is not standing still. We have work remaining in some categories and markets to get our brands back to market levels of growth. These opportunities are being addressed category by category, brand by brand, channel by channel. We're after it, but it's not going to happen overnight. While it's very difficult to tell where things will net out, we're currently maintaining our organic sales growth and core earnings per share outlook for the fiscal year.
We're expecting organic sales growth of around 2%. This includes about a half a point of headwind on an annual basis from portfolio rationalization and strengthening work within the ongoing 10 categories, which will dissipate as we go through the year. It also includes a headwind from the lost sales for our Venezuelan subsidiaries in the first half of the fiscal year. We expect all in sales growth of about 1%, including a one point drag on growth from the net impact of foreign exchange and divestitures. Our bottom line guidance is core earnings per share growth of mid single digits, and that range reflects the volatility of the markets in which we compete.
It reflects the investments we intend to make in the business to accelerate organic sales growth in a sustainable, long term, market constructive, value accretive way. We're still sorting through the foreign exchange and geopolitical impacts of the U. S. Elections. We do not plan to cut investments as a way to manage through these events.
So we'll have to see as things settle down where we net out for the year. However, it's unlikely the very recent impacts we've felt will reverse or be covered within the Q2. Fiscal 2017 will be another year of significant value return to share owners. We expect to pay dividends of over $7,000,000,000 We reduced outstanding shares by $9,400,000,000 in the transaction with CODI, and we expect to make $5,000,000,000 of direct share repurchase, total about $22,000,000,000 in dividend payments, share exchange and share repurchase. We continue to outlook up to $70,000,000,000 in dividend share exchange and share repurchase over 4 years through fiscal 2019.
As David said, our long term objective is to return to and sustain balanced growth and value creation. Leadership total shareholder return requires balanced top line growth, bottom line growth and high cash efficiency. This is an opinion, this isn't the philosophy, it's a fact. Delivering top third TSR entirely from the bottom line would require 200 points of margin growth each and every year. That simply isn't going to happen.
Our competitors aren't going to let that happen. Delivering top third TSR entirely through the top line would require 8% organic sales growth year after year. That's never happened in our industry. It isn't going to happen. Balanced top and bottom line growth along with high cash efficiency is the only way we get home, period.
We must accelerate top line growth, reaching and sustaining organic sales growth at or slightly ahead of underlying market growth. We've strengthened our growth hand through our portfolio moves and are transforming our organization and culture to more consistently win. Productivity improvement and cost savings underpin all of this, providing fuel for top line growth and margin expansion. I'm going to start there with productivity in terms of covering the 4 focus areas that David mentioned. Top line growth and bottom line growth are simply not separate endeavors.
They reinforce and fuel each other. Nearly 5 years ago, we stated we needed to make cost and cash productivity part of our culture, as integral to our culture as innovation. We've made significant progress. Over the last 5 years, we've accelerated and exceeded each of our productivity objectives. That strong track record and our line of sight to additional opportunity inform our intent to save as much as another $10,000,000,000 in costs over the next 5 years.
We expect to reinvest, as David said, a significant amount of the savings in R and D and product and packaging improvement and sales coverage and brand awareness and trial building programs to deliver balanced top and bottom line growth. We're driving productivity up and down the income statement and across the balance sheet. All areas of cost and cash are opportunities for productivity improvement. I'd like to introduce my colleague, Ioannis Kupfelis, our Global Product Supply Officer, to share with you in more detail productivity areas opportunities in the area of cost of goods sold.
Thank you, John. Ladies and gentlemen, good morning to you, and I'm really honored to be with you. Back at 20 14 at our Investor Day, I shared with you the great progress that is being made more to tell you that we were able to exceed that commitment and with more than $7,000,000,000 of savings, and I am excited to share our plan to sustain this productivity with significant potential ahead of us. I am more than confident that cost of goods savings can once again be a key contributor to the company's intent to save $10,000,000,000 over the next 5 years. So let me explain how I see this.
We are making significant investment in supply network transformation. We actually call it synchronization. This is the creation of supply network all the way from our customers to our suppliers, which responds in real time to consumer demand. In an ideal world, our supply network would be fully linked and synchronized with real time point of sales data and a consumer purchase literally will trigger updates to our manufacturing and planning schedules and us ordering materials to our suppliers. This transformation, it is a strategic imperative to serve the evolving needs of our customers, of our consumers and be a huge value creation for our company.
Synchronization starts with digitally linking P and G supply network to our This allows us to respond with the right product on the right frequency and it allows both parties to reduce inventory and cost. I would like to cite a great example this of our North American mixing center network, which is shown here. Through this network, we can reach 80%, I will repeat that if you don't mind me, 80% of our customers in less than a day. And this network opens up new cost savings opportunity for all of us. By using mixing centers, we are able to put more product on each track, reducing the number of tracks on the road.
And we have literally more concentration on key shipping lanes, allowing us to secure a far better pricing and a far better service. In many cases, we are creating dedicated lanes filling trucks that would have previously been empty. As a result, transportation in North America has been reduced, reduced significantly despite higher labor cost and tight freight capacity. And if you wonder, this is not only North America, Similar benefits from synchronization are being delivered in places like Latin America with 13% savings in transportation and warehousing over the past 3 years. As importantly, for our retail partners, and on self availability has reached record levels.
As you can imagine, this drives both top and bottom line. Now synchronization is powered internally by highly automated operations with globally standard equipment that we call manufacturing platforms. Over the past decade, we have reduced the number of platforms by 50%, outside the example of laundry liquids where we have reduced the number of bottle sizes from 100 to 20. Now these platforms provide faster, more efficient response timing to product changes and initiative launches. We are relentlessly focused on making these operations more efficient.
Much of the progress today could be attributed to what we call integrated work systems or IWS is our manufacturing methodology that focus on 0 loss identification and 100 employee involvement, total employee involvement. There are 4 phases in this particular methodology of IWS. As you progress, you reach levels of excellence, of stability, productivity, agility and integration. As you can imagine, Phase 4 is the highest level. Over the past 5 years, we have increased the number of sites at Phase 3 and 4 from 37
percent to 70%.
These sites have the highest capability and deliver the most value creation. Our methodology, together with affordable automation and digitization, delivers manufacturing productivity. A great example comes from our Mariscala site in Mexico, where over the past 4 years we have increased productivity by 60%. Almost half of that improvement is attributed to the digitization programs that we have and the other half is related to automation programs where robotics come in play, robotics in the area of palletizing in automated guided vehicles and automated bottle sorting. For the total company, these programs in manufacturing have contributed to 27% same site enrollment reduction over the past 5 years.
We expect this progress will continue and actually we think automation as it becomes more affordable and digitization along with digitization will eliminate manual work and will increase our organizational capability across the globe. We are leveraging our supply network design to accelerate adoption of all these platforms, adoption of automation, manufacturing standardization to fewer strategic sites, multi business unit sites that operate together and they are located close to population centers. Since 2013, four years ago, we have reduced our number of plants globally by 10% while increasing the percentage of multi category sites by 15%. I want you to know that this transformation is underway in North America, in Europe, and we are expanding it in Latin America, Middle East and India and all other markets in the near future. These new manufacturing sites are being built with efficient overhead structure so that they can be located strategically and help us reduce both the wage rates and the transportation and warehousing costs.
When we initially announced the transformation, we talked about delivering up to $2,000,000,000 in shareholder value. I want you to know that these plants are on track, and we expect the savings to ramp up over the next several years as we move past the initial period of investment. This entire supply network of physical assets is being synchronized through a digital sales and operating planning work, which spans across from a finished product of our customer shipments all the way to our suppliers. In 2012, we launched a program to simplify that entire planning ecosystem from 300 planning centers to 8 of them. This has enabled us to standardize the entire system and processes and significantly improve our productivity.
This journey continues now, continues by investing in what is called algorithmic planning, enabling agility, accuracy, while improving organizational capability and driving more savings. We are also focused on more strategic supplier relationships. We have fewer, we have integrated the suppliers with us and we can now leverage even more our scale, digitize the flow of information, reducing production costs for both parties. Now we will continue to strategically optimize our supplier base and expand our integration so we can drive up more savings. Over the past 5 years, we have reduced our total number of suppliers by roughly 20%, and we began most importantly, and I think that's quite a fascinating evolution, to co locate some of their employees next to our planning centers.
We actually have 50 suppliers that as we speak across the globe, they are co located on our working floors and at our own planning centers. Suppliers, partnership and collaboration, I want you to be reassured, leads to new savings opportunities. For example, we have reduced perfumes for more than 30% as part of our business simplification efforts. This simplification creates bigger, fewer spend pools and allow us to drive better pricing and reducing the production cost for P and G and for our suppliers. We have saved in that area over $250,000,000 since that fiscal year F for 2014.
Now on top of these savings, we continue to focus literally eliminating non value added costs from our product design and manufacturing process. I would like to cite the example in baby care where we have implemented a technical solution on our converting lines to combine material that has given us an ability of close of savings of close to $50,000,000 on the lines. This lean approach is not only the examples of perfumes and baby, I want to know it is embedded in every one of our business units. Now representing 62,000 men and women in product supply, I would like to close by discussing our culture, the plan that brings to life everything that we do, every single one of our men and women in product supply, they are hardwired in delivering value creation for P and G. We are continuously re skilling this workforce by adopting and adapting technology that improves productivity and customer service level.
I believe that this calendar, along with our synchronization strategy and umbrella, gives us great confidence that we will be able to meet our productivity commitments and that we will continue to fuel the top line growth and gross margin improvement for years to come. I would like to thank you and turn back to John. Thank you. Thanks, Ioannis.
Through the work that Ioannis has just described and as he's mentioned, we've reduced manufacturing enrollment by 22% all in over the last 4 years. That figure includes staffing necessary to support capacity additions. And as Janus indicated, on a same site basis, manufacturing enrollment is down about 27% through June 2016 with additional progress planned in 2017. In February 2012, we announced that we would reduce non manufacturing or overhead enrollment by 10% over 5 years. As of July 1, we've reduced rolls by nearly 25%, 2.5 times the original target.
Including divestitures, we'll reduce rolls by about 35% by the end of fiscal 2017. To put these headcount reductions into perspective, we compared ourselves to 3 gs, generally regarded as a best in class benchmark in cost management and overhead efficiency. Our 25% reduction in overhead manufacturing staffing compares to the 3 gs benchmark range of 5% to 23%. We continue to see additional opportunity, even with continued reinvestments back into R and D and into sales coverage, as we operate in the new, simpler, more focused 10 category company going forward. We're also making significant progress in making our marketing dollars more productive.
I'd like to welcome Mark Pritchard, P&G's Chief Brand Building Officer.
Thanks, John. Good morning, everyone. We're driving marketing productivity by improving the efficiency and the effectiveness of our investments to grow users and deliver balanced top and bottom line growth on our brands. Now, P
and G is one of
the largest advertisers in the world, with our marketing costs being the 3rd largest spend pool behind people and products. And 3 years ago, we spent nearly $8,000,000,000 in advertising, including more than $2,000,000,000 in agency fees and the cost to produce advertising and marketing related materials. Now we're improving the efficiency of these spendings by reducing costs that consumers don't see. Category by category, market by market, we consolidated to reduce the roughly 6,000 agencies that we use for advertising, media, public relations, package design and in store materials by about 50%. We reassigned several brands to higher quality partners and we cut the workload to produce far fewer but much better advertising and marketing campaigns.
We've already saved $620,000,000 which has been reinvested in media and sampling. We see more savings runway ahead using digital technology for production, pooling more production and also using open sourcing and creativity in our work to create advertising both within and outside of existing agency networks. For example, SK II uses open sourcing to develop and produce its advertising at about 50% the cost of traditional ads. And company wide, there's still plenty of opportunity ahead as we're still spending more than $500,000,000 in advertising production around the world. We're also improving the efficiency and the effectiveness of our media investments by increasing media reach and continuity while optimizing the mix across mediums.
Our portfolio of household and personal care brands are used and purchased every day by about 5,000,000,000 people around the world. So to make sure that our brands are top of mind when it's time to buy, we need broad media reach to create awareness among all potential category buyers across the range of communications methods that they use, search, social, online video, mobile, print, television and many others. We're increasing media reach by 10% to 20% on brands like Tide in the United States by shifting to more broadly appealing television shows and also higher reach digital platforms. Febreze is broadening its reach in social media and online video by using a broader target audience definition to reach all potential hair care buyers. We're delivering mass reach on Pampers, but with greater precision at the right times to the right people, targeting communications to moms from the start of their pregnancy to birth and then throughout the diapering years.
We're also increasing media continuity by balancing spending more evenly across months quarters on all brands to enable top of mind awareness year round. Even a brand like Vicks, which is traditionally heavily advertising heavily advertised during the peak cold season in winter, has better balanced its advertising on a more year round basis because 40% of colds actually happen outside of the winter. Now, we're optimizing media mix by following consumer behavior to advertise based on when, where
and
consumer products advertising is in some form of digital media. P and G brands spend in line with the industry norm on average, but what's more important is to tailor the ads to be more effective in creating brand and benefit awareness based on how consumers actually view the media. For example, online videos are effective in a 15 second and a 30 second format, very similar to TV. So our brands extensively use online video and TV, of course, to communicate their superior performance. But we're also increasingly using 5 to 6 second formats that quickly convey the brand and the benefit given the ad skipping behavior that we know happens quite frequently.
And on social media, we make ads work in literally 2 to 3 seconds, recognizing that people are whipping through their news feeds. Of course, there still is a place for longer form advertising on all mediums, and it must be highly engaging on what matters to people and where the brand matters. For example, Pantene's Strong is Beautiful campaign brings to life distinctive elements of Pantene's superior performance through the provitamin product story that delivers the benefit of strong beautiful hair. And Pantene is also part of the cultural conversation, nearly doubling reach through free earned impressions from social media and public relations with diverse brand ambassadors such as Selena Gomez, Jillian Hervey, and expressing Pantene's point of view that strong and beautiful daughters come from time spent with their dads. Let's take a look.
But now Pantene is making my hair practically unbreakable. The new Pro V formula micro targets weak spots, making every inch stronger. So I do love my hair longer. Pantene, strong is beautiful. Get even faster results with Pantene Expert, our most intensely concentrated Pro V formula.
I used to blame the weather for my fridge. Turns out, my curls needed to be stronger to fight back. Pantene's Pro V formula makes Micro so strong, they can dry practically freeze free because strong is beautiful. Get even stronger results with Pantene Expert, our most intensely concentrated Pro B formula.
I don't know why they make these bores so complicated for guys.
My dad's giving me a dad do.
Dad do comes from the heart. It's probably not a whole lot of style. Who knows? I mean, maybe there's a post career here. I love
you, dad.
Father, 3 daughters, I've done a lot of bad dad dues. Now, ads like Panty and dad do, Always Like a Girl, Ariel, DadShareTheLoad, Secret Stress Tested For Women, and SK II Marriage Market Takeover are not only highly effective, they're culturally relevant, becoming part of a broader cultural conversations and generating free earned impressions. For example, SK II Marriage Market Takeover in China delivered 1,000,000,000 impressions in paid media and an additional 4,000,000,000 impressions through public relations and social media, a fourfold increase in reach and frequency. By improving the efficiency and the effectiveness of our marketing spending, P and G Brands are continually improving productivity to grow users and drive top and bottom line growth. Thank you.
I'll turn it back to
John. Thanks very much, Mark. Finally, we're working to improve the effectiveness of our promotional spending. In fiscal 2016, we spent $15,000,000,000 in promotional spending. A portion of the spending is directly tied to pricing algorithms and trade terms with our retailers, but even excluding these dollars, it's too big of a spend pool to ignore.
We have a significant amount of spending available to optimize. We see clear opportunities to improve the effectiveness of the spend for us and our retail partners to build the value of our categories and our brands. As we approach enhancing the effectiveness of these dollars, we will not do it in a way that puts our brands at a competitive disadvantage. Our key objective is to drive category growth with our retail partners by leveraging new tools and data analytics to help identify which events work best and which SKUs are most effective. For example, in some of our categories, a full price end cap display of a premium tier product will generate more revenue and profit for both our retail partners and ourselves than a deep discount promotion on a lower priced item.
Combining our efforts and resources on joint marketing programs can be more productive to drive additional shoppers into the store and to our categories than deep discounts. More effective spending and category growth are the objectives here, a win win for us and our retail partners. Now taking productivity as a whole, net of reinvestments into innovation, sales coverage, media and sampling, productivity has enabled us to deliver constant currency gross and operating profit margin improvement and high single to double digit constant currency core earnings per share growth in each of the last 4 fiscal years. We've improved gross and operating margins by triple digit indices, both including and excluding currency in the year we just completed. Over the last 4 years in our developing markets, constant currency earnings have grown 6 times faster than organic sales, due largely to productivity cost savings and portfolio choices that have strengthened the overall profitability of our business.
Again, top and bottom line growth are not separate endeavors. They reinforce and fuel each other. They're part of the same ecosystem. They live together. They depend on each other.
They can't be separated. The second of the 4 priorities we'll discuss is portfolio transformation. I want to take just a minute to highlight where we've been and where we're heading to help illustrate the significant changes our company has made to prepare us for our next 180 years. P and G is a very different company today than it was just 10 years ago. We're much simpler and more focused.
Between our portfolio moves and productivity improvements, we've, as I said earlier, strengthened our growth hand for the longer term. Think about the significant simplification we've made over the last decade. We've reduced the number of categories we compete in by 60% and brands by 70%. We've simplified the number of go to market clusters for which we serve the globe by 50%. We've reduced the number of manufacturing sites, mainly in developed markets and move more of the work closer to consumers in faster growing developing markets.
As Jana said, we've simplified manufacturing platforms by 50%. Manufacturing enrollment is down by 30%. As Mark said, we've reduced the number of advertising PR and agencies supporting the business by 50%. We've reduced the number of office buildings and technical centers by 60% and 25%, respectively. We've cut the number of legal entities in half.
We're processing 30% fewer invoices each year. Overhead, including divestitures, will be down 35%. 10 years ago, it took 140 category country combinations to generate 70% of the company's sales. In our new portfolio, less than 50 category country combinations generate 70% of sales, 140 to 50, and we're growing in almost half of them now. This is significant simplification that enables better execution, leading to stronger, more sustainable results.
The day after the quarter ended, on October 1, we reached a very important milestone in our portfolio transformation program, closing the beauty transaction with Coty. This marks the completion of the most significant portfolio transformation in P&G's history. In just over 2 years, we've divested, discontinued or consolidated 105 brands. These brands represent about 14% of fiscal 2013 sales and only 6% of profit. Over the last decade, we've exited 12 product categories, bleach, water purification, kitchen appliances, pharmaceuticals, coffee, snacks, pet care batteries, fine fragrance, cosmetics, retail hair color and salon hair care.
With each of these exits, our primary objective was to maximize value to share owners. In total, across these transactions, we estimate we've generated $8,000,000,000 to $9,000,000,000 of value for our shareholders that would have been created by continuing to operate these business ourselves. We've done this by finding good owners for our brands and good opportunities for our people and by effectively structuring these transactions. The businesses we've exited have gone to owners for whom these are core categories. The buyers paid full prices and have largely succeeded with the brands they've bought.
That's good for P&G and our share owners and it's good for them. We've streamlined our portfolio for faster growth and higher profitability. We now have a much stronger portfolio that's better positioned to win. The 10 category portfolio we're moving forward with has historically grown a point faster and is 2 points more profitable than the old company. These are categories where P and G has leading market positions.
These are categories where purchase intent and choice are driven more by a specific job to do and a product's effectiveness in doing it than by self expression or fashion trends. 10 years ago, about a third of our sales were in categories where purchase decisions were driven primarily by fashion, flavor or fragrance. It's effectively 0 today. Consumers use these categories on a frequent basis, typically daily. Daily use categories are important to our retail partners.
They drive shopping trips and dollars. Loyalty to brands is often higher in daily use categories. The brand relationship is a closer one and we sell more. The categories we're retaining leverage our core strengths of the company, consumer understanding, branding, innovation and go to market capabilities, much more fully than the portfolio we've divested. We've also simplified within the 10 category portfolio, making smart choices for short, mid and long term value creation, foregoing bad business even when these choices create near term top line pressure.
In hair care, we've reduced the number of brands we bring to market by 65%, SKUs by 40%, formulas by 25%. In laundry, we've reduced the number of brands by 35%, SKUs by 30%, manufacturing platforms by 35% and the number of different packages we produce by 40%. The total number of SKUs in the ongoing ten categories are down 24% from where we started. We're beginning to annualize the choices we made early last year to strengthen our lineups in Mexico and India as two examples. Organic sales in these markets were up 6% and 9%, respectively, in the July September quarter.
Importantly, local currency profit continues to grow faster than sales in both of these markets. The steps we've taken to streamline and strengthen our Fabric Care portfolio, discontinuing product forms such as additives, bars, bleaches and powder detergents will continue to be a top line drag through most of next calendar year, but will improve the profitability of the business and its long term attractiveness. As we come out of this, we'll have strong top line growth that is really worth something. There's really no point to growth if it isn't worth something. This completes the first portion of the presentation this morning.
We'll now take a 20 minute break. We'll return to discuss the work we're doing to accelerate top line growth and improve the company's organization and culture. Please be back to your seats. John, do we have a time? Yes.
9:35. Thank you very much.
Ladies and gentlemen, please take your seats. Our program is about to begin.
Welcome back. As I hope you can see from the first part, we've made great progress in the transformation of P&G's portfolio and in driving productivity improvement and cost savings, both which are critically important to getting back to balanced growth and value creation. However, as John demonstrated earlier, we can't get to our STR cell goals with cost savings alone. We have to deliver steady, consistent top line growth atorabovemarketlevels to reach our goals. Accelerating top line growth has been and clearly remains our biggest value creation opportunity right now, and we're making progress, but we're not where we need to be.
Top line growth starts and ends with the consumer and shopper and delighting them, winning the 0, 1st and second moments of truth when consumers research our brands online, when they purchase them in a store or online and they use them in their homes. Winning these three critical moments of truth requires consumer and shopper understanding and insights that lead to improved product and packaging innovations, consumer communication and retail programs that lead to competitive advantage for P and G's brands and products. Now we're investing in package and product innovation and go to market programs that delight consumers and importantly, build categories. And you hear more about building categories. We are market leaders in our categories and we take responsibility for growing those categories.
When we do our work well, consumers want to use our brands and retailers want to partner with us because we're helping them grow also. Now throughout P&G's history, we've led market growth by creating new categories or reinventing existing ones. Now, I'll give you an example and there's many examples I could give you. But let's take Fabrice Car. Go back 6 years ago.
It was a sleepy category, about $250,000,000 in retail sales. Many of you probably used the products. How many of you have had a Christmas tree hanging from your rearview mirror? On a hot day, what happened? It blew you away with fragrance.
On a cold day, nothing. A week later, nothing. They didn't work. So we developed a product with a partner outside that has special membrane that volatizes perfume in a hot car and a cold car very consistently. Day 1, day 7, day 28 very consistently and what happened over time.
We're able to grow that category. In in store, when we went to talk to the retailers, where do they want to put it? In the car aisle. How many people shop in the car aisle? Not a lot.
We convinced the retailers to put it where the consumer shop where most of the purchases are made and we put it in the air care aisle. And then what happened over the next 6 years, the category grew from $250,000,000 to $500,000,000 and we led that. Today, we have almost a 45% share of that category. But it illustrates what happens when you come with a product that solves the dilemma and it may have been an frankly unarticulated need, but it did it really, really well. We grew the category and the retailer says, we'll reward you with that because you grew our sales and you grew our margin.
There's many examples. We just launched for Braze in Saudi. We bought 3 of our forms. The category is growing 4% or 5%. 6 months after we launch, category is growing double digit.
We've gone from 0 to over 20 share in our leading form, which is our aerosol, is over 40 share. But it illustrates what happens when you understand what consumers need or what they want or what they may appreciate if they had and give it to them and work with your retailers to create the environment in store where the category grows. Innovation driving category growth. Now, you'll hear more examples in just a few minutes. But given the need to accelerate sales growth, some of you may ask why haven't you made near term market share growth your primary top line objective?
And I understand the desire for faster growth and for a single-minded short term objective. But we have seen this movie before and frankly, we don't want to live the sequel. We have gone through periods of extreme focus on short term growth and the bottom line suffered. The pendulum swung the other way. We have gone through periods where it's almost single mindedly on getting the bottom line and the top line suffered.
This again leads us back to balance. We're as impatient as anyone to accelerate top line growth and get back to our long term target rates, but we want to get there and sustain it, while delivering bottom line and cash targets. We want to grow the number of users of our brands and the usage in our categories to accelerate organic sales in a sustainable, long term market constructive and value accretive way. If we attract more users to our brands and we lean the growth of the categories, our market share growth will follow. Now, I've asked several of our business unit and SMO presidents to give you some more perspective on the work they're doing to accelerate growth.
Have pictures of all the ones that have come up in a minute. We are going to start with the business units. Shailesh will discuss our work in Fabric Care first. Fonda will cover Fem Care. Charlie is going to discuss grooming.
Johnny is going to cover baby care. And then Alex will highlight the work we're doing in skin and personal care. We'll start with Shailesh.
Thanks, David. Global Fabric Care is an attractive category with almost $70,000,000,000 of retail sales and market growth of about 3%. P and G is the market leader in this category. We have nearly a 30% value share. Fabricate is the largest category at P and G with over $14,000,000,000 of sales, it is about 22% of the company's sales.
We have a concentrated portfolio with 4 brands making up nearly 85% of our category sales Tide, Aerial, Gain, Downy, which is also called Lennar in some markets. We have 4 main focus areas for growth and value creation in Fabric Care. 1st is winning in priority markets, winning in fabric enhancers, winning with new innovative forms like beads and pods, and driving productivity to fuel investments for growth and improving profit margins. The 10 priority markets represent 65% of our sales and over 90% of our profit. As you might guess, many of these are developed markets like the U.
S, where we have strong share positions. Therefore, to deliver sustained growth of our business, as David said, we need to drive growth of the markets and then our share within them. To enable this, we have become much more deliberate about what it takes to grow the category. There are really 3 strategic planks we are focused on, trade in, trade up and trade across. Let me talk about trade in first.
We need to ensure value equation is strong in all price tiers where we choose to compete. Tite Simply, which plays towards the value end of detergents in North America is a good example. Tite Simply is priced at a premium to competitive mid and low tier brands, but is seen as excellent value by consumers who shop in this tier. It is a great entry point for consumers who aspire to use Tide, the best brand in the category. Sampling is another great way to trade consumers into our brands.
We have significantly increased our investment in sampling to give consumers the best experience possible when they buy their new machine. We have in fact increased sampling coverage 6 fold in the past 2 years. We are also driving trade in with sharper consumer insights. In Japan, we have done this by leveraging insights in how consumer behaviors change with the seasons. Let's take a look at couple of aerial commercials from Japan.
The second way we drive category growth is trade up. We are driving trade up with our premium propositions, most importantly, the unit dose form, which has reached over $2,000,000,000 of retail sales and has been key to driving category growth. Another huge category growth driver is dosing. One of the biggest barriers to category growth in the U. S.
Has been the increased household penetration of high efficiency machines. The median size wash tub of the installed base of machines has increased by more than 25% over the past 6 years and is still trending up. As these machines grew, consumers underdosed, optically the loads look smaller and many machine manufacturers advised them to use less detergent because some detergents were not designed well for these machines. As a result, the consumer was getting a suboptimal performance. We've addressed this in the U.
S. By adjusting our recommended dosing to ensure our consumers use the correct amount for these larger loads. Larger machine size have also resulted in fewer wash loads. Most of these new machines offer a quick cycle when you have a smaller load. But less than 5% of consumers use quick cycle today, either because they don't know it exists or they believe that they will not get the right level of cleaning.
Our efforts to teach consumers about the Quick Cycle loads has potential to increase load frequency by up to 30%, and can be much better from a sustainability standpoint too, because it reduces energy and water usage despite doing more loads. We're also looking to drive category growth by getting consumers to trade across, adding new products to their regimen to achieve an even better consumer experience. Making simple but important steps like having the same fragrance across product forms removes barriers to building consumer regimens. In store execution is also very critical to expanding the shopper basket. We're working with many of our retail partners to implement shelving solutions that drive regimen and fabric care.
This very deliberate program is really beginning to make a difference in category growth. As you can see, the results in our top two markets are quite impressive. We have grown the category and grown our sales ahead of the category. Fabric enhancers is now over a $3,000,000,000 business for us. We have delivered 8% top line growth over the past 5 years with 6 percent coming from the base liquids business and about 30% growth on beads.
But the great news is there is still plenty of growth opportunity ahead. Fabric enhancer load penetration is less than 30%. Even in a developed market like the U. S, load penetration is only 27 consumers. Some consumers, especially millennials, either don't know what the product is for or think it is for a specific load.
Let's look at a couple of examples that demonstrate Downey's benefit and make the brand relevant for it to be used on every load.
Downey put a GoPro in a washing machine to show you how the laundry process wreaks havoc on your clothes, Thrashing them 3,000 times every wash. Crushing them with 60 times the g force of a rocket launch. And baking them in a dryer that can get hot enough
to cook
ribs. Detergent alone is not enough. Add Downey Fabric Conditioner
to help protect clothes from stretching, bending, and fun.
Learn more at how downyworks.com.
Laundry can wreak havoc on our clothes, ruining them forever. Sweaters stretch into muumuus and pilled cardigans become pets. But it's not you. It's the laundry. Protect your clothes from stretching, fading, and fuzz with Downey Fabric Conditioner.
It not only softens freshens,
it helps protect clothes from the damage of the wash.
So your favorite clothes, stay your favorite clothes. Downey Fabric Conditioner, wash in the wow.
New innovative forms like Unidose and Scent Beads are also significantly accelerating our growth. As I mentioned, our Scent Beads offerings, including Downy Unstoppables, Lenore, Gainfireworks and Bounce are delivering strong and continuous year on year growth of approximately 30%. These results support our vision to make Unstoppables a $1,000,000,000 brand. Scent beads like the unit dose are a huge premium growth opportunity, and we are still on the journey to expand them globally. Earlier this year, we executed a very successful launch of Lenorebeads in Germany, where we already reached an 18 share in just 5 months.
10 points of share growth were incremental to Lenore, making the total brand over a 50 share. But more importantly, the total fabric enhancer category in Germany is now up 8%. Just as we speak, we are launching beads in the Arabian Peninsula as well. Productivity is an essential part of the strategy we have to ensure the flexibility to invest in our products, packaging, branding and sales coverage. We will continue to simplify our operations to deliver a step change on productivity.
We are on track to make deliver our structural savings program, which is benefiting from the supply chain transformation that we have. By the end of this effort, we expect to have reduced the number of laundry product formulations by over 40% and simplified manufacturing platforms by about 50%. At the same time, we have rationalized our laundry packaging menu to serve consumers in a more cost efficient way, resulting in 50% packaging solution simplification. This strategy has enabled more effective execution of innovation, increased cost savings and significantly reduced capital spending. The simplification of our work is also helping us free up capacity to move much faster on innovation.
A good example is the work on Tide Pure Clean, where we went from idea to market in just 9 months. This is a great example of productivity improvement driving the top line in addition to the bottom line. In summary, we have a very clear focused approach to deliver balanced top and bottom line progress. Our focus will continue to be on driving cost savings to fuel investments needed to win in our top priority markets with product superiority and with new forms that delight consumers and grow our categories. Now I'll hand it over to Pharma Francisco, President of our Feminine Care
Thanks, Shailesh. The global feminine care category is over $20,000,000,000 in sales and growing at about 4% every year. With our big brands, Always Whisper, Tampax and Always Discrete, we are the global share leaders sold in over 130 countries around the world with nearly a 30% share. We have strong share positions in North America, Europe, India, Middle East and Africa and Latin America. And this month, we are restaging our premium lineup in China to capture a much bigger part of this fast growing market.
With roughly $4,000,000,000 in sales, these brands are creating significant value for our consumers, customers and shareholders. We're also accelerating top line growth on our Always Discrete brand, our entry into the fast growing adult incontinence category. This category has a market size of $6,000,000,000 and growing 6% to 7% every year. In fem care, we are accelerating growth through 4 key strategies. 1st is to give the consumer the product experience that she wants.
2nd is to launch innovation that grows the category. 3rd is to win her at point of market entry. And 4th is to accelerate productivity to reinvest behind growth. We do this through product, package and commercial innovations and I'll share with you some examples of how these strategies are working to drive growth for P and G and the category. We're leveraging our best performing and most highly rated pad, Always Radiant, to provide consumers with the best experience possible.
This uses a proprietary absorbent material that absorbs 10 times its weight, but feels like nothing. The Flexfoam Core's design is so soft and flexible that you forget that the pad is even there. The Radian packaging is fresh and useful, which is attractive to younger consumers. And the results are strong. Radian's share of the U.
S. Pad market was up nearly a point over the last 6 months, contributing to over a point of share growth for the Always brand and over 2 points of growth for the overall U. S. Pads market on a past 6 month basis. We're also using the superior technology and product experience to establish our super premium segment in the China market.
We just launched Always Infinity and Radiance this month to offer the best assortment of this proposition to Chinese women. The early results are encouraging, and we expect this imported premium innovation to drive trade up among existing pad users as well as attract new users into the China pad market. In addition to our top end entry with Infinity and Radiant, we also had to address the Chinese consumers' need for superior comfort across our entire lineup. To do so, we launched our entire brand, including a new cloud like soft cotton line that delivers comfort and breathability like never before. We delivered upgrades to our SuperDry products with much more softer and more comfortable wings as well as slimmer, longer and more breathable night product that provides superior comfort overnight.
This relaunch was supported by a new campaign, Oh No, Oh Yes, to communicate comfort beyond imagination. Both launches were introduced at a PR event just a few weeks ago at the iconic Beijing Olympic Water Tower, which generated unprecedented coverage. We had live streaming in our biggest customer, Tmall, and we also had live streaming in Weibo and WeChat, which are the biggest social channels in China. The early results are strong. Behind flawless customer activation and retail support, which Matthew will discuss more later.
In feminine care, discretion and portability are also important aspects of the consumer experience in addition to fundamental performance. Our recent innovation on Tampax, the Pocket Pearl line, provides the best protection of our Pearl tampons in a new pocket sized form, which comes with a breakthrough wrapper that is very discreet, very compact with an easy to open tab. This product allows women to use it conveniently both at home and for on the go. Over the last 6 months, the Tampax Pocket Pearl line has reached 4,500,000 women, adding 700,000 new users to the Tampax brand and 600,000 new users to the overall tampon market in the U. S.
It's another great example of how we're using product and packaging innovation to improve the consumer experience and grow the category. Another example of winning with both the product experience and innovation is always discrete. Our recent introduction into the fast growing adult incontinence category. This is a category that we are aware we can make a real difference for women by bringing superior technology as well as a more discrete usage experience to help normalize the condition. Always Discrete is significantly preferred versus competition because of its thinner, less noticeable design and superior odor control.
And it also helps that Always is a brand that these women have known and trusted over the last 30 years. The potential always discrete is significant. In the U. S. And very similar around the world, 1 in 3 women experience incontinence.
And actually, as you go above the age of 50, it's 38% above the age of 70, it's over 55%. So somehow, we will all most of us will get there. So out of the 1 in 3 women that actually experience the condition, before we launched Always Discrete, only 1 in 9 women actually used the category. Now only 2 years later since we launched Always Discrete, 1 in 7 women are using the category, which is an indication that our proposition is working and there's even more potential ahead. Our adult incontinence value share in the 8 markets we are in range between 10% 20% and disproportionately appeal to new users.
In those markets, the category growth has accelerated by more than 50% since we launched, creating tremendous value for our customers and shareholders. In the U. S, for example, before we launched Always Discrete, the category was growing about 5%. It's now growing 7% to 8%. In the UK, 8% before we launched, now about 12%.
So the market has really accelerated since we launched. Next, I want to share with you some examples of how we're growing the category and driving new users through commercial innovation, particularly at point of market entry. In 2014, just 2 years ago, the brand team came across what we call an outrageous fact. And an outrageous fact is something that is touching you at the heart and makes you want to do something. And that outrageous fact is around the world, among all the girls that go through puberty every year, 50% of them experience a huge drop in self confidence, and many of them will never recover their self confidence through adulthood.
This is often triggered by the onset of their first period, but is also affected by societal pressure, gender bias and demeaning phrases such as like a girl that are so ingrained in our everyday culture that we don't even notice its everyday effect. Because of that, Always made it the brand's mission to stop the drop in confidence that growth experienced at puberty and empower girls to fight against any limitation that they may face. That's how the Like A Girl campaign was born, and it started as a one market experiment for the U. S. This summer, we found another outrageous fact that 7 out of 10 girls feel that they don't belong in sports.
And because of that, over half of girls, half of girls around the world quit sports at puberty. You know how much times that rate is higher versus boys? It's 2.5 times the rate of boys dropping out of puberty. Boys drop out 20%, girls drop out 50%. There is no reason why that should happen.
So our most recent addition, Keep Playing Like a Girl, was activated in 42 markets around the world simultaneously, coinciding with the Rio Summer Olympics. Let's take a look at the video.
A lot of boys have told me that I can't play rugby because I'm a girl.
Actually, I've had a lot of people come up to me saying, aren't you afraid of getting really massive? You have to be girly. You have to like certain things.
I think a girl can play anything that they want to play. Girls can actually play rugby and they could also be the team captain of the team.
You are worth it, and you deserve to play whatever sport you want to play.
This campaign generated 200,000,000 views around the world, 11,000,000,000 PR impressions and very strong retail activations with our partner customers in the U. S, U. K, China, Russia and beyond. Like a Girl has significantly improved our brand awareness, our equities among teens and among moms, and it's driving incremental sales and profits. Most importantly, while growing the business, the brand was also able to create real societal change.
Before the campaign, only 19% of girls had any positive association with a phrase like a girl. And after watching the first video only once, 76% of girls no longer saw like a girl as an insult. I think this is brand building at its best. It's the kind of marketing that's really resonating with our teens, with our millennials, and it's something that's growing the brand. In addition to the Let the Girl campaign, another effort that we're very passionate about is our puberty education program.
This program reaches 15,000,000 to 20,000,000 girls every year in 60 countries around the world. Primarily a school program, we provide product samples and educational materials to the girls. This year, we expanded the reach of our school program in the Middle East and Africa by over 50%. We talk about confidence, we talk about everything that girls can do, we talk about puberty and we talk about periods. The results are very positive.
Category usage among teens has increased significantly, up to 8% in Pakistan and category growth is up 5% across all of these markets. This program is also making a real difference in whether our girls are able to stay in school or whether they have to miss school during their period and some eventually drop out. Finally, we have to fuel investment for growth by driving productivity in everything that we do. This last year, we saved over $100,000,000 behind 2 key areas. 1st is the focus on driving marketing efficiencies across our non media spending, particularly in agency production costs as well as agency fees.
And second is we're driving down cost of goods savings through supplier contract negotiations, material savings and simplifying our global platform. Savings creates for us the investment opportunity to drive back into the business through great campaigns like Like A Girl, our sampling and educational programs and our innovations like Always We have leading brand equities
and shares.
We have a broad footprint
on Global Feminine Care. We have leading brand equities and shares. We have a robust innovation portfolio across pads, tampons and adult incontinence. And we are accelerating growth through 4 proven strategies: give consumers the product experience she wants, launch innovation that grows categories, win her starting from point of market entry and drive productivity to fuel innovation for growth. Thank you.
Next is Charlie Pierce, Group President for Global Grooming.
Thanks, Fauma. Good morning, everyone. P and G is the leader in the $20,000,000,000 global grooming category. In the largest segment, the $15,000,000,000 shave care category, which is growing 2%, P and G holds a 60% share. This includes both blades and razors and shave preps.
The remaining $5,000,000,000 is electric hair removal where we have a 20% share. Last fiscal year in the grooming category, we delivered steady growth in international markets, holding or growing value share in each region outside the U. S. And driving market growth behind strong innovation, advertising and sampling programs. The growth in international markets was offset by soft results in the U.
S. In the U. S, our blades and razor share is still down 60 basis points over the past 3 months time period. We have faced competitive entrants in the direct to consumer space as well as the traditional retail space. We are addressing both.
To improve our growth and the growth of the market, we are driving innovation, new user trial, go to market excellence and improved consumer value across our portfolio. These elements which are driving growth internationally will be the same for what it takes to win in the U. S. Market. Grooming grew organic sales 2% last fiscal year.
We are encouraged by our start in fiscal 2017 with Q1 organic sales up 3%. Turning to innovation, we completed the global expansion of our very successful Gillette Fusion FlexBall innovation earlier this calendar year. More than 40,000,000 FlexBall razors and counting are in the hands of consumers around the world. We expanded our performance advantage at the top end of the market. Our most recent cartridge innovation, Gillette Fusion ProShield launched this past January.
ProShield has lubrication before and after the blades for an incredibly comfortable and smooth shave. ProShield has been the number one razor in key markets such as the U. S, U. K. And Germany.
We're supporting a broader range of our product ladder from our best product Fusion ProShield to Mach 3 systems to premium priced and superior performance disposables with stronger consumer value communication. This is an important strategy change for Gillette where the focus in the past was almost entirely on new cutting edge products. For example, Mach 3 is a $1,000,000,000 brand which occupies a key position in the price performance ladder between high end disposables and the top of the line systems. We're launching improvements, including our 1st blade upgrade in over a decade on both base Mach 3 and the higher performing Mach 3 turbo in markets around the world. New base Mach 3 is the best entry level Mach 3 we have ever made, produced at a lower cost on our new global flexible manufacturing platform.
New Mach 3 Turbo brings our most advanced blade technology to the Mach 3 family. Let's watch the U. S. Ad spot which features our stronger performance claims and value messaging on the Mach 3 brand.
The hair on the face of a man is said to be as strong as copper wire. So what's a man to do? How about a razor with blades stronger than steel? The new Gillette Mach 3 is engineered to take on hair this tough from metal stubble to manly stubble.
The new Mach 3 with the world's number one selling
blades now starting under $10 Gillette, the best demand can get.
In disposables, we are launching an all new 3 blade disposable razor in Latin America, which is designed to trade up 2 blade users with pricing between current 2 and 3 blade products. This product occupies an important new position on the price performance ladder, which broadens the appeal of Gillette to more men and is also made on our new low cost manufacturing platform. Innovation is driving growth on our Venus and Braun brands as well. Venus Swirl utilizes the dual pivoting head technology first used on Gillette FlexBall and was launched in international markets last fiscal year, helping to drive double digit top line growth in these markets. Similarly, performance on Braun has been strong with 3 consecutive years of value creation and a good start this fiscal with mid single digit organic sales growth.
Growth on Braun is being driven by innovation. For example, earlier this year, we entered the light based hair removal segment on the female business with strong early results. And we are launching next quarter a major overhaul of our men's styling portfolio with several new products, including precision trimmers, as we better serve men across the spectrum of their grooming needs. We are committed to winning both rate, so ensuring we have a winning plan online is an important part of our overall growth strategy. We have versions of the Gillette shave club up and running in more than 10 top markets.
We're driving trial at point of category entry. We put Fusion ProGlide FlexBall razors in the hands of over 80% of young men in the U. S, over 2,000,000 samples last year with our 18th birthday sampling program. We're now sampling the FlexBall razor handle and ProShield cartridge, our very best combination of shaving technologies. We're also driving trial of key seasonal opportunities such as the holiday season and Father's Day.
We just announced our new tie in with the new Star Wars Rogue 1 film with strong retailer support for display of special holiday Gillette gift packs, usually a difficult time to get in store support. Our Father's Day video this past year had exceptional engagement. Let's take a look now at the video.
They have the world at their fingertips.
Do your kids come to you as much as you enter your debt?
No.
All right, come on in. So first off, I'm
going to have you look a
few things on the Internet.
How do I tie a tie?
Hey.
How do I fry an egg?
I'm now going to have you ask your dad.
So which was better? The better teacher was my dad. Amy Papa.
The Go Ask Dad Father's Day video had over 550,000,000 earned media impressions and almost 20,000,000 video views across Facebook and YouTube. The campaign also generated an impressive 190% lift in organic search for Gillette Shave Club in North America and a 40% lift in site traffic. Next quarter, we will launch a major change to Gillette's packaging in the U. S. This is designed to simplify our brand architecture and improve findability and shopability for consumers, helping to drive purchase and category growth for retailers.
Productivity continues to be a part of how we operate, driving costs down through our cost of goods sold. We have reduced enrollment through smart automation. With IWS progression that Janus referenced earlier, we have delivered process reliability on our machines at record levels. We continue to drive cost savings through material localization. Finally, the global platforming work continues to help regionalize the supply chain, placing production in lower cost areas and eliminating costs from our transportation and warehousing.
This has also increased the speed of execution on innovation, which contributed to our first Mach 3 upgrade in over a decade. In closing, in P&G Grooming, we will continue to drive innovation across our portfolio and increase trial generation to grow our brands and categories by delivering superior value to consumers around the world. Thank you. And now I'll hand over to Gianni Cicerani, Group President of Global Fabric and Home Care and Global Baby and Feminine Care.
Thank you, Charlie. Good morning, everyone. So the baby care category is a large category, dollars 30,000,000,000 in retail sales. We hold a 35 share of that category. That means the baby care unit is about $9,000,000,000 95% of which is in Pampers.
The category is growing low single digit. This is a deceleration from the past and one of our focus areas. When you look at our performance, we have been globally slightly behind the market growth. And as you are all aware, therefore, we lost some market share. Today, I will be talking about the intervention areas that we are putting in place to return baby care to solid top and bottom line performance.
Before we go there, however, I wanted to share a couple of success stories. Countries where we have executed our intervention plans in the right way and are starting to show the right performance. U. S, where we are, this is a category where our share advantage versus our main competitor has continuously growing over the years. And in September, the last month for which we had data, we achieved the highest share advantage versus key competitor in the last 20 years.
And this is despite some aggressive price moves that we had to face. Another market, which is for us a success story is Japan. In Japan, if you go back a decade in the years between 2,008 2010, we were a number 4 brand in the industry. If you look 10 years later, now we are the number one brand. Not only we are the number one brand overall, but we are the brand leader in pants, which is, as you know, the dominant form in Japan and a form where historically P and G has been behind and we are catching up very fast.
These are the success stories. Of course, there are other countries where we are not performing as well, particularly China. This is why our organic sales last fiscal year 2015, 2016 have been slightly below 100. As I said, we have been losing some market share. What is important, however, is to look at the trend.
In the first half for 'fifteen, 'sixteen, our performance was minus 2. In the second half of the year, we have been slightly growing and we had a strong start this fiscal year. So what are the intervention areas that we have agreed that we have funded and we are executing everywhere in the world? Here they are. 1st is the focus on the top 20 markets.
This is for us priority 1, 2, 3. 2nd, similar to what you have heard from pharma, the critical importance of the point of entry. 3rd is the growth of the new form called PENF. 4th is the grow the market with innovation. As I said before, the market has been growing less than in the previous years and this is an era there where we want to intervene.
And of course, the productivity, which is the fuel needed for us to fund the top the other top four priorities. So let's take each of them 1 by 1. The top 20 markets in baby care represent over 80 percent of our profit. Of course, there is some white space growth that is out there, but we are very, very clear that our priority is 1st and foremost get this market to balance top and bottom line performance. As we started to focus on those a year ago, we have started to see sequential improvement.
And in this market, we are registering share growth in the past 6, 3 and 1 period. Let's now talk at the point of entry.
This is
the number one priority in baby care. Why is that? It's because we can measure a direct correlation between our total market share and the share that we have at the point of entry. If you want, the point of entry determines what is the ceiling that we can achieve. As we work on the point of entry, specific capabilities are needed.
You need to learn how to sell to hospital, which is a capability that we have in the business unit, which is unique to us. You need to learn how to engage moms with digital and social media, which is over proportionally important with pregnant moms and new moms. We look at the work at point of entry in 3 phases. First, we need to get the brand familiar with consumers, particularly with first time moms that know nothing about the category. This is why it's so important for us to be present during pregnancy.
We need to be present as the first time the mom is searching for new baby. The second phase of the work has to be to create a relationship with these moms, which we do through the work that we do in the hospital, through the the relationship, then we need to generate preference. The way we do it is with sampling in the hospital. We have Pampers sampled in over 80% of the hospitals in these top 20 countries. You do that with rate reviews.
These moms are very keen to understand the point of view of other moms. The word-of-mouth is therefore critical in this type of work. And then we have award system in which we reward moms for their loyalty to the brand. So there are mobile application, they register to the brand, they scan their tickets as they buy Pampers, they accumulate points and therefore we are able then to reward them for their loyalty. In the point of entry, as I said, it's very, very important to have specific capabilities that are needed here.
And I wanted to share with you because this week we are launching in the U. S. Our latest innovation for premature baby. These are diapers that are only sold in the intensive care unit. And the one that you see at the top is the latest diaper that we have introduced.
This is real size and goes for premature babies that are something incredibly important for babies, while at the something incredibly important for babies, while at the same point generating very strong equity for the brand. As a result of all these activities, when you take the top 20 markets for baby care, we are market leader in point of entry in 'eighteen of those. And this is where always the first priority, the 1st dollar and the first people are spent. 2nd priority is the one on pants. 3rd priority is the one on pants.
So the pants category in our estimate will be 90% of the growth of this category in the next 10 years. 90% of the growth will come from the conversion from tape diapers into pants. In the U. S, pants are used for toilet training, but this is a unique feature of this market. Everywhere else in the world, pants are replacing diapers.
Today, pants represent 21% of the category. It is up 20% versus year ago. We are growing 30% versus year ago on our pants and we gained in the last year 5 points of segment share within pants. This is one of the interventions of the 5 that we have been able to execute already in China. And we moved within a year from being the number 5 brand in pants to the number 2 brand in pants and more to come.
This is a clear focus area. There are now growth in pants in countries like Japan, where pants represent 60%, 70% of the market. In India, pants are 85% of the baby care market. In Russia, they are over 30%. So this is clearly the form for the future.
Next priority is driving market growth with innovation. As I said, we are not happy with the fact that the category is growing less than before. We believe what is needed is the repetition of what we have done in the past in U. S. With the introduction of swaddlers, where we have new technologies that perform better with the babies and the moms and therefore we generate a trade up.
The latest technology that we have introduced is the one called channels. This is for us a major breakthrough. We are able now to apply every single particle of super absorbent exactly in the position that we want on the diaper. Therefore, as we position the super absorbent into the core of the diaper, we can leave open channels without super absorbent, which helps the fluid to go faster all around the diaper. The baby skin is drier and because the fluid is distributed better, we avoid the sagging of the diaper when it is wet.
Let's see how this has been executed in the UK.
New generation of Pampers with 3 absorbing channels that help distribute wetness more evenly for less wet bulk in the morning. So you'll wonder where all the pee went.
There is a very important part here related to our manufacturing. Thanks to the work of the Department of Ioannis, our global production lines are modular. And you remember, we presented that to you in the past. That means that the first module, the one where we make and convert and create the absorbent core is the same on every line around the world and it is the same on lines that produce tape and lines that produce pants. That has allowed us to take this technology and roll it out to pants as we speak and roll it out into mainline as we speak.
This is a unique advantage of this modular construct where once we have a break through in one feature of the diapher, we can roll it out very fast across plants, across tiers and across product forms. We have talked about productivity and the importance of having the fuel needed to invest into the pants conversion, into the point of entry conversion, into superior innovation. On top of everything that Mark and Yanis have discussed before, I want to bring an example on how a technology can become a source of productivity. If you go back to the example I presented on channels, because we are able to apply every single particle of the super absorbent in the right position, we have become more efficient on how much super absorbent we need to use in each diaper, fundamentally there is no waste. In doing that, we have a much better control on these because therefore we can accelerate our lines and achieve another level of productivity.
And we can roll out, as I said, this technology across different platforms and by doing so accelerate the speed to market. So in summary, I hope I have been able to explain what are the 5 interventions. The 5 interventions are being implemented everywhere in the world. And what is encouraging is that we see the progress country by country as we are able to execute the plan. Thank you.
And I pass to Alex, President for Skincare.
Thanks, Gianni. Good morning, everyone. The global skin and personal care category is a big opportunity for P&G. It is the largest category P and G plays in, over $80,000,000,000 in retail sales, growing around 3% annually. This category is made up of 4 distinct segments, antiperspirants and deodorants, personal cleansing, super premium skincare and mass market skincare.
P and G currently holds between 5% to 40% of the value share depending on the country and segment combination. Skin and Personal Care is roughly 8% of P and G's global sales, with each of the 4 segments contributing equally to sales and all segments and brands playing a major role in value creation. Our major brands include Secret, Old Spice and Gillette in antiperspirants and deodorants, Safeguard, Olay and Old Spice and Personal Cleansing, SK II in super premium skincare and Olay in mass market skincare. All of these brands, with the exception of Olay, have grown sales over the past 4 years. We have momentum in these businesses and significant upside as our footprint is largely contained in North America and Asia, and neither region currently has full distribution of our portfolio of segments and brands in the market.
I'll highlight some of the work we are doing in each of these segments. One great example of sustained growth and success with much opportunity to expand is Old Spice. Old Spice has been growing continually every year since we introduced our Old Spice guy, Isaiah Mustafa, the man on a horse in 2010. Since that time, Old Spice has grown on average $50,000,000 per year. In February 2016, we introduced a new collection designed to increase the efficacy profile of Old Spice, the hardest working collection.
This collection is priced 25% above our premium lines at $5 and is the main driver of our recent growth on Old Spice across antiperspirants and deodorants and personal cleansing. It is delivering new user trial and strong repeat and already accounts for about $50,000,000 in retail sales. Our unique commercial positioning resonates outside North America too, and we are also growing share in several markets, including Mexico, Brazil and Russia. At Barclays, John shared the SK II Change Destiny campaign with you. This powerful campaign developed from local insights around the leftover woman has driven incredible engagement with and trial of the brand.
Sales of SK II in China finished last year up 25% and are accelerating this fiscal. Safeguard is another brand that is winning in China. It is P and G's most widely distributed brand in China and it's growing. Past 6 months share growth is led by the fast growing body wash and liquid hand soap segments. Safeguard's superiority in long lasting germ protection, its powerful wash hands and have dinner digital program for Chinese New Year and its strong in store presence are working together to grow the brand despite ongoing competitive challenges, including a major antibacterial brand launch and heavy promotion activity.
We are funding support to accelerate our top line and grow these brands via very deliberate productivity program that has become part of our annual planning cycle and day to day execution. We reduced several non consumer facing budgets before the year starts to create a bank of funding that allows us to fuel incremental brand support while delivering profit margin growth. Last fiscal year, we funded more than $20,000,000 of incremental media in our category, while delivering over 100 basis points of before tax profit margin expansion. We are making important progress and have strong brands and growth to leverage for our total skin and personal care business, while we address our issues on Olay. And we are making meaningful progress on that.
Olay stretched too far to address every new benefit space, price tier and channel that emerged in the market. The shelf became complex. As sales slowed, cost reductions were made in packaging, beauty counselor programs and counter operations in China. The relevance of our brand declined with small innovations that were not at the core of the brand. The first step we took was to sharpen our in store presence in North America.
We reduced 20% of our SKUs last year. While this created several points of headwind for us, it was necessary to remove slow moving items from the line and create space to double and triple face our best selling SKUs. This includes Regenerist Microsculpting Cream, our iconic red jar, which remains more than 10 years after its launch, the number one selling facial moisturizer in North America, with sales more than 50 times the average SKU in the mass skincare category. This hero item grew 7% last fiscal year and the total Microsculpting line grew 27% behind the total commercial program and our refocused focus on the core. In China, our in store presence in counter channels had degraded significantly and in store consultancy was not competitive.
I'll move out of the way of that picture so you can see it. In the last 6 months, we have completely revamped our beauty counselor programs and are investing to upgrade our faster growing, more profitable counters with much higher and tighter standards. As part of this effort, we are reducing the number of counters by around 30% and reinvesting in diagnostic devices, samples and counselor training and incentives that are designed to bring new users into the brand. Early results on the upgraded counters are positive, and we are expanding. In all markets, we are returning Olay to these benchmarks across the entire ecosystem.
Over the next 6 to 12 months, you'll see more improvements, which will elevate our equity and make the shopping experience easier. Another critical area is meaningful and superior science designed to grow the category by attracting new users. The first example of this is Olay Eyes, a collection of 5 products designed to address the biggest areas of concern. Eyes are the 1st place that women notice the signs of aging. We launched this line in North America in July 2016, and in its 1st few months, we are seeing positive results.
We have gained 9 points of segment share, making us the segment leader. We are growing the eye segment double digits, and it was down 3% for the year preceding our launch. And early reads show that over half the trialists are new the Olay brand. We are making progress and seeing positive signs. Our shelf simplification, counter reinvention and Olay eyes are just the beginning.
We have bigger and more exciting things coming in the next 12 months, 12 to 18 months that I can't reveal here today. One thing I can share is our new Olay packaging, which will begin rolling out next month in the U. S. We're bringing prestige quality packaging back to the brand with simplified navigational cues to help consumers find the right product for her. Our first steps are showing promise, and I am confident that the total program will return Olay to growth in both the U.
S. And China as it comes to bear. Thank you. Now I'll turn it back to David.
Thank you, Alex.
I hope you can see from each of these examples some of the principles that I talked earlier, focusing on new users, growing categories, insights, using productivity to invest and we've identified many areas we needed to invest and are investing or making a difference. And it's not just these 5 categories. This is happening in all 10 of them. We want to feature 5 today. Now next, I want to switch to the sales and market operations.
I've asked 3 of our leaders from the SMOs to share how go to market innovation and execution improvements are also accelerating top line growth and making a meaningful difference. First, Carolyn from North America, then Matthew from Greater China and then Juan Fernando from Latin America. First up, Carolyn from North America.
Thanks, David. Good morning. North America is one of the strongest growth markets in the world, and it's P and G's largest and most profitable market. We have over $28,000,000,000 in sales, and we have the number 1 or 2 brands in each of our 10 categories. And importantly, as David has mentioned, we're making the investments and choices necessary to win.
About 20 months ago, we changed our operating model in North America. Previously, we've focused a little too much on scale, and we're now more focused on product category. Category is the point of competition. It's the point at which consumers engage with our brands. It must be the lens through which we operate our business.
We've created category superhighway, a direct line from each of our 10 product category teams to our retail customer teams, operating seamlessly and efficiently to win. The goal is to drive fast and agile decision making with each category general manager focused on what it takes to win through the lens of consumers, shoppers and retail partners. We've changed a lot to bring this new operating model to life. Business planning and decision making, metrics and accountability, talent development and career planning, recognition and rewards. Let me share a few specifics.
We've invested in selling resources and category dedication. In the last 2 years, we've added approximately 140 salespeople, including external hires, and we now have over 90% of our sales covered by dedicated category experts. We've eliminated many of the aggregate metrics, and we've moved to more granular accountability. We're measuring and rewarding our salespeople on the results they deliver for their category. And this includes growth contribution as a profit metric.
Our customer team leaders are rewarded on the number of categories delivering their goals, ideally 10 for 10. The move to category dedication is making a difference. Now, of course, we continue to operate with scale and as one company where it creates value and competitive advantage, such as our company wide mixing centers, which Janice talked about. We believe we're on the right path and we're beginning to see progress. Our historic organic sales growth for the past 5 years averaged 1%.
In each of the past 4 quarters, we've delivered sales growth of 2% or greater. In the most recent quarter, 8 of 10 categories were growing sales. Now looking ahead, our business results and our growth trajectory will not always be a straight line, but we're encouraged as our new operating model takes hold. We're focused on what matters the most, brand plans that win with consumers and grow categories for our retail partners. We're focused on winning with the fastest growing consumer groups and winning in retail formats that shoppers prefer.
And we're transforming capabilities to deliver this. Let me give you a few examples. Growing household penetration is a top priority for North America. We're double clicking on the 4 critical user groups that will drive 85 percent of household growth over the next 5 years. These are millennials, Hispanics, African Americans and 50 plus.
Our household penetration gap with these four groups represents a $1,000,000,000 sales opportunity. We've discovered that our on shelf availability is lower in stores with that over index with Hispanic or African American shoppers. So for these stores, we're creating specific action plans to close those gaps, including more localized product assortment, tailored shelf sets and incremental store coverage. We're also leveraging our influencer and media partnerships to win with these user groups. We have a platform that delivers significant reach with 50 plus consumers, and we're using this to amplify our brand innovation, including sampling and credentialing.
We're also using this for retailer partnerships to drive in store merchandising. We have a My Black is Beautiful platform, which we're using to launch national brand initiatives targeted to African Americans. These types of platforms are giving us great ways to connect with these consumers. Growing users, especially with these four groups, is foundational to our growth. We're focused on winning in the shopping formats and the locations that consumers prefer.
We have a very strong business and highly developed shares in large format stores, and we're working to build the same advantage in smaller formats and online. With the trend to urbanization, winning in these formats is crucial to drive our growth, and we're having good success here. Some of our strongest results are being delivered in the fast growing, smaller format dollar channel that serves the lower income consumer. We're growing $1,000,000,000 businesses in this channel with a lot of upside still to come. And of course, we must win online.
Consumers are seeking better solutions, quick and easy replenishment and deep engagement with the brands that they love. We're working with retail partners on their brick and click site, such as walmart.comortarget.com. And we're partnering with fast growing players like Amazon and innovators like box.comorjet.com, which as you know was recently acquired by Walmart. We're experimenting and learning with direct to consumer, where we can provide consumers a value proposition or an experience or a new benefit that they're not able to get elsewhere. In all cases, our intention is to learn, and we'll share these insights with our retail partners to accelerate our growth.
These efforts are having a positive impact. In the most recent Advantage Monitor survey, P and G was rated number 1 by our retail partners overall. And in the online space, we're also number 1 and leading by a very wide margin. Our retail partners have also told us that they're very happy with the supply chain transformation that Janus talked earlier. We've improved reliability, shipment lead time and delivery frequency, while reducing cost and cash in the supply chain.
We're reaching 80% of our customers, our retail partners in less than one day, and we've increased delivery frequency from 1 to 2 times per week to daily. Our customer service has reached best ever performance levels. In fact, with one of our most demanding customers, we are the only supplier that's been able to meet their on time and full requirement. This capability is enabling us to deliver strong in stock positions and on shelf availability, both of which will accelerate top and bottom line growth. A final example is the work that's underway to drive effectiveness brands, while getting maximum value for every dollar spent.
We're going after non working dollars and ineffective spending everywhere, and we're looking at our spending very holistically. We've combined efforts with retail partners to improve point of sale coupon validation to reduce cashier overrides and to block counterfeit coupons. We estimate this effort has saved us about 40 $1,000,000 and allowed us to reinvest those dollars into activities that more effectively can accelerate our growth. We've also recently rebid our agency partnerships, as Mark talked about earlier, and we're transforming how we plan and invest our trade spending to accelerate growth. In both of these situations, media and trade, we've increased the rigor and detail of the planning, leveraging data and analytics to guide our choices and with new tools to better understand the effectiveness of the plans that we execute.
This is the productivity set that we have paired with our growth and innovation mindset, a critical part of our culture. Overall, we believe we're on the right path in North America. We've made some progress as our category based operating model takes hold, and we're very committed to accelerating this progress. My message to our organization is unrelenting. We are doing the right thing.
We're on the right track, but we must make faster progress. We are not letting up and we are determined to win. Thank you. And I'll turn it over to Matthew Price, SMO President for Greater China.
Thank you, Carolyn. Good morning. Well, Zhao, Shanghai, as we say back home. As you know, China is our 2nd largest market in terms of sales and profit. Before I talk about the challenges that we've faced in China, and many of you had the pleasure to ask me about them last night, which I very much appreciate it.
I would like to point out that we are 2x to 3x the size of our largest competitor in China. We have brand equities number 1 or 2 in most of the categories. There is 95% of Chinese consumers have purchased a P and G brand in the last 12 months. And we have brands many brands like Safeguard, where our household penetration is greater than 50%. Now our portfolio in China is fairly concentrated.
We compete in 7 categories with 19 of our global brands. So this in itself is an opportunity. The categories we compete in are growing. They're growing mid single digits, but crucially, there is double digit growth at the premium end. David shared a unvarnished critique of our performance in China at the CAGNY conference, and our results were not what they should be.
What happened? We were too slow to respond to market premiumization. Most of the growth in China is coming from premium brands. And secondly, there is a change in shopper habits. There is a move to new channels.
And these two things are linked because the shoppers buying in the new channels want to buy premium products. So I suggest you go to China and visit a baby store. In a baby store, as I told some of you last night, you take your baby in, they put a rubber ring around his neck, they put him in a hot tub, they give him a massage and you go shopping. It's great to be a Chinese baby. But what it also means is the mom who's going into that store clearly wants to buy something new and different.
They want premium products or they want new forms like pants. The market zigged and we zagged, but now we need to zag. Both SMO and GBU own a piece of the problem, and we have strong progress to address the issue. First of all, we're putting in place a very strong lead team. Most of the people we now have on my lead team in China have extensive Chinese experience and we have brought people back.
Secondly, the GBU leaders are putting design people on the ground in China, focused on designing for China, designing packaging and designing communication. Business units are starting to really step up the initiative master plan with more focus on premium. We have launched new products and packaging across several categories in the last 12 months, and every single category will see strong base and premium innovation over the next 12 to 18 months. We're also focused on how we can leverage this innovation to grow categories consistent with our leadership position. This also builds much stronger trade support.
In the ASMO, we had become overly focused on sell in. China is a big country, selling in is quite easy. The tricky bit is to make sure the stuff sells out. And we have built significant trade inventory over time. We have, over the last 18 months, significantly reduced our trade inventory, as you can see from the green line.
And we now believe that we are selling in line with consumption. We have reduced our focus on traders. We have taken our discount structure and got it under control. And we are investing more in distribution and rebuilding sales fundamentals. An in store fundamental tracking system with 40,000 stores.
This is managed by a gentleman who I call the Minister of Truth, who reports direct to me and ensures that the data is totally accurate. So everything is nice and transparent. And we know precisely what we're trying to do in store. You can also see, if you go back one slide, that our quarter by quarter progress, we are sequentially improving and we grew JS16. This for sure is not where we want to be, but I'm pleased to see that we're improving our business whilst also keeping trade inventories under control.
What are our focus areas? 1, premiumizing our brands. The GBUs are fully focused on bringing the right innovation. Secondly, digitization. TV is still important, but increasingly, consumers are watching online, and actually 60% of what they watch digitally is actually mobile.
I was at a consumer's house, a young lady's house in Changsha a few weeks ago, and we were talking about her media habits. She had an old TV in the corner. I asked her to turn it on. She looked at me and she said, I don't even know how to turn it on, grandpa. She didn't say grandpa, but I could see it in her eyes.
The point is that everything is now mobile and it means that they're choosing what media they want to look at. So our communication, we need to place it where they're going, and we need to make it seductive and interesting for them. We're also transforming our go to market. We are investing our trade spending in key business drivers, which we have understood by channel. We are strengthening our shopper marketing capability.
We're also creating a dedicated category customer organization, which is end to end. I'll talk about this a bit later on. But this is allowing a much deeper category understanding by our sales force and allowing them to work much closer with the GBUs. We have also, in the last 12 months, created a truly multifunctional e commerce team. We've put a senior general manager in charge of it and turned it into a business unit, and we actually have GBU people in the e commerce team, so that we can react very quickly to what's going on in the market.
So how is this playing out? I'd like to build off the example that Pharma shared. We have We have Whisper brand in China. Whisper has become, I would say, fairly mainstream and mid tier in terms of perception. This is now changing.
We are launching Infinity, which has the patented Fexflowing technology. This will be priced 3 times higher than the market average. We've also upgraded the cotton like products. In fact, we've upgraded the entire lineup and pharma has even developed a nighttime product with connect and develop, so it develops in China. Next slide.
So we're developing a very well, I would say, in the old days, we would have 32nd advertising, and we would put it on air and push the communication to the consumer. Now and we would probably be reapplying a global campaign. Now we have a GBU, a global business unit marketing person on the ground. They have developed local TV advertising. It's a Chinese idea, take comfort beyond imagination.
It's oh, no, oh, yes, which is a double entendre in Chinese, if you speak it, which means oh, leak and then oh, joy. And this is creating a lot of buzz within China. We need to make all of this innovation that we have talk of the town. Hence, we launched it at the Beijing WaterCube Olympic site. We demonstrated the superiority to media attendees.
We also had key opinion leaders and we had consumers via live streaming, which we have not done before. I'd like to show you a quick video. So we managed also to use a washing machine. It's because we're P and G in the demonstration where we put a pad into the in the washing machine and it maintains its form when it takes out. We have and I've triple checked this number, we have 6,000,000,000 impressions from this, which is very big and we only did this last month.
We have distributed 6,000,000 samples through our trial machine, through our university program. We're using the launch to premiumize the category. And we're using it to build the category with retailers. Now because we have a full portfolio, we're able now to win in each channel because for e commerce, we have the high end with Infinity, which is priced at 3 times and it's new and different. And actually, we were it was the hottest selling SKU in feminine care in 11.11, which I'll talk about in a second.
We are using it with hyper stores to trade up. We've got a shopper based design. This is not a category that people like to shop. Women don't like to stand in front of the fem care shelf for a long time, particularly if they're with their husband or kids. So we try to make it very easy for them.
We've created a shopper based design. Where we've done it, we've seen an 18 point increase and we're rolling it out to 1,000 stores. And we're also then using the rest of the line to win lower down the trade as well. This is, in my view, how to win in China, a full portfolio with leading innovation across the line. And I think we were market leader in fem care in 11.11 last week.
Actually next slide. Actually speaking of 11.11, because some of you are asking, within 6 hours of 11:11 last week, P and G offtake had exceeded last year's record. And what I'm very pleased is that we did this with a very, very, very disciplined approach to promotion spending. We focused on marketing and we focused on acquiring new users. It's quite easy to sell a lot on 11.11 with a high level of promotion discounts.
This was not the approach that we took. Our sales on Ali Tmall were up 60% versus last year. We believe we have acquired new users, 2,000,000 new users. We were the number one SKU in hair, fem and personal care. And Yanis managed to ship 3,200,000 parcels, 1,000,000 parcels in one day.
So our focus on driving premium innovation and building categories is allowing us to partner with retailers. It is also allowing us to develop deep insights with people like Alibaba and Jingdong and also to develop O2O programs with top hyper retailers. We're building capability team by strengthening our shopper marketing, and this is enabled by dedicated category customer organization. Last year, 15% of our salespeople were focused on one particular category. By December, we will have nearly 60% focused on just selling one category.
This means and the plan is to keep them in position for a minimum of 2 years and to try and keep people working in a particular category. So we build deep category understanding. What this means is that the GBU GM basically has his or her own sales force. It brings the GBU GM much closer to the customer. Indeed, they have to go and present to the customer.
So they have to eat what they cook to some extent. And it allows much, much faster decision making and communication. We believe this is a great enabler to winning in China. We're also driving productivity. We have reduced central overheads by 30% in head office, and we have invested this in more coverage with more category focus than I just talked.
We are creating a baby care dedicated sales force now. We are creating a dedicated cosmetic stores sales force Now, we have put dedicated people into e commerce and we're putting more people back into the regions as well. We will continue to drive productivity as it is the engine that allows us to keep growing and reinvesting in the business. To summarize, we're committed to reaccelerating growth in China. We are seeing premiumization coming on all categories.
We are starting to make some progress. We are increasingly investing in digitization so that we can influence shopper habits, both online and offline. We're building winning partnerships with all online retailers. We are transforming our go to market, and we are channeling our trade spending to focus on key business drivers, and we're creating a dedicated end to end customer organization. It will take us some time to get back to market level growth, although on some categories, we are now exceeding it.
We started last year with 2 quarters down 8% as we took a lot of inventory out of the system, as you saw. We grew 2% in the Q1 of this year. We have a talented, highly experienced team in place. I want you to know that winning in China for me and the team is not just a job, it's a personal mission. It's a great honor to do it, and we will not stop until we're winning in China again.
Thank you very much. And now, Juan Fernando from Latin America.
Thank you, Matthew. Good morning. Latin America is one of PNG's most dynamic and faster growing regions. The Latin American market is $56,000,000,000 excluding Venezuela. And last year, it grew at 8% organic growth.
PNG has a 23% share of the categories in which we compete. And at sales of about $5,000,000,000 the region comprised 8% of the company's sales. In Latin America, we are determined to make our go to market activities a source of competitive advantage to accelerate top line growth and create value for P and G. As you have seen, the business units are delivering very strong innovation and branding plans. And we in the SMO are partnering with retail so that we execute the sales fundamentals that lead to category growth and to drive consumption for our brands in a sustainable way.
What this means is having the right trade coverage, the right forms, the right sizing and price points and the right in store execution in the different channels, retailers and stores across the region. And we know that it all comes down to execution, getting those key business drivers right every day, day in and day out. Let me provide a few examples of how we are doing that. A key element of winning with the Latin American consumer is affordability. Our brands are regarded generally as the best performing brands in their categories, but sometimes the price points are too high for consumers.
This was the case with the fast growing discounter and proximity channel in Mexico. This channel seeks to offer high quality brands at price points of around COP 30, that's about $1.50 today. To address this opportunity, we put together a portfolio of smaller sizes on our superior brands such as Pantene, Head and Shoulders, Ariel and Acid Detergent, making our brands much more accessible to a broader range of consumers. These initiatives have been successful to date, allowing us to deliver double digit growth in these key channels and growing market share as well. Similarly in Peru, where about twothree of our sales are still going through traditional small independent stores and where about 80% of the transactions happen at the one sold price point, about USD 0.30 We recently launched Pampers Singles to meet the need for a superior performing diaper that provides a full night sleep to the baby with a low cash outlay, again making it much more affordable to a broader part of the population.
It is early days in Peru, but the business is accelerating behind this initiative. And it's doing well as well as our baby care business is doing around the region behind the innovation that Jannie shared. In addition to accessible pack sizes and price points, in store execution is critical to winning the first moment of truth. In Brazil, we have revamped our trade spending to reward the specific activities that we know will drive brand growth and will grow the categories by brand and by channel key business drivers. On Pampers, for instance, that means making sure that we have the full range of sizes available at all times in all stores and that we also have a secondary point of sale in each store.
On Gillette, it means that we have the right shelf space, that we have Mach 3 being sold in open sales and that we have distribution both for Presto Barbatres as well as beans. We have these key business drivers for each brand identified, and we track compliance versus them in over 7,000 stores in Brazil today. In the stores where the key business drivers are executed, our growth accelerates as well as the category. Further, our focus on these very specific activities has allowed us to reduce trade spending so that we have reinvested in additional sales coverage in the country. These interventions are a big part of why our business in Brazil is averaging double digit growth over the last 12 months in a challenging economic environment.
We are also making sure that our brands stand out in the stores. In a number of countries, we have agreed with top retailers to have long term store displays on our largest brands such as Salvo. These displays are high quality, they communicate the key product benefit and they reinforce our brand equities. They replace in and out promotional displays that were often low quality and were very inefficient, both operationally and financially for us and the retailers. Now to foster a culture of execution, of performance, of accountability, we implemented a performance scorecard across all our sales force in the region.
This scorecard ranks each salesperson in the country on a balanced set of measures that includes growth on sales, growth on growth contribution and the execution of those key business drivers. The ranking of our salespeople is then directly tied to their ratings, their recognition and their pay. This program provides the data and tracking system to enable each of our salespeople to act as sales manager for their business. And our organizational results indicate that they are happier working in this performance based system. As you can see, we are asking our sales people for improved mastery and execution, and we are rewarding them when it is delivered.
In total, these strategies are working for Latin America. Over the past 4 quarters, the LA business has averaged double digit organic sales growth. Now in addition to delivering today, we are also focused on building for tomorrow. We aim to be the indispensable partner and thought leader for retailers, partnering with them to grow their business and very importantly, grow the categories in which we compete. To do this, we are elevating the quality of our joint business plans.
We start with discussion about how we will grow the categories. This means, for example, in laundry, how do we drive compact liquids as well as on dishwashing? In hair care, how do we add the second and third step to the consumer's regimen. And in shave care, it's how we drive more system usage. Many of these sessions take place in our innovation center in Mexico or our innovation center here in Cincinnati.
These sessions changed the game, moving us from a commercial negotiation to joint business plans that create value for retailers, P and G and the categories. This work, together with the strong progress we're making on executional metrics such as service, is being recognized by our customers. In the 2016 Advantage survey, we were rated either number 1 or number 2 in across most categories in the region. Strong progress from being number 4 just 3 years ago. This is so that is our activity system in terms of how we are going to market.
Now the way to fuel this is with our efforts on productivity. We are driving out non value added cost across all elements so that we can reinvest in the business and keep a superior value equation. Over the last 2 years, we have made strong progress, I would say, across all the cost elements. Janis already talked about the progress on product cost savings. Last year, Latin America delivered cost savings 2x the historical average, and we are on track to do that again this year.
We are focused on attacking all non value added costs that are under our control, but not appreciated by consumers. One example of this is what we called indirect media spending that Mark referred to. We looked at the number of agencies, commercial production, celebrity fees. We found that in some cases, we were spending more there than on the actual media we were putting behind the content. So we went after that, and we found savings of 40% of that cost budget, about $100,000,000 over the last 3 years.
We have been able to reinvest part of this behind media, keeping our media on air throughout the year, helping build our brands and equities. In total, our focus on productivity has allowed us to substantially improve our operating margin in the region while maintaining a winning consumer value equation. So overall, strong results behind the power of the business plans, the market, the go to market activity system. We are pleased with the progress, but much more to do. Thank you, and I will now pass it back to David.
Very good. Thank you, Juan Fernando. Hopefully, as you could see, each of the 10 product categories in each of their markets has its own priorities and tactics, but the ultimate objective is very clear and hopefully consistent, sustainable, consistent, balanced growth. And we are making progress. Organic sales had accelerated sequentially in 7 of the 10 product categories from the first half of last year to the second half of last year to the Q1 of this year.
Organic sales have accelerated across 4 of our 6 selling and market operations from the first half to the second half to the first quarter of this year. The global and regional averages are improving and more importantly, we're making improvement at the category country level. And this is a really important lens to me and it's one I track monthly and discuss with each President. In calendar 2015, we were growing share in 14 of our top 50 category country combinations. Over the past 12 months, that's up to 16 past 6 months, 21 past 3 months, 23 of our top 50 category country combinations now are growing share.
It is still not where we want to be, but steady improvement, which is translating into stronger organic sales growth. Organic sales growth were flat in the first half of last fiscal, up 1% in the third quarter, 2% in the 4th quarter, plus 3% in the most recent quarter. Now we know that further acceleration won't happen in a straight line and comps get more difficult as we move throughout the year. And as John said in the last earnings call, considering we're expecting about 2% organic growth for the year and the Q1 was 3%, there's likely going to be a period that's on the low side of 2%. We'll have quarter to quarter volatility and improvement won't happen overnight.
But we're measuring progress in fiscal years, not quarters and this year will be another year of improvement toward our long term objective of consistently growing above the market. Again, our objective is to get back to target growth levels and sustain the results over the long term, avoiding big swings from the top to the bottom line. This means we will need to be more consistent in the key drivers of both top and bottom line results. This requires several things. We're going to be investing in sustaining superior value equations relative to our best competition in each price tier in each market, ensuring we have the consumer and shopper insights so that we get the information necessary to guide our product innovation and commercialization decisions.
We're going to invest in and saw examples of product and packaging innovation to gain or sustain noticeable superiority at each moment of truth. Investing in sales coverage so our brands are available when and wherever consumers and shoppers want to shop and finally, investing in marketing programs to deliver the media reach, frequency and continuity, as well as sampling our products to drive awareness and trial of our brands. This is why the productivity program is so important. Productivity provides the fuel for investment in each of those five areas and allows us to drive top line growth. And all of this is ultimately enabled by P&G People, which is why we're making changes to strengthen our already strong organization and culture.
Now we're making many changes that by themselves may seem small and obvious, but when you take together, I really do believe these are significant, meaningful and will drive change. We're changing our talent development and assignment planning system to drive more mastery, continuity and depth. The objective is simple, improve business results by getting and keeping the right people in the right place to develop and apply deep category or market mastery in order to win. Now we shared a while back the example in personal healthcare in North America where we raised the level of category dedication and mastery through a combination of outside hiring and managing careers within categories of this sector. This is happening there.
It's happening in the other side of the world in Australia. We've done the same thing, moved to an Indian approach through dedicated sales coverage in the pharmacy channel for our health and beauty categories. Our salespeople are applying their mastery of these categories to win with a set of customers with similar store and shopper dynamics. And we made this change at the start of the fiscal year and we're already seeing a strong lift in organic sales where we've done it. And there are many other examples, but the point is simply that we are making changes and placing a premium on applied mastery throughout our company.
And P and G is very fortunate to consistently source and develop strong talent and we intend to maintain our develop from within approach. But as I talked before, there will be times when the best talent for a role may not be inside our organization. Going forward, we will selectively hire from the outside to add the skill and experience that's needed to win and field the best team possible. Over the last year, we've doubled the number of experienced hires. We brought in experienced talent at 5 different levels of management, including at the Vice President level.
Experienced hires comprise about 5% of all management hires in the last fiscal year. We've also just hired a new regional business unit Vice President from outside of the company, Paul Gama, who will lead our personal healthcare category in North America starting next quarter. Paul has 25 years experience in personal healthcare, adding depth and mastery to our team. We've also recently added external positions external hires in senior positions in areas like media planning that was announced, but cybersecurity and corporate communications. Bottom line, we are committed to getting, keeping and growing the right people, right place to drive better business results.
Dedicating sales personnel, sales resources to categories or sectors has improved the clarity of roles, responsibility and importantly, accountability and is leading to better execution, which leads to better results. You heard examples from North America. You heard them from
the other side of the
world in China. We're adapting how we manage small countries and market cluster groups. For small markets, we're implementing changes to give on the ground market leaders more flexibility to react quickly to competitive threats and customer opportunities within a predefined framework developed by P&G's regional category leaders. In the Asia Pacific region, we just implemented this new freedom within a framework approach for smaller markets. The approach covers 71 smaller category country combinations that frankly require less regional day to day engagement, given their sales and profit significance.
A few key aspects of this approach are to have regional leaders establish a strategy, a product plan and a budget for the category and define the executional boundaries. As long as the market is executing within these predefined strategies and plans, there is not a need for the level of engagement we've had in the past. This approach has enabled the region to cut the number of review meetings in half, reduce the number of people participating in the region significantly and reduce the content required at meetings from 10 documents to 1. It is simplification at its best and it will lead to faster growth. We're aligning incentives at a lower and a more specific level of granularity to better match these responsibilities and frankly to elevate accountability.
2 changes were making place are taking place this fiscal year. First, annual bonuses will be determined by the specific results of a business team at a region or country level versus global average results, linking rewards more closely to work. Now this more granular approach, incentives has expanded the number of pools, profit pools 5 times. We have 20 last year. This year, there will be 90.
2nd, our long term incentive program, which is called Performance Stock Program, will be expanded to include all vice presidents ranging the participation from about 30 executives to 250. The payments from this incentive program are based on 4 metrics, organic sales growth, core EPS growth, core before tax operating profit growth on a constant currency basis and adjusted free cash flow productivity. Expanding participation in this program drives broader alignment across our top leaders, presidents and vice presidents that drive total shareholder return. We're changing how we measure our progress, reducing and in some cases eliminating aggregate measures and averages. You had some other people mention this.
A few of you have noticed that when stopped reporting things like percent of global sales or U. S. Sales that are holding or growing share. I'm not a big fan of measures like these that are either internally or externally. It's a result to one part of the business mask real problems in another.
Worse, in some cases, they don't really correlate with how we're doing. We're tracking our progress on a category country basis, that lens. In our simplified portfolio, the top 5 markets for each of the top 10 categories or 50 category country combinations covers 2 thirds of our sales and 75% of our profits. I can track it on 1 sheet of paper and do. I'm a firm believer in the management philosophy, you get what you track and what you measure.
We're measuring what will help our winners win bigger and quickly exposing issues so we can come and help and address issues where we're not delivering. We're measuring details, not averages. We're benchmarking against our best competition, not horizontally across other members of the portfolio. Again, each of these measures may seem small and obvious, but collectively, you take them together, they're big and important changes for our organization and culture. Now each area of transformation, top line acceleration, productivity, portfolio and strengthen the organization and culture requires change and we're making good progress in each of these.
But success ultimately will be graded by sales, profit, cash and value creation results that we actually deliver, not on the activities that get us there. We are committed to doing everything we can to change what must be changed to deliver these results. We expect this year will be another significant step back toward balanced growth and value creation. We are committed to continued productivity improvement and cost savings that provide the fuel for innovation and investments needed to accelerate and sustain faster top line growth. And you've heard about a lot of progress everywhere we're making.
We've created and are sustaining strong cash flow, cash productivity momentum. We're building stronger innovations aimed at delighting consumers in growing markets. You heard a lot about growing markets and growing our market share in the process. We've completed the major portfolio moves to simplify and strengthen the category portfolio and we're making similar moves at the brand and product form level to improve the profitability and value creation capability of each of the categories we've retained. And finally, we're strengthening the organization and culture by improving our approaches toward talent acquisition, career management, decision making, accountability and incentives.
We're willing to change anything and everything that's needed to win. The only thing we will not change is the company's purpose, values and principle and our commitment to winning. Other than that, we will adapt, evolve and change as needed to get back to winning consistently. We are making progress and we are determined to win. But we're also realistic about the time it will take for all these improvements and investments we're making to fully play out and results all over the world.
But our standards are high. We are not satisfied with being a little better than last year. We want to be the best. I thank you and I'd be happy to take your questions. I'll ask John to come up as well.
Now, if I could ask you, please use the microphones. We have folks around here with those. Hands will go up. Our IR team has the microphones. And if you raise your hand, John, everyone will get microphones to you.
Thanks, guys. So I have two questions. You mentioned the word of concept balance to my count 15, 16 times.
Glad you're showing
it. Today, I'm trying to count something. So clearly things are changing, right, from a productivity perspective, from accountability perspective, portfolio perspective. And you mentioned just at the end, look, we're willing to adapt, we're willing to change. Can you give us a sense of how you know you're getting to the right balance?
So how are you testing yourself to know whether you have to go further than you're going so far?
And in that, can you give us
kind of an answer to what you view the value of scale being?
Sure, sure, sure.
First, how will I know we're doing better? Through the lens of the 10 categories, which is the way we're running this company, through the then finer lens of category country, one of the most important is which ones are we winning? Is the category growing in those top 50 category countries and are we starting to grow share? That tells me vis a vis the category competitors in that market will be better than whether they're small, local or global competitors. And to me, it's important because we have a lot of charts in the past that they look horizontally across.
We're very much looking through the lens of categories and category country and the external competitive set that they deal with in every category. And that to me gives me a very good indication. On the balance point, we track top, bottom, cash are the three things we watch. There's a lot of in process measures that are important to manage a business like ours. But the relative priority has shifted very focused on organic top line and making sure we get the bottom line in cash generation.
We're given a lot more flexibility by category and when needed by category country to do what it takes to win versus the competitive set that they have. But those are the tools that I use and the category country one is always with me because that's the best lens when I'm interacting with the President or General Manager to say versus your best competitors, are you winning top, bottom, cash? And your second question was you got 2 in there. Okay, scale. You didn't hear myself or John or any member of the leadership generally talk a lot about scale.
We believe we get a lot of advantages by being part of Procter and Gamble. There's a tremendous advantage whether it's with a customer or whether it's with our central services. But generally, we want the scale advantage to be on non consumer facing items so that we still can be as agile as we need to be to win in every core category country combination. And I believe the outcome of doing that really well in those top 50 will be we'll get an even bigger scale advantage. We will grow.
Now there's many, many areas. If you look at product supply area that Jan has talked about, mixing centers, I get an enormous advantage. Every one of these 10 core categories could not create anything close to what we've created because of the 10 categories. We've gone down from over 15 to the 10 that we have a basis to really win and now we got to go out and execute. But our supply systems is an advantage.
We have many platform technologies, supplier relationships, customer relationships where we get meaningful scale advantage. The watch out and the reason you don't hear me talk about it a lot, if you focus on scale as the outcome, to me there's a tendency to centralize and globalize and do not want to do that. We want to do the things necessary to win and be very competitive, but we get enormous advantage for all those areas that I just mentioned as well as the non consumer facing items on shared services. So I think we'll get a scale benefit, but I want to be very competitive by category, by country. Thank you.
You guys pick. Wendy?
Thanks. My question is going forward, do you think the cost of defending your market share is going to be greater than the cost of kind of where you've gotten thus far. So the question is you've generated a ton of cost savings, you've shown a fair amount of margin expansion. But I would think that as you continue to actually take more share in more categories for more competitors, the response could be pretty aggressive in multiple markets all at the same time. So my question is, I guess fundamentally, what's your confidence in ability to keep putting up margin expansion in that environment, where the cost savings are still flowing through, but you might have to actually spend more going forward.
And related to that, John, you had thrown out the number several years ago about the gross margin benefit when you finally kind of reached a critical scale in some markets like Brazil or like India. And I'm just wondering where we are.
Okay. Let me take the first one here. Actually, if you want to do the quick one. I think that if we do a great job on innovation that builds categories that I will not see the dynamic that you're saying. Certainly, a competitor in a brand country combination or a category country combination may get more aggressive.
But you'll hear the words modest share growth. The majority of our growth will come from category growth, significant majority of our growth has. If you go back and look at last 10 years, for us and every one of the industry participants in this category, the big ones, has come from category growth. You heard a lot, I hope, on category growth. When the category grows and we get a disproportionate amount of that growth, we grow fast, we grow a little share, But it's a very market constructive strategy to do so.
If your strategy is to have aggressive share growth, I think that dynamic that you described is very real. But we've got many examples now where when category growth ideas, I think for Brise Car, the profitability of that category is quite healthy for the retailers, for us and for other participants because the category is twice the size that it was 6 years ago. In beads, profitable for us, profitable for the retailer, probably profitable for other participants, just not nearly as much as for us because we invented and grew the category, which is why there is such a premium for innovation that is truly superior. We talk about getting to a much higher standard of irresistible superiority. Kath and her team are working with every one of the 10 categories to say not just a little technically better, but meaningfully better, which would drive more users, higher consumption and faster category growth.
Absent of doing that, the risk that you highlight is real, which means we need to do that really well in all 10 categories and all markets. The other thing I'll say is the 6 regions play a huge role in creating the environment in store that grows the category. Different shelf sets, we've got clear evidence can grow categories and close sales more. So that lens of category growth, whether it's a market or whether it's a business, is enormously powerful and is a very market constructive strategy. John?
Yes, let me just first build on that. Also, as you can imagine, our relevance and importance to our retail partners relates directly to our ability to do exactly what David talked about. They really don't care about P and G share growth. They care about the growth of their market baskets and their sales. In terms of being able to do what David is describing and continue to generate some level of margin growth, we showed one chart twice.
There was only one chart we showed twice. And that chart was the chart that showed the importance of both top line growth and getting that back to where it needs to be and continued modest margin expansion. We have been operating as a 10 category company for 49 days.
But who's counting?
I counted a lot of days before that. But and I'm convinced that there is significant opportunity as we start to wrap our minds around what this represents. We had a meeting yesterday with all the SMO leaders that you saw here today. And the ideation around the opportunity on both top line and significant productivity, not just from a savings standpoint, but for making us more effective in the marketplace, more agile in the marketplace, really focusing us on the biggest opportunities to drive market. If we do what David described, I think very well, grow markets as we grow our business and we do what I'm confident we can do and hopefully we've demonstrated we can do, which is continue to drive cost out of the system, the right cost out of the system and reinvest in cost that drives the business, we'll be able to do what that chart prescribes.
The other thing I'd add is we're in the early part of the supply And Europe and and Europe and each of the other regions are still to come. They're in various stages. So, they're many years ahead of meaningful total cost opportunities, Mark highlighted. So, I don't see that as a barrier at all. I think there's a lot of opportunity.
Our job is to move faster
with more
intention and maintain balance. Others, please.
Great. So, if I think about your $10,000,000,000 cost savings objective over the next 5 years, that's about $2,000,000,000 a year, which on your EBIT base is about 10% to 15% profit growth plus organic growth, that's solid mid teens profit growth versus long term guidance of mid single digits.
Yes.
So how do I think about that gap? Is that just what it costs to grow a little bit ahead of
the market? Or is that flex? Help me. And where does that gap go as we get to
go forward? So it's both. We've said in every presentation today that we're going to invest in the 5 areas that David showed towards the end of his remarks. And that's the primary reason for what you described as that gap. But we also want to have the flexibility to invest where we see opportunities to grow and alternatively to deliver bottom line health simultaneously.
So it's both.
Two questions. John, just real quick on the trade spending. Where are you in the process? You've talked about it as being an opportunity, but like how developed is it in terms of the number of dollars you can save or redeploy? So that's the first question.
And then David, P and G has been historically an innovation and marketing driven culture. And it strikes me as one of your biggest opportunities is the in the store execution out of stocks, etcetera. How do you train and attract and retain the best talent from that vantage point? Because it seems like that is a lot of low hanging fruit if you can just get that part right? Thanks.
So in terms of trade spending, effectiveness and efficiency, Nick, I would say we are at a place in that program that is similar to where we were on non manufacturing overhead reduction in 2012. So it's very early days. We launched what we call the trade transformation program in North America and Europe as pilots last year. So we're 12 months into that. A lot of that was developing an understanding and a knowledge base and a tool set.
And now that's being put into action. So it's very, very early days in that opportunity.
Nick, on your point on in store, first, I think it's a very fair point. We are an innovation driven company. We take that innovation in the form of brands, but ultimately, the consumer, the shopper sees however it shows up. And we've learned a lot getting what I'd call very objective measures on how we actually show up. And Matthew gave a good example of probably one of the worst cases in terms of finding out the delta between where we would want to be and where we really were when he's gotten the data from stores from an objective source.
There's several things we're doing to try to address that. The staff to win idea, the idea of saying that you're going to stay more 1st dedicating the category where it makes sense, bigger markets dedicating the category, huge change. You understand the category, you understand the competitive environment, you understand the market and you have a relationship with the customer, all really important. So the rate of change we move people had to change. And the whole philosophy that says, if it looks this way versus this way is a big change for our company and we're adjusting then the staffing plans and assignment planning and making sure it fits.
That's in process and making a difference and Carolyn gave an example as well on what she's seen from past 5 years to past 4 quarters. That's got to happen. There will be and I think we found some areas where we've gotten too tight in field sales coverage. So we weren't doing this well with both coverage and in store conditions. And there's something we call shopper based design, resources that look at how you organize a shelf to create an environment that grows the category and disproportionately favors our brands.
We've got some really good examples, but we've also got many categories where we haven't done well. I mean, Alex showed a kind of a before and after at 1 of the counters. Doing that well can make an enormous difference with exactly the same product and package. Then when you have a better product and package, it amplifies it. In some categories and in some markets, if we're not doing well enough and don't believe we have it, we'll do external hires.
And one of the bigger chunks of external hires over the last year has been sales personnels, category masters that have an understanding both of selling skills, but also presentation in merchandising skills in stores through the lens of a manufacturer, but understanding the retailers' needs. And I'd say that's the focus area, which is why we've got 6 Presidents here and available last night that will talk about what they're doing through the lens of their country in the 10 categories. And the idea is when you round the aisle, we had a show better than anybody else and we had a category orientation that both grows the category and favors our brands. That's what success looks like.
Good morning. I thought the slide where you comped yourself against the 3 gs companies was particularly interesting because part of what I think drove such a big delta for some of these companies was where their starting point was. So can you talk about your starting point and your level of investment versus where they've been historically? And do you think your manufacturing efficiencies after these enrollment reductions, what's not
just a change year over year
for you, but after the cleanups you made, do you think you're at par relative to your peers or superior relative to your peers?
If you look at gross margin as one indicator, just talking about cost of goods for a second, and as we benchmark that across the peer group. First of all, one mistake getting to the point of aggregate measures that was made several times is that we don't want to compare total company to total company because we lose opportunities in that comparison. We really want to compare Charlie's grooming business to his best competitor, Fauma's Feminine Care business to her best competitor. And we look at gross margins on that basis, we're ahead in probably 8 of the 10 categories. I might have that wrong by 1, but we have a pretty good gross margin obviously has a sales component as well and we are a little bit premium priced, so both of those feed into that.
Having said that, we believe that there is still significant opportunity as Johannes indicated. As David mentioned, we're just in the beginning of our supply transformation program. The whole area of digitization and automation, I would argue we're in the same place on the journey that I talked to Nick about on trade terms. So there is significant opportunity there. In terms of overhead, again, when you look at it not as a company aggregate by category by category to best competitor, we're not in as good a place, probably 6 out of the 10.
Now some of those are deliberate business model choices we're making. We don't run our business the same way. I won't run our business exactly the same way as competitors. We are going to invest heavily in innovation. And we shouldn't penalize ourselves for that.
It's part of our business strategy. But in the areas that aren't a core part of creating noticeable superiority and a competitive difference, we need to be best in class. So we're really looking at that granular level across the activity system, where do we choose to invest and where we don't, do we have a line of sight to best in class. And I think, again, as I've said many, many times, I mean, I don't think I don't want to personalize this, but I remember our conversations very, very clearly, because they were somewhat cost takeout there without impacting in a significant way our capabilities across the business. And I would just tell you that I feel even more strongly about that today than I did back in 2012.
Jack, can you
just put a little bit more meat on the
bone on the EPS softness in the second quarter? So is it all discrete to currency?
And do
you still think sort of like 1% top line for currency divestitures for the year is still right? And I think you said $0.12 of EPS. And then for both of you, do you still think you're going to exit fiscal 'seventeen at category growth rates? Because I think you sort of said both offline and online that by the time you get to the 4th fiscal quarter, things will kind of be ready to go and you'll be at or close to category growth rates.
So first, the all in sales growth number of 1%. Yes, we still think that's the right number. In terms of the desire to be at or getting approaching category growth rates by the end of the fiscal year, that's very much our desire. And that's why I said on the call, as David repeated in some of his remarks, 3% in the Q1, that would imply something close to 3% in the 4th quarter. We still see 2% as the average.
So there'll be some lumpiness across the quarters. OND will be a tough quarter, in part because of that lumpiness, but also because of these massive currency changes that have occurred literally in the last 2 weeks since the election. And those are things that we'll work to recover over time through a combination of cost savings, smart pricing mix. But with 6 weeks left, there aren't things that we're likely to be able to cover in the quarter. What category countries are going
to meaningfully accelerate to get to that 3% growth exiting the physical?
Well, I try to when I talk about opportunities, when we discussed the top line indicate a couple of categories in a couple of markets where we weren't yet at category growth rates, the big ones, right? So we said hair care and baby care grew 2% in the quarter we just completed, but that was still below the category. We talked about U. S. Grooming.
I talked about China and Russia growing, but behind category growth rates. And Matthew talked about the desire to continue improving that over time. So frankly, those big opportunities, if we're able to make sequential progress in each of those, we should be getting pretty close.
Thanks. Just following up, I know you said that hair care, you said, okay, hair care is one of the categories that didn't deliver just yet, but we didn't hear much about it beyond that today. So going off script, could we hear a little bit about what's going on in hair care and maybe why it wasn't a featured category because it has been a piece of the this is one of the businesses that has to turn for us to get back to where we want to be?
So you're absolutely right. The only design intent and not explicitly covering hair care today is to get you to your planes on time. But I'm going
to turn
it over to Therese to talk about off script how we're doing on hair care.
And we talked some of it last night.
Off script, but a setup question.
Go ahead.
Very good. So listen, on hair care, a lot of the things that we've talked about are very consistent for hair care, right, focused on accelerating the top line through better brand building, stronger innovation. You saw some examples this morning of what we're doing on Pantene. You saw Pantene started the fiscal year very nicely with mid single digit performance. We expect to continue to drive that.
2nd piece is portfolio, right? And we've gone through significant cleanup in our portfolio, whether that's the divestiture of our color business. We're selling some of the mid tier, low tier businesses that we have sprinkled around the world. 3rd piece is you heard a lot about go to market and transforming the shelf and shopper based design is very relevant for hair care. You saw a couple of examples on Pantene.
We're doing the same across the entire portfolio, which is how do we simplify the shopping experience, how do we really make this category a category that consumers enjoy buying because this is beauty, so there has to be kind of this emotional dimension. One of the concepts we're driving is what we call Golden River on Pantene, which is breaking this white brand block. You saw a couple of examples today of kind of bringing that to life. And we're seeing where we implement that, we're seeing the business respond very strongly. And then I think the 4th point from a capability standpoint is we are thinking about hair care, you saw this I think across all the businesses, as a dedicated company, right, operating end to end with the right capabilities to win in hair care.
So not trying to see what's required to win in baby care and assuming that we just apply that in hair care, but really focusing on given the hair care consumer, given the competitive landscape, given the retailer expectations, what's required to win in hair care, starting with the U. S. And starting with China. And we're building those capabilities, which helps get us to a decent start in JIS and I expect us to accelerate. And I think to Bill's earlier question, we expect to end the fiscal year at category growth rates on hair care.
Okay. Thanks. Just to build on Bill Schmidt's question before, but specifically on China, one thing I was struck by during a conversation last night and again today was the expression is going to take some time. And it would seem in the absence of being able to return to category growth rates in China, back to the napkin math, it's probably somewhere to about a 50 basis point drag relative to the 3% to 3.5% that you guys want to get back to. So two questions.
Maybe you could help us sort of contemplate what's sort of baked in, what's sort of the timeframe understanding there's a lot going on in the market, number 1. And number 2, David, from your perspective, what are the learnings from China? And do you feel like you've made the right changes organizationally? Because that, in theory, should play to Procter's strengths in terms of winning at the high end where you guys caught a little bit flat footed. What are sort of the learnings there
that could be applied to the rest of the business?
Let me give you
a couple of quick and then I'll turn it to John. I lived there three and a half years in Greater China from 'ninety eight to 'one. John was there as well. So we both spent time living in the region before. And that market around 2,008 to 2012 moved very, very quickly.
And as I've been very open with, I think at times aggregate measures blind emerging issues. And if you look, many of the categories that have real issues in China in absolute or in global lens, we're doing fairly well for several years. So one of the learnings is looking at the senior levels at global averages or aggregate measures did not cause the level of attention that needs to be put there quickly enough. The second one is portfolios are broad generalizations, developing market, developed market to me also blinds. China is one of the biggest developed markets in the world, most demanding consumers and it's one of the biggest developing markets in the world and we need our full portfolio, not in Phase III of the rollout because it's a developing market.
It ought to get the best we have at the same time of the most advanced markets in the world because if you've been to Shanghai recently or many of the metro areas, urban areas, you have an incredibly large number of demanding consumers and you have very fat, very modern format stores and many specialty stores. So again, I'd say when we looked at it developing, developed or you look at it through any lens other than the brand country combination, we didn't react as fast. And we've recognized and been very open about that and shifted. And I think you're seeing a difference front half of last year to the second half into this year. And how fast it happens, we'll see.
Having been there, just know there was a sign that was on the wall when I first went to China in 1998 and it said, anything is possible. And right below it, it said, nothing is easy. And both of those are very true in China today. Anything is possible, but it is a big country. There are lots of different challenges.
Virtually every competitor, both local, regional, global is there. And what we're trying to do and working hard to do is build the go to market capability wherever the shopper is by category. Johnny referred to baby stores which is being worked. And what we're also trying to do is build the portfolio and the capacity to serve it in a constructive way and that's going to take some time. And in some categories, we're moving very quickly.
We have several categories that are growing quite nicely and they have the best of their portfolio. We have a few categories where we are a little bit out of position and that's coming in and it's coming in progressively over the next several quarters. In the meantime, we have quite a few markets that we showed are growing share and they're going to need to make up for that while this one gets better.
And I would only add in terms of the organization, a couple of things that I think are important. One is really making a deliberate effort to get some of our best management into China who have experience with China, as Matthew mentioned. The other is doing the same thing with our suppliers. So the media agencies, resources on the ground in China who really understand the Chinese market working in daily proximity with our advertising groups. The third is management attention.
Each of the GBU presidents sitting here today, I don't want to speak for them, but I would guess if you ask them, China's number 1 or number 2 in terms of their priority, in terms of how they're allocating resources, in terms of how they're allocating their own time. And that's also the truth for David and myself, which wasn't necessarily the case as we got into some of the problems that we have.
We're going to have to close now. Let me just make one last comment is my hope for those of you that were here last night saw that we're very open to engage and answer questions. And we had all of our 10 category presidents, we had all of our SMO leaders, each of the 6 there and we had a number of our function leaders. Every one of us is very, very clear on what success looks like, every one of us. This balanced growth and value creation that puts our company back in the top third of our peer group is very, very clearly the goal for every one of the people that are in front of you today.
We also understand that there is a strong push to go faster and we are working that as hard as we think is appropriate to do in a way that will make sure it's sustainable. We very much appreciate the investment you made last night and today and learning more about the company. And as I said when we started, we're very committed to win and this team to me is capable of making that happen. Thank you very much.
Have a great holiday.