P&G would like to remind you that today's presentation includes a number of forward-looking statements. If you will refer to P&G's most recent 10-K, 10-Q, and 8-K reports, you will see a discussion of factors that could cause the company's actual results to differ materially from these projections. As required by Regulation G, Procter & Gamble needs to make you aware that during the presentation, the company will make a number of references to non-GAAP and other financial measures. For completeness, Procter & Gamble has posted on its website, pg.com, a copy of the key slides from this presentation and a full reconciliation of non-GAAP and other financial measures.
There's still a few seats left in the front pews. I'm going to wait a minute. There's still a couple of people coming in. All right. Good morning, everyone. I'm sure you're happy to come in out of the cold for a minute or two. Jon and I want to welcome you to Cincinnati and our global headquarters. We'd also like to extend a warm welcome to those listening to the webcast. We have a full agenda this morning. Jon will spend a few minutes recapping recent results and our outlook for the fiscal year. We'll spend the balance of the morning discussing four strategic focus areas, our strategic portfolio focus and strengthening, brand and product innovation, cost and cash productivity, and execution. Execution's the only strategy that customers and consumers ever really see.
We'll also try to address a few of the questions we know are on your mind, and then we'll of course open it up for other questions. Let's begin. Jon?
Thanks, AG. As you know, fiscal year 2014 organic sales grew 3%, in line with the median performance in our industry. Fiscal year core earnings per share increased 5%. Both our organic sales and EPS results were within our target ranges. In fact, they were both within the pre-Venezuela devaluation ranges that we established going into the fiscal year. That was despite more than a 25% reduction in market growth rates from four points a year ago to two and a half to three points currently, and significant foreign exchange developments versus our going-in plan. Our productivity program was a significant enabler in delivering that result and overcoming those headwinds. On a constant currency basis, core earnings per share was very healthy, growing double digits. We generated over $10 billion in free cash flow.
Free cash flow productivity was 86% all in, and 94% excluding the voluntary contribution that we made to our German pension fund. We returned $12.9 billion in cash to shareholders, $6 billion in share repurchase, and $6.9 billion in dividends, about 110% of net earnings. We raised the dividend by 7%, the 58th consecutive year our dividend has been increased. July to September continued to be challenging from a macro standpoint, with slowing market growth in both developed and developing regions, strong foreign exchange headwinds, and market-level challenges in the Ukraine, Russia, the Middle East, Venezuela, Argentina, and Hong Kong, and increased consumption taxes in several large markets, including Japan and Mexico. Despite this, we were able to deliver top and bottom-line results for the quarter, which met our going-in expectations.
Organic sales grew 2% and were in line with or ahead of year ago in each of our reporting segments. Global value market share was about flat. Core earnings per share were $1.07, up 2% versus the prior year. Excluding FX, core earnings per share grew 9%. We generated $3.6 billion in operating cash flow and $2.8 billion in free cash flow, with 96% adjusted free cash flow productivity. This was our best first quarter cash performance in the past five years, driven in part by our supply chain financing project. We returned $4.2 billion in cash to shareholders, including $2.4 billion in share repurchase and $1.8 billion of dividends. As we announced earlier this morning, we'll be exchanging a recapitalized Duracell business to Berkshire Hathaway for Berkshire's share of P&G stock. I'll talk more about the form of that transaction a bit later.
We'll be restating Duracell results to discontinued operations, starting with current quarter results. The deal has no impact on our outlook for organic sales growth or core earnings per share growth this fiscal year. Our forecast for organic sales growth remains in the range of low to mid-single digits. This is based on current market growth rates of about 2.5%. Based on mid-October spot rates, we expect foreign exchange to be a negative two-point impact on sales growth and a five- to six-point headwind on core earnings per share growth. This is roughly double the impact that we've estimated going into the year. We're currently maintaining our core earnings per share growth guidance range of mid-single digits, though FX skews us towards the lower end of this range.
We'll do our best to try to offset the FX impacts with productivity savings and pricing without compromising increased investments in brand equities, value equations, innovation, and selling capability. This is what we were able to do successfully last year. Excluding FX, we're now forecasting double-digit core earnings per share growth for the fiscal year. Our guidance is based, as I said before, on mid-October foreign exchange and commodity spot rates. Further significant currency weaknesses, including Venezuela, is not anticipated in the guidance range. As I said, our outlook is based on current market growth rates, which we're monitoring closely. We also continue to monitor unrest in several markets in the Middle East and Eastern Europe. We continue to closely monitor markets like Venezuela and Argentina, where pricing controls, import restrictions, and access to dollars present some risk. Our guidance does not assume a prolonged business disruption in Argentina.
On the flip side, our guidance also does not reflect potential tailwinds. For example, our results could improve if currencies in our commodities ease, if markets begin to expand in a sustainable way, or if there's an easing of political tensions and consumer confidence begins to improve in a number of countries, particularly in the U.S. There are a few things you should keep in mind as you construct your models for the remainder of the year. Our top-line comps are more difficult in the second quarter versus the back half of the year. Benefits from new pricing to offset foreign exchange impact in both Venezuela and other markets will build throughout the year. We expect significant top and bottom-line headwinds from foreign exchange in the October-December quarter. Currencies have moved further against us since our earnings were released three weeks ago.
At current FX rates, we'll annualize a portion of the FX headwind in the back half, and productivity savings will, of course, increase as the year progresses. We expect to continue our track record of robust cash flow generation and strong cash return to shareholders. We're targeting to deliver at least 90% free cash flow productivity. Our current internal forecast is 96% free cash flow productivity against the stretch objective we've set for ourselves of 95%-100%. We'll look to offset additional capital investments with continued working capital improvements. We plan to return this cash to shareowners through share repurchase in the range of $5 billion-$7 billion and dividend payments of about $7 billion. In summary, first quarter sales and core earnings growth were in line with our going-in expectations. We continued to build on our strong track record of cash productivity and of cash return to shareholders.
With strong productivity progress in the back half of the year, we hope to be able to deliver our fiscal year objectives. We expect the headwinds facing our industry to continue blowing. We're consequently continuing to sharpen our strategies, accelerate and increase productivity savings, and strengthen execution.
We're going to be popping up and down a lot. Bear with us. We're going to spend the majority of our time today talking about the main drivers of sustainable growth and value creation, with most of the focus on the strategy and priority choices that we've made. Our aspiration is straightforward: consumer-preferred brands and products that result in category-leading positions that translate to superior industry value creation. Our objectives flow directly from this vision. Deliver superior value for consumers and superior value for shareholders. It's that simple. We use one integrated internal measure of value creation success, Operating Total Shareholder Return. Operating TSR keeps us focused and balanced on the real drivers of value creation, sales growth, gross and operating margin expansion, and strong free cash flow productivity. As you would expect, Operating TSR results correlate highly with market total shareholder return over time.
Balance may be the single most important value creation concept for P&G. We perform better, we perform best when we stay in balance. Operating TSR is fundamentally a measure of balanced value creation. We're becoming more balanced across developed and developing markets. We're getting more focused and balanced in our category and brand portfolios. We're balancing our need to invest for future growth with our desire to drive cost savings. Our growth and operating strategies are relatively simple and mostly unchanged. We begin in and from our core in both developed and developing markets. That's where we grow the most value. We're working to strategically focus and strengthen our portfolio. While we work to simplify and streamline our current portfolio, we will also selectively and strategically address new category opportunities. We're following shoppers into new fast-growing channels.
Developing markets will continue to be driven by demographics and household income growth and will continue to be a significant growth driver in our industry and for our company. We're focusing developing market investments on the categories and countries with the largest sizes of prize and the highest likelihood of winning. Our how-to-win strategies are also straightforward. Keeping consumers at the center of our decision-making, driving value creation with innovation and productivity, and executing with excellence across every aspect of our business. Everything begins with understanding consumers and winning the three consumer moments of truth. When consumers learn about our products and brands, when they purchase them, and when they use them. Winning these moments of truth leads to trial, usage, purchase, repurchase, and loyalty of P&G's differentiated brands and products. That builds leadership businesses over time and value for P&G shareowners.
There are four focus areas we will look at more closely today, starting with strategic portfolio strengthening. We're taking an important strategic step forward to simplify, to streamline, and to strengthen the company's business and brand portfolio. We will become a simpler, more focused company of about 70 to 80 category-leading, competitively advantaged brands. Organized into about a dozen business units and four industry focus sectors. Over the last three years, the 70 to 80 brand portfolio has accounted for about 90% of company sales and an even higher percentage of profit. We will compete in categories that are structurally attractive and that we believe play to P&G strengths. Within these categories, we'll focus on leading brands, where the size of prize and probability of winning are highest, with product lines and SKUs that matter to shoppers and customers.
We will harvest, partner, discontinue, or divest the balance 90 to 100 brands. We're going to create a faster-growing, more profitable company that is far simpler to operate. Every brand we plan to keep is strategic, with the potential to grow and create value. These core 70 to 80 brands are leaders in their industries, categories, or segments. They're brands shoppers buy, consumers use, and customers support. They're generally leaders in brand equity and consumer awareness, trial, and loyalty. They're leaders in product performance and product innovation, and they're leaders in growth and value creation. In contrast, the sales and profit of the brands we plan to exit in aggregate have been declining over the past three years. Exiting them will mathematically increase top-line growth, and before tax operating margin will increase, as will the rate of profit growth.
We will retain sufficient scale in our largest markets, maintaining the vast majority of current sales across each of our top markets. The time that we'll take to streamline the brand and product portfolio will be guided by our ability to create value every step of the way. We'll manage the portfolio process to maintain focus on growing our core strategic brands and businesses first and foremost. Some brands will be discontinued. Some will be combined into other brands. Where it makes sense, multiple brands will be grouped in one transaction. In the end, the number of transactions should be very manageable and should not cause any significant distraction.
Making good progress on the portfolio strengthening and focusing effort. Over the last five quarters, we've divested, discontinued, or made plans to consolidate 28 brands. We exited, as you know, our bleach business, MDVIP. We've also exited the Naomi Campbell, Avril Lavigne, and Puma fragrance brands, and the DDF and Noxzema skincare brands, just to name a few. In the September quarter, we completed the exit of the pet care business, which transitioned seven brands to new owners. We closed the divestiture of the America's pet business to Mars in July. Mars executed their option to purchase the business in Asia. Six of the option markets have received anti-trust approval and should close very soon. In September, we signed an agreement to divest the European pet food business to Spectrum Brands.
We expect all remaining elements of these transactions to close in calendar year 2015, pending, of course, regulatory approval. We generated very good value in this three-stage transaction, earning more than a 20 times multiple on past three-year average EBITDA on the pet business. Three weeks ago, we announced our plans to exit the battery business. Our goals in the process are to maximize value to P&G shareholders and to minimize earnings per share dilution. There are two transactions in this plan. The first transaction was the sale of our interest in a China-based battery joint venture. This transaction closed yesterday. I checked this morning, the cash is now in the bank. It's important. The second transaction is the exit of the Duracell business. As you know, we initially announced our preference to split off the Duracell business into a standalone company.
Today, we're updating that plan, announcing that we'll be exchanging a recapitalized Duracell company to Berkshire Hathaway for their shares of P&G stock. We expect to contribute about $1.8 billion of cash to recapitalize the Duracell company before it's exchanged. This is a tax-efficient transaction. The value received for Duracell is approximately seven times fiscal 2014 EBITDA, which equates to a cash sale value at approximately nine times EBITDA. The combination of the China JV sale and the transfer of Duracell to Berkshire deliver on our goals of maximizing value for P&G and its shareowners and minimizing earnings per share dilution. Last, we've just begun the process to divest about 10 more small brands with information currently in the hands of prospective buyers.
When we're finished with the strategic portfolio reshaping, we'll be more agile, we'll be more responsive, we'll be flexible, and we'll be faster. We'll be a faster-growing, more profitable company that, as I said before, is far simpler to operate. We really believe less will be more. As we continue to strengthen our category and brand portfolio, we will strengthen and focus our brand building and product innovation efforts and investments against our biggest opportunities. Year after year, decade after decade, successful brand building and product innovation have transformed P&G categories and driven value creation. Higher value for consumers, higher value for shareowners. We're committed to be the innovation leader in the categories in which we choose to compete. Innovation combats commoditization, stimulates category growth, and builds the cumulative advantage of our brands and businesses over time.
Ultimately, innovation that delivers superior value to consumers will drive value creation for shareowners. As I said, when we win these three moments of truth with superior brand and product innovation, selling and sourcing, it drives all the critical metrics of consumer-driven total shareholder return. The number of buyers we attract to our brands, how often they buy, how much they buy, and how much they're willing to pay. Generating higher sales and profit per unit enables us to capture a greater share of the value of the profit in cash where we do choose to compete. It is the share of value, the share of profit and cash that is generated that we really want to capture. We have about a 60% share of U.S. laundry sales, but we earn about 85% of the profit in cash generated in the entire category.
We have about a 35% share of global diaper market sales, but we believe we earn about half of the profit in the category. We have nearly a 70% share of global blades and razor sales and earn about 90% of the value or profit in the category. We're able to earn these high shares of value by being the brand and innovation leader in these categories, leveraging product innovation to create, extend, and sustain meaningful competitive advantages in product performance and brand equity that drive consumer trust and confidence and loyalty over time. We have a long history of brand and product innovation leadership driven by deep consumer understanding and meeting consumers' articulated and often unarticulated needs and wants.
The invention of one key ingredient may be enough to launch a brand, but to create and grow brands that live for decades, you need to take a long view of innovation. You need to have innovation processes and capabilities that can keep you in the lead. Here's Kathy Fish, our Chief Innovation Officer, to tell you more about how we manage innovation cycles of our brands and categories.
Good morning. At P&G, all of our innovations start with the consumer. We develop deep consumer understanding of relevant, important, and often unarticulated needs, which our R&D organization then translates into consumer preferred product and packaging. We invest more than $400 million a year in consumer interaction and research. We use a variety of research techniques, ranging from traditional concept and use testing, to online research, to rapid cycle learning, where consumers essentially co-create new products and packages with us. We marry these consumer insights with a world-class network of internal and external product developers to create the best performing products in our category. I've made this process sound simple. Talk to consumers, get some ideas, throw together some new ingredients, and you've got a new product innovation.
It's obviously not that simple, and it's especially not that simple when your objective is to create a multi-year pipeline of innovation that can build and sustain competitive advantage of a brand for decades. We recently completed a study looking back through our innovation history. We wanted to learn from our own successes and shortfalls. The study revealed that all of our billion-dollar brands are built on one or more discontinuous innovations that created new S curves, which grow the brand over many years. S curves, which are a commonly used concept to explain the fast growth and fast fade dynamics for technology innovation, have three phases: the investment emergent phase, the ascent phase, and the maturity and stagnation phase.
During the investment emergent phase, you build a new S curve by creating a new category or delivering a transformative innovation that meets a consumer's unmet need by adding a major benefit to an existing category, solving a trade-off for the consumer, or in some cases, creating a new job to be done. Recent examples of these types of transformative innovations are Downy Unstoppables, Crest SensiStop Strips, Tide PODS, and Always Discreet. This early rapid growth phase of the S curve can last five to 10 years. These new and transformative innovations require significant investment in R&D, capital, and marketing, so it's critical we extract maximum value from them. In the ascent phase, we deliver innovations that build on our advantages by staying connected to consumers and to current social trends.
These build innovations enhance the equity of a brand, reach consumers at the point of market entry, and address trial barriers that may be inhibiting growth. The extension of Pampers Swaddlers into sizes 4, 5, and now 6, or the Old Spice Wild collection scents across body wash, deodorants, and body sprays are great examples of innovations that extended the growth of brands several years after a transformative innovation. The third phase of the S curve is maturity and stagnation. In this phase, competition reduces our competitive advantage and growth slows. At times, competitors may initiate a new S curve for the category, which slows our growth even faster. In this phase, it is important not to panic and fall into the trap of increased product activity with little consumer benefit.
We've been guilty of doing this in some businesses, especially some of our beauty categories, when growth of our big brands stalled. Instead of change for the sake of change, we need to extend the current S-curve or start a new one with a transformational innovation. Given the time and investment it takes to create a transformative innovation, we are always working on multiple ideas at any point in time. The Gillette organization is masterful at managing S-curves in blades and razors. As one transformative platform is being launched, the next two platforms are already being designed. In between new platforms, their innovations extend the advantages and build on Gillette's outstanding equity. We are making sure the innovation portfolio for every category is taking a similar approach.
By putting the consumer at the center of our innovation program, and by taking a long view of our innovation process and pipeline, we build consumer preference for our brands, extend competitive advantage, grow sales and market share, and capture a larger share of category value, profit, and cash. This is how P&G innovations create value for our consumers and our shareowners.
Brand building and product innovation have enabled us to create the leading global business in fabric and home care. In 1946 came the launch of Tide, the wash day miracle, built on a new formula that cleaned better than any other detergent on the market at the time, at a price that offered outstanding value for consumers. By 1950, Tide was the leading laundry detergent in the U.S. Downy liquid fabric softener introduced in 1960, and Bounce dryer sheets were added in 1972. We haven't always been the innovation leader in the U.S. laundry market. In 1984, we launched liquid Tide about 25 years after the first competitive liquid laundry detergent was introduced. Since 1990, our U.S. laundry story has largely been one of continuous innovation and steady growth. However, when the economic crisis hit in 2008, competition capitalized on a weakness in our mid-tier portfolio.
The market contracted, as you know, and our growth declined for a few years. More recently, innovations like Tide PODS and Gain Flings, upgrades to Tide Plus, and the launch of the Tide Simply Clean & Fresh line have returned the P&G laundry business to market share growth. We recently hit an all-time record high-value share in our U.S. laundry business. I'm going through this history lesson to demonstrate the importance of taking the long-term view of product innovation and the importance of staying in touch with the consumer every step of the way. Letting consumers lead us to the product innovations we bring to market, ensuring our products deliver on their promise, and offering them at prices that deliver excellent value. We won't be first with every new idea. Competition will have their day in the sun.
Over time, we're committed to be the innovation leader in every one of our core strategic categories, building our share of the market steadily and building an even greater share of the value, cash, and profit created in the category. I've asked each of our sector leaders to talk about the consumer insights and innovations that are driving their businesses. We're going to start with Gianni Ciserani in Fabric and Home Care. I stole a bit of his thunder, so his comments are focused a little closer in on how consumer-led innovations that we've launched over the last few years have accelerated Fabric Care business growth. Here's Gianni.
Fabric and Home Care is a high-engagement category. Consumers spend a lot of time dealing with our products every day. They really personally care about their clothes and their homes. Our goal is to make their life a little bit better every day. We spend countless number of hours with them at home, in store, and in our technical centers. The key question for us was to define a business model so that we can channel all these efforts for the best results, best for consumers, and best for the company. The model we are using is the one of trade up, trade across, trade in. Trade up is when we formulate new superior products that are sold at a higher price so that consumers can move and have higher satisfaction with this product while we also have higher returns for the company.
Trade across is when we ask consumers to buy more of our categories. This is usually done with regimen, where they enter new categories and new benefits they were not using before. Finally, there is the trade in. This is simply when we get new consumers that were not purchasing a category or not purchasing our brands to do so. One of the best examples of trade up has been the launch of PODS or uni-dose around the world. Today, we already make over $1 billion of sales in this very strategic segment. It is a win-win-win. It is a win for consumers since they get a better performance, which led to a very high repeat rate. Also they get a major simplification of the laundry. No more messy overdosing, but now a very simple gesture of the Pod.
It is also a win for the company, as we are able to charge a higher price, therefore gain a very important competitive position in the market. Let's start from North America. Today, the segment is about 12% of the total laundry, quite big already. We have 75% of that new segment. The first launch was Tide PODS, the first three-chamber product in the market. It was intuitive to understand what PODS was doing. Three chambers, three benefits, the famous three-in-one. This was such a success, we decided to immediately follow with Gain, this time offering the very famous Gain freshness and experience, Gain Flings. PODS went very rapidly beyond North America. Today, we're selling PODS very successfully in Europe, and we also launched unit dose in Japan, in Middle East, and in other parts of the world, including South Africa.
Let me now share an example on trade across. Trade across is when consumers buy more categories and more benefit in every job and in every trip. In the past, they were used to only buy and use laundry. We successfully created the category of fabric enhancers. Nobody thought that we could convince consumers to buy a third category, but we did. This is the one of beads. Beads offer superior freshness. They are freshness boosters. Today, we offer this benefit in three different brands in North America. We have the Downy Unstoppables, Gain Fireworks, and we have Bounce Bursts. The category is already 15% of North America, and we own 75% of this segment that is growing very rapidly. We also started a successful rollout of beads around the world. It is already a big part of our business in Japan.
The last addition of the U.K. is off to an even bigger start, with eight share of the market after a few weeks. The last part of our business model is the trading in. This is when we are able to get new consumers that were not buying the category or not buying our brands. In this case, the idea was very simple. Tide and Ariel are famous around the world for their performance, but many consumers decided that this performance was over-designed for their needs. What we did was to take Tide, take Ariel, the brands, and the performance, and make it affordable for these consumers. This was the launch of Tide Simply and Ariel Simply. The strategies are the same. The product is superior versus what is available to these mid-tier consumers today.
It is a trade-up story versus what is available in the marketplace for mid-tier consumers, it was within the famous brand equity of Tide and Ariel. The launch so far is off to a very good start. We are already bigger in North America with Tide Simply than what our financial assumptions was. The most important news is not the size. It is the incrementality. We knew that the success depended on our ability to attract new users, the trading in. We are very happy to report that today, Tide Simply is more incremental to the rest of Tide and to the rest of the P&G portfolio than we had anticipated. The business model of trading up, trading across, and trading in is also effectively used in home care. Let's briefly discuss the case of dish. Here we have three power brands around the world.
It is Fairy, it is Cascade, and it is Dawn. On all of them, we introduced a new lineup called Platinum that offers by far the best performance in the category for a higher price. This has worked beautifully, we have been growing dish business with a CAGR of 6% every year over the last five years. Febreze CAR is a great example of trade across in home care. There are millions of consumers that are in love with the Febreze benefit of freshness and malodor removal. Until yesterday, they could only experience this product in their homes. We launched Febreze CAR. First of all, the category grew exponentially. We now are market leader in this important segment in U.S., in Japan, and in Germany. Febreze CAR was one of the 14 Nielsen Breakthrough Innovation winners, this was out of over 3,000 launches that happened.
A great example of moving consumers in love with our brands in one category into a new category. I hope this has been a helpful perspective, how you start from a consumer-centric focus and you develop a business model which is a win-win-win. It is a win for consumers because they have access to better performing product and more of those. It is a win for P&G and the shareholders, as we are able to start from a wider user base and then able to trade these consumers to higher price, better performing product across more categories. Of course, it is a win for the category and retailers as our brands are now able to bring even more value into the category.
We're very excited about the future, a future with Global Fabric & Home Care in which we are able to offer better value to consumers and of course, to P&G and the shareholders. Thank you.
Before we move on to the next sector, I want to take a second to share some of the consumer awareness and product safety work we've been doing on unit dose laundry detergents. We've launched an educational campaign that includes on-pack reminders to keep Ariel or Tide or Gain hidden away from children. We're also running TV ads, an educational campaign that started playing this month in the U.K., and will expand across Europe, Japan, and North America in the next few months. Let's take a look at that campaign.
Parents help their children discover the world.
Animals. I've seen those before.
Sometimes they do it on their own.
My body. Wow, food for giants. Definitely not a lollipop.
Kids discover the world with their mouth. Ariel three-in-one pods, always out of reach, always away from children.
Early next year, we'll be expanding the TV campaign to digital, including our brand Facebook sites and with influential mommy bloggers. I hope it's obvious we take the safety and security of our consumers and our products extremely seriously. With unit-dose laundry, we're confident that more consumer education will make a difference to improve the safe storage and the safe and continuing usage of these products that many consumers prefer. Next up is Martin Riant, the leader of our baby feminine and family care sector.
In this sector, we know we can succeed when we innovate to meet consumer needs in a way that truly differentiates us from competition, reinforces the trust that consumers have in our brands, and the value that we provide them and their families. One example is U.S. Baby Care, where this year we regained market share leadership from Kimberly-Clark for the first time in 20 years. Our path to leadership started in 2002 when we introduced our premium baby stages of development lineup with Pampers Swaddlers and Cruisers. This was born from deep consumer insights around babies' physical needs and moms' wants and aspirations for their infants, and how these change as babies and parents grow and develop.
With baby stages, we design products to reflect how babies grow faster in the first five months of life than at any other time, and how moms love the idea of bonding by swaddling their babies in a diaper that provides blanket-like softness. Swaddlers provide the softness and skin protection these rapidly growing babies need, along with a unique honeycomb top sheet to absorb that new baby runny poo. For the next stage of baby development, we introduced Pampers Cruisers with more stretch and flexibility with no leaks for babies who are starting to discover the world by moving and cruising everywhere. Consumer response to Swaddlers and Cruisers was very positive, growing dollar share for Pampers four points in the first year and starting a decade-long climb. While both Swaddlers and Cruisers were very successful, the Swaddlers experience created a connection with consumers that was in a class by itself.
It is the first diaper the vast majority of moms come across in the hospital, and we discovered that quite simply, they didn't want to give it up as their babies graduated from size 3. We listened to parents, and over the last two years, introduced Swaddlers in size 4, 5, and most recently, size 6. The response has been very positive. In North America, Swaddlers has grown share more than three points to a 10% value share of the total U.S. diaper category, while priced at a premium to the category average. This represents more than half our diaper sales growth in the region. Swaddlers today has roughly $600 million in sales and is growing fast. All this from understanding and listening to consumers' needs and focusing our innovation to meet those needs better than anyone else.
We have become the leading diaper business in North America and globally by consistently delivering mom and baby preferred innovation, primarily in taped diapers. However, over the last few years, we have seen an emerging consumer preference for diaper pants, even for the youngest of babies. This trend started in Asia and is now extending to markets like Russia. Growth of the diaper pants segment has been rapid, with a 45% CAGR in key developing markets. We have been largely underrepresented in this form and have accelerated our innovation, developing a new product to delight moms with improved absorbency, softness, and increased convenience, with an underwear-like design at a cost advantage to our current pants product. We launched our new mid-tier pants in India earlier this year, and share is up seven points versus a year ago.
We're now expanding Pampers Premium Care pants in Russia and then to China in the coming months. Over time, we expect pants to become a significant segment in these markets and another important building block, adding to the cumulative product and equity advantage we've already established with Pampers. We've used a similar model of innovation leadership driven by deep consumer understanding on our Always brand. Always launched in the U.S. in 1983 and reached 15% market share in the first year behind superior consumer benefits of unsurpassed protection and comfort. In 1986, Always was the first brand to introduce wings, an unexpected solution to women's biggest unmet need: leakage protection. We continued with a steady drumbeat of innovations that delighted our consumers by providing better absorbency with improved comfort and continued to build women's trust in Always, a critical element in the feminine care category.
In 2008, we launched Always Infinity, a proprietary technology with a foam-based core that absorbed 10 times its weight while still being so comfortable for a woman to wear that she can hardly feel it. We continue to develop and expand this transformative technology globally. Always has become the global leader in feminine care products, sold in more than 130 countries worldwide and gaining a 25% global market share. With over $3 billion in sales, Always is creating significant value for consumers, customers, and shareowners. Earlier this year, we launched Always Discreet, our new brand entry in the adult incontinence category. This is a $7 billion global market, which is growing at over 7% per year. This is a category where we can make a real difference to women by bringing superior technology and usage experience to create life-changing benefits.
We have launched Always Discreet in North America and Europe with a range of products designed to help women manage urinary incontinence, a problem experienced at some level by 40% of women over the age of 40. Always Discreet is significantly preferred versus competition due to its thinner, more discreet form and superior odor control. Because Always is a proven, trusted brand, importantly, Always Discreet is bringing femininity to the category. We began shipments of Always Discreet in the U.K. in July, where the market growth has accelerated 20% since our launch and have quickly grown value share to over 9%. We started shipping Always Discreet in North America and France in August. With less than two months in the market, the U.S. adult incontinence market growth rate has increased to 10%, and we've grown to over 7% value share.
In summary, we have a broad global footprint on baby and feminine care, leading brand equities and share positions, and a robust innovation portfolio. We are focused on building our brands and innovating to delight our consumers at the zero, first, and second moments of truth, building our cumulative advantage and creating value for our shareowners.
Next up, David Taylor, the leader of our Global Health and Grooming sector.
In Health and Grooming, we have a long history of innovation. In fact, some of our brands have been delighting our consumers for over 100 years. No one understands men's shaving needs better than Gillette. Innovation has been an important part of the brand's heritage since founder King C. Gillette invented the safety razor with disposable blades in 1901 and forever changed the way men shave. Since that time, Gillette began to innovate at an astonishing pace with the Super Speed razor, the first twin-blade shaving system, the first razor with a two-way pivoting head, the first spring-mounted blades for comfort, the first razor to feature five blades, and breakthrough shaving technology featuring thinner, finer blades. Even with all these innovation and improvements in shaving performance and comfort, our constant search to better understand the science of shaving revealed that men still weren't completely satisfied with their shaving experience.
Though Fusion ProGlide provided Gillette's best shave, users still found some areas difficult to shave. In fact, after surveying over 24,000 men around the world, we learned that an overwhelming majority of men, nearly eight out of ten in the U.S., said that not missing hairs is very important when it comes to choosing a razor. Here's the problem. Whether we take long strokes or short, whether we shave with the grain or against, we generally shave in straight lines, but our faces are not flat surfaces. Our faces are curved and contoured, which causes the blades to lose contact with the face, resulting in missed hairs. Armed with this new insight, we knew it was time to redefine shaving once again. This would require reinventing how the cartridge moves, which is exactly what we did.
Our newest innovation, ProGlide FlexBall, is a new era of motion, joining our best cartridge with our best handle innovation. It's the first razor designed to pivot in a 3D motion to respond to the contours of a man's face, maintaining maximum contact and delivering a closer, more complete and comfortable shave. FlexBall extends the performance advantage of Gillette blades and razors and reinforces what consumers already know: Gillette truly is The Best a Man Can Get. Since the launch of FlexBall, we've seen improvement in the U.S. blades and razors market growth, including more than a 30% spike in razor sales versus year ago and sequential improvement in our razor shares over the past 12, six, and three-month periods. Nearly 5 million handles have been sold thus far, and 94% of users report a better shave than with their previous razor.
We will begin the global expansion of ProGlide FlexBall in early 2015. In addition, we'll extend our breakthrough technology to women with the market-leading Venus brand. In our oral care business, Crest is a brand that has continually innovated to improve oral health for nearly 60 years. In 1955, P&G launched Crest with Fluoristan toothpaste to address the issue of tooth cavities, which was the leading cause of dental disease in the U.S. Crest has been innovating ever since, building on a clear market segmentation model to meet the needs of simplicity-focused consumers with products like Crest Complete; beauty-focused consumers with products like 3D White collection, inclusive of Whitestrips toothpaste, mouthwash, and toothbrushes, which together provide noticeable whitening results in one day; and health-focused consumers with our line of ProHealth toothpaste, brushes, floss, and rinse to protect against all seven areas dentists check.
Most recently, the brand took innovation to a new level with the launch of Crest Sensi-Stop Strips, a new product providing unprecedented tooth sensitivity relief. A deep consumer immersion revealed nearly 60% of Americans suffer from sensitive teeth, but only four in 10 are satisfied with their available sensitivity product solutions. We also uncovered the number 1 trigger of tooth sensitivity, cold liquids, cold foods, and cold air. Sensitivity sufferers were actually sacrificing some of the simple things in life, such as having ice in a drink, sledding with the kids in the winter, or enjoying a cup of ice cream with a friend. This insight led to the creation of Sensi-Stop Strips. Unlike toothpaste that takes several weeks to reduce sensitivity and need to be used twice per day, one Sensi-Stop Strip applied for 10 minutes provides immediate relief for up to one month of protection.
Our focus now is driving awareness and trial of this revolutionary new treatment for tooth sensitivity sufferers. We're making great progress on our journey to globalize our oral care business. We've introduced or expanded our oral care presence in 43 countries over the past five years. We're a very strong number 2 player in this category globally, and we'll continue to leverage consumer insight-driven innovation to get us to number 1. In personal healthcare, Vicks is currently the number 1 cough and cold brand in the world, with annual sales over $1 billion. The brand got its start in 1890 with the creation of Vicks VapoRub, the most iconic product in the Vicks lineup and still a favorite for moms today. After decades of success with Vicks VapoRub, the brand began expanding into new treatment areas.
Vicks NyQuil, a liquid multi-symptom cold remedy in a category dominated by tablets, a daytime remedy with Vicks DayQuil, and we entered the sleep aid category with ZzzQuil. Most recently, Vicks branched out into the $3 billion sinus and allergy segment in the U.S. with the launch of Vicks ClearQuil, providing on-demand relief for the occasional allergy sufferer who does not want to medicate every day. ZzzQuil and ClearQuil are great examples of how we can offer new benefits to consumers from a brand they already trust. We are following a similar model with the transformation of our Metamucil brand. The insights behind our plans are straightforward: 95% of Americans do not get enough fiber in their diet, and we know they want solutions from trusted brands that stand for quality.
To meet this need, we have transformed Metamucil into a new Meta Mega brand that gives consumers simple, effective ways to get their daily recommended intake of fiber with real health benefits. Our base Metamucil supplement powder now highlights Metamucil as the four-in-one multi-health fiber solution, helping lower cholesterol, promoting digestive health, helping to maintain healthy blood sugar levels, and a clinically proven benefit of helping you feel less hungry between meals. In addition, we have introduced two brand-new products, Meta Health Bars, fiber bars that can help lower cholesterol to promote heart health and satisfy hunger as a healthy snack, and Metabiotic, a two-in-one multi-health probiotic supplement. With this newly expanded Meta line, we are well-positioned to grow within this $40 billion segment in North America. In closing, we are committed to be the brand and product innovation leader in the health and grooming categories in which we compete.
We will continue to tap into the consumer insights that lead us to breakthrough innovations as we build on our legacy of strong brands going forward.
Over the last 14 years since we first formed the business, P&G has built one of the leading beauty businesses in the world. We have taken small, sometimes tired brands, and built them into global market leaders. We have done this in skincare and haircare, in prestige fragrances, and personal care. When you are building brands that you intend to live for decades, growth does not happen in a straight line. Even the strongest brands hit occasional flat spots. When we get back to basics and fundamentals, when we put the consumer at the center of our decision-making and product innovation to delight her at each moment of truth, we put ourselves back in a position to get on a winning track. Here is Deb Henretta, the leader of our beauty, hair, and personal care sector.
In beauty, we believe that success is rooted in deep consumer understanding, superior brand building, and innovation that creates noticeable consumer-obvious differences. Consumer-led innovation is especially important for beauty, a category that is deeply emotional and whose functional benefits must deliver on its promise of transformation, something we describe as beauty you can believe in. Building successful beauty brands that thrive for decades requires a steady flow of innovations to meet changing consumer needs and expectations while still building on the core equity of the brand. This is how we have built a rich portfolio of so many iconic market-leading beauty brands. It took a number of innovations to build brands like Pantene and Olay from under $100 million in sales to the multibillion-dollar global brand leaders they are today. Head & Shoulders and Old Spice are two brands whose long-term sustained successes have often been overlooked.
While Head & Shoulders and Old Spice are currently growing and have done so over the long term, it hasn't always been a smooth ride. Their successes have been built on innovations and branding that win at the 0, 1st, and 2nd moments of truth, with periodic reinventions to keep them in touch with consumers and growing profitably. Head & Shoulders is an unsung hero in our hair care portfolio, but it's a great example of consistently delivering breakthrough innovation and superior brand-building, rooted in deep consumer understanding year in and year out. Head & Shoulders was developed to address the unmet consumer need of dandruff-free hair. Nearly a decade of research went into creating a new breakthrough shampoo formula. It launched in November 1961 with the powerful claim, "Clinically proven to reduce dandruff." This claim has been the core of our brand promise ever since.
Head & Shoulders continued to grow slowly and steadily through the '70s, '80s, and '90s as the clear authority in dandruff prevention. But after nearly four decades of steady growth, sales of Head & Shoulders began to stall at around $600 million. Head & Shoulders was getting stale in the minds of consumers. It got pigeonholed into an equity limited to dandruff protection and not delivering other benefits consumers expect from their hair care products. By recognizing this issue, we improved our product formulations, our packaging, and our marketing campaign to make and keep Head & Shoulders relevant. These innovations elevated Head & Shoulders' powerful performance claim of eliminating 100% of the dandruff you can see behind a new brand promise, unbeatable dandruff protection, and unbelievably beautiful hair.
Our consumer insights also led to the iconic tagline, "You never get a 2nd chance to make a 1st impression." Recent innovations have built on this and taken it to a whole new level with Head & Shoulders' 100% flake-free guarantee while improving the consumer experience at the 2nd moment of truth with our new scent burst technology, which we introduced successfully around the globe just last year and is fueling growth. The invention of Head & Shoulders was designed to meet an important unmet consumer need. The rejuvenation of Head & Shoulders was ignited by delivering dandruff-free hair with a no-compromise beauty experience. Delighting consumers with powerful innovation and ownable product technologies has driven Head & Shoulders to strong long-term sales growth, more than quadrupling sales from just over $600 million in the late 1990s to about $2.8 billion last year.
Old Spice is another story of long-term growth driven by consumer-led innovation and brand reinvention. Many of you are probably too young to remember the early days of Old Spice. The original Old Spice aftershaves were introduced in 1938 with its nautical theme and trademark sailing ships on the bottle. P&G acquired the brand in 1990 with the idea of leveraging our antiperspirant technology to expand and grow the brand. In the early days, the strategy worked well. Old Spice deodorant sales grew at double-digit pace through the '90s, unfortunately, fragrance sales declined. Overall, the brand wasn't growing and was stuck at under $200 million in annual sales. In the early 2000s, we improved our products, packaging, and marketing to shake off the old image of Old Spice and make the brand more relevant and attractive to younger consumers. Sales nearly doubled from 2000 to 2005.
However, in 2006, Old Spice faced a new challenge from a new brand. Axe entered the category with good products and disruptive advertising that was highly attractive to young guys, a key point of entry. Growth of Old Spice stalled, once again, we needed to put the consumer back at the center of our innovation and branding plans. Deep consumer understanding led to a new positioning for Old Spice, one that leveraged the brand's core historical assets, its equities, and its visual and auditory expression. The new product lineup included body wash, body sprays, and deodorants, the new positioning was brought to life across all touchpoints and led to major successes, starting with the man your man could smell like, which led to very engaging and very funny ads and YouTube videos.
We maintained a steady pace of innovation, including the launch of Old Spice Wild Collection last year and upgrades to our proprietary scent technology with our new Refresh body sprays earlier this year. We've also successfully launched Old Spice into big developing markets, including Russia, India, and most recently, Brazil. This drumbeat of consumer-inspired product and branding innovations have enabled Old Spice to double sales again over the past 10 years. Over the past three years, Old Spice has been growing global sales at nearly a 9% annual rate. I wanted to share these stories because I think they are instructive for how we are recommitting ourselves to consumers in all of our categories and across all of our beauty brands. We're also taking steps to improve our execution in all facets of the business, in innovation and branding, and in product quality and supply systems.
For example, we recently started up our new state-of-the-art skincare plant in Greensboro, North Carolina.
Investments and efforts like these are important components to strengthening the foundation of our beauty business.
Two of our largest beauty brands are Pantene and Olay. Together, they account for about $5 billion in annual global sales and nearly 25% of the reporting segment. I asked Colleen Jay, President of our Retail Hair Care business, and Alex Keith, President of our Global Skin and Personal Care business, to provide an update on the progress we're making to improve the performance of these two leading brands. Here's Colleen.
Pantene is the leading hair care brand globally, with annual sales of about $3 billion, sold in more than 150 countries. Pantene nearly doubled sales and tripled profits between 1997 and 2007, behind expansion in emerging markets and share growth in most of the developed regions. Success is driven by a few core fundamentals. Deep understanding and connection with consumers in solving their daily and chronic issues, including hair fall control, damage repair, moisturizing, or simply classic cleaning benefits. Outstanding brand building and iconic packaging built on big, insightful ideas and clear, simple, excellent execution. Breakthrough innovation that resulted in superior products built on pro-vitamin science, delivering healthier, more beautiful hair with every wash. All good news.
As sales growth slowed in a very competitive and fragmented market, and as the economic crisis set in, efforts to restage the business in North America in particular, led to a period of what I would call overaction on product, on packaging, on variants introduced, and confusing consumers with multiple consumer messages. Long story short, we drifted away from the core fundamentals that had made Pantene a global leader. What did we do? First, we re-immersed ourselves with our target consumer to understand her wants and her needs. We also re-grounded ourselves in Pantene's history and equity. What made consumers love Pantene? The brand's roots, including the promise of the most beautiful, healthy hair through Pro-V science, delivered with superior products. Second, we benchmarked ourselves versus competition, and we acknowledged the reality of the challenge we were facing.
There were a number of issues to address, which were created over several years and would take some time to fully fix. Third, we brought in experienced people who had proven successes in the hair care business. These steps led to a series of interventions. We put the consumer back at the center, simplifying the product lineup with a focus on core collections that matter most to her. We reintroduced the collection she loved that had been taken away. We innovated, investing in product formulations to restore Pantene's performance superiority and ensuring we have the best packaging in the marketplace. We've ensured that our brand building is simple, holistic, and grounded in Pantene's core equity of the most beautiful, healthy hair, so you shine.
We have communication that works at the right weighting and strong trial programs in place to accelerate the return of our lost consumers back to Pantene. Most of these interventions have just reached the marketplace in the last nine to 12 months, they're beginning to work. Pantene is now growing share in the U.S. and growing sales globally at a mid-single-digit rate so far this year. In the first quarter, Pantene sales were up 4% globally and 6% in the U.S. market. Encouraging progress. We're going back to Pantene's fundamentals, what's been proven through years of success, in a refreshed, contemporary way. It's still early days in the rejuvenation of this great brand, the consumer is back at the center of our product, our packaging, our brand building, and we are winning more and more at the zero, first, and second moments of truth.
We're encouraged by the progress we've made, even more excited about our future plans. We're confident that Pantene soon will again be a brand so healthy, it shines. Thank you.
Next up, Alex Keith.
Olay is the number one facial moisturizer in the world. We built this leading brand with a decade of double-digit annual sales growth from 1999 to 2009. We did this by innovating to create new anti-aging benefit areas with breakthrough technologies that provided her with noticeable skin improvement, which allowed us to compete successfully across channel borders. Outstanding brand building that resonated with her in the most relevant and compelling way, when and where she was consuming information. Growing the mass-market skincare category by attracting high-end prestige shoppers with noticeable benefits that were sometimes even better than the much higher-priced products they were buying in department stores. Simply put, we offered superior consumer value. Unfortunately, the brand has been declining at about a 2% average rate over the past five years, and we're working hard to turn it around. What are we doing?
We've been engaged in a deep assessment of Olay, starting most importantly with the consumer, understanding how she thinks of Olay, what she thinks the brand stands for, and what benefits she thinks it delivers. Two things came through very clearly in our consumer research. First, we have great assets to build from on Olay. The brand equity is very strong and remains the leader in the category. Our products continue to have significant performance advantages when tested against competition, and women continue to vote for Olay at the shelf more often than any other brand. Second, while the brand equity is strong and product technology is superior, the relevance of the brand and the range of benefits consumers perceive it delivers has deteriorated. The declining relevance has happened in large part because we became victims of our own success.
Olay built its equity and competitive advantage by promising and delivering superior anti-aging benefits to consumers for over a decade. For much of that time, our competition struggled to compete with the power of our innovation and branding. About five years ago, our competition began playing the category differently, focusing on benefits that Olay didn't own, things like tone and light hydration. They priced new products in the mid-tier of the mass category, which was the weakest part of the Olay portfolio. They also increased the pace of innovation on cleansers, which had become a relatively sleepy segment of the facial skincare category. We give our competition credit. They fought along the paths of least resistance and of growing consumer interest and put Olay on the defensive. There are several key opportunities our new plans for Olay are addressing to put Olay back on offense.
We'd like to share all of the details with you of what we plan to do and when, but for competitive reasons, we can't. However, I will share some of the general areas where we expect to make improvement. Simply put, we're getting back to basics, starting with our fundamentals, deep consumer understanding, outstanding brand building, and strong innovation. We're letting consumers lead us to the most compelling benefit areas they want from Olay. We are clarifying the brand architecture, making each sub-line of Olay, the benefits they offer, and the packaging that goes with them more distinct on the shelf. This will make the shopping experience much easier. We are focusing our innovation on getting back to our past success factors, strengthening the power of our product claims, and driving meaningful benefits and regimens that delight women at every price tier.
We have taken the first steps in launching Olay Luminous regimen to deliver noticeable improvements in women's skin tone and in bringing compelling claims on our core Regenerist and Total Effects sub-lines as part of our new Your Best Beautiful campaign. It's very early days, of course, but we're seeing positive results so far. With each new innovation and shelf reset, we will be enhancing product formulations and messaging to ensure the core SKUs of each sub-line have shelf holding power, clearly communicate their benefits, and are easy for shoppers to find. The elements of the brand where we've made improvements are showing promising early results, but there's more work to do. It will take time, but we are fully committed to getting the market-leading Olay brand back to market-leading growth.
While we're not there yet, we believe, and early data shows, that Pantene and Olay are moving in the right direction. We've had good success in the past on these brands and on our beauty business overall. We're making progress in the present by getting back to basics and fundamentals, starting with a real understanding of the consumer. We're confident in the future. We believe we know how to do the things we need to do to build, and when necessary, rejuvenate successful beauty, hair, and personal care brands. We've done it before. We're going to do it again. I hope it's evident that we're focused on serving consumers first and foremost, and that we are committed to being the brand and product innovation leader in those core categories we choose to compete in.
We're increasing our investment behind product innovation because with productivity, it is a primary driver of total shareholder return. That completes the first portion of our presentation this morning. I think we'll take about a 20-minute break, and then we'll reconvene. When we return, we're going to discuss productivity and execution, and we'll address some very specific questions we know are on your minds. Enjoy your break. I'll see you in 20 minutes. Thank you.
Ladies and gentlemen, please take your seats. Our session is about to begin. Ladies and gentlemen, we ask that you would please take a moment to silence your cellphone and other electronic devices. Thank you for your consideration.
We've just spent a good amount of time talking about innovation, which is obviously the lifeblood of the company and one of the key drivers of shareholder value. Productivity is the other key driver of total shareholder return, along with innovation, and the best companies in any industry find a way to lead both innovation and productivity. We're turning productivity, as you know, into a core strength at P&G, making it a systemic and enduring value creation pillar alongside innovation. We'll accelerate and we'll exceed the $10 billion cost savings goal we set two and a half years ago. We're driving savings up and down the income statement and across the balance sheet, getting more productive in all areas of cost and cash. Here's Yannis Skoufalos, our Global Product Supply Officer, to talk about progress we're making first in cost of goods sold.
At our 2012 Investor Day, I shared our plans to deliver $6 billion of cost of goods over five years. Today, I'm pleased to share that we are ahead of that commitment. Over the last three fiscal years, our savings have accelerated from a $1.2 billion to $1.6 billion per year. We are working to deliver this level of savings again this fiscal year and for the foreseeable future. Engaging our 70,000-plus product supply employees around the world in this effort has been critical to our success. To ensure their mastery, energy, and passion are linked to value creation, we have identified our most critical product supply measures that drive Operating Total Shareholder Return. We have linked individual plans to these measures on every product supply floor, from our manufacturing plants to our purchasing desks, to our engineering and quality labs, and to our planning service centers.
This journey of total employee involvement brings total shareholder return to life across our entire supply network, from our suppliers to our customers. The three big cost areas that make up cost of goods sold are manufacturing expense, transportation and warehousing, and materials. Here are some examples of how we are making our savings program bigger and more sustainable in each area. We begin with manufacturing productivity, which we measure as the number of cases produced per person. Manufacturing productivity is the single biggest driver of manufacturing operating expense. On a monthly basis, we measure the number of cases produced per person. We have accelerated our progress from 0% improvement in fiscal 2012 to 7% last year, and we are on track to deliver 7% again this year. We have accomplished this while building 16 new sites or production modules at existing sites over the past three years.
Our manufacturing productivity performance is rooted in proprietary methodology called Integrated Work Systems or IWS. It focuses on constantly improving metrics such as productivity, cost, inventory, customer service, process reliability, quality, and safety through a relentless process of losses identification and elimination. Within IWS, we have four phases of excellence. Over the last 24 months, phase progression has accelerated sixfold, and we now have 24 of 136 sites at phase 4, the highest level of excellence and savings contribution. The second major spending element is transportation and warehousing. This is an area where we have driven $1.1 billion of savings over the past six years, more than offsetting diesel and freight inflation in markets like North and Latin America. The most effective way to deliver breakthrough transportation savings is through the optimization of our supply network design.
In North America, we are bringing this to life by building six new mixing centers. We have two of these centers started up with the balance coming online in 2015. These mixing centers will allow us to serve 80% of our customers within one day transit time, thus increasing replenishment rates, maximizing vehicle fill, reducing cost to serve, and lowering inventories. Our final spending element is raw and packaging materials. This is an area where we have consistently delivered close to $1 billion per year of cost savings and where our strategic decision to invest in global manufacturing platforms is critical. 65% of our business units now have platform standardization roadmaps, and we will implement this as part of our supply network redesign project and with new product initiatives.
We truly believe this effort will enable us to reduce material costs by up to 20% in some businesses, deliver scale cost advantages with suppliers, and increase the global impact of future cost savings innovations. Our current cost savings plans are strong, and we are exceeding our original commitments, we know there is more value to capture. Recently, we announced supply network redesign studies in North America and Europe with more opportunities to follow as we localize and optimize production in developing markets. Through these projects, we have established an overarching goal of delivering $1 billion-$2 billion in shareholder value and $400 million-$600 million of annual cost savings. These savings come on top of our original commitments.
This will work, will transform our supply network into an engine of top-line and gross margin growth, will improve cash productivity, and will be critical to creating sustainable cost structures, innovation speed, and unmatched customer service advantages for P&G.
As Yannis said, we're on track to exceed our original annual target savings run rate of $1.2 billion for the third consecutive year. We'll approach $6 billion in savings in just four years. We see a long road of additional savings ahead. The next cost area that we want to talk about this morning is marketing. It's roughly a $13 billion spend pool made up of about $9 billion in advertising costs and $4 billion in non-working marketing costs. Here's Marc Pritchard, our Global Brand Building Officer, to talk about the ways we're simultaneously making our advertising more effective and more cost-efficient, and how we're reducing non-working costs.
Good morning. By following the consumer, we're improving marketing spending effectiveness and efficiency to deliver more with less. Marketing spending is our third-largest spend pool behind people and materials. By following the consumer, we are increasing advertising spending to deliver more awareness, trial, and purchase of our brands while decreasing non-advertising costs, which add less value to the consumer experience. Following the consumer means shifting more advertising to digital media, search, social, video, and mobile, which is where consumers are spending more of their time. Depending on the brand or market, consumers spend between 30%-45% of their daily media viewing time on various digital devices for entertainment, news, information, and social communication. Our brands understand these media behaviors of their target consumers and allocate advertising spending to digital media accordingly to reach consumers when and where they're most receptive to the brand's promise.
This matches high-quality advertising messages with the medium preferred by consumers to create top-of-mind awareness of the brand's benefit, which leads to trial, purchase, and loyalty. Digital media offers significant benefits versus traditional media. It delivers a higher return on investment through lower rates driven by greater supply while achieving the same or better sales lift as TV or print. Digital data provides the opportunity for more precision targeting to improve ad effectiveness and eliminate waste. For example, P&G brands are broadly using programmatic buying that allows brands to precisely buy and direct ads to target consumers based on their individual online and mobile behavior. Our proprietary automated system significantly improves digital media effectiveness and efficiency by targeting the right ad to the right consumer at the right time with no waste on a mass scale.
Television and print advertising remain an important part of our media mix, so we're also improving their effectiveness and efficiency. With the overwhelming amount of information clutter in today's world, we're finding that fewer advertising messages communicated more consistently and with fewer changes are more effective at delivering top-of-mind awareness and trial. This enables us to build advantages over time in consumer recall with strong brand campaigns like we're doing with Pampers Love, Sleep & Play; Tide's My Tide; Febreze Breathe Happy; Venus Bring Out the Goddess in You; Crest Pro-Health; and Gillette's The Best a Man Can Get. Let's take a look at the Pampers and Gillette examples.
Good morning. Good morning. Good morning. Good morning to you. For every morning to be a good morning, all your baby needs is your love and a dry night's sleep. Pampers Baby-Dry has double dry zones, a new absorption layer, and a core that locks wetness in better for up to 12 hours of dryness and good mornings. Pampers, we wish you nothing but love, sleep, and play.
When guys shave, this is what they do to try to get every hair. This is what we do. New Gillette with FlexBall Technology makes maximum contact over tricky contours and gets virtually every hair. New Gillette with FlexBall Technology. Gillette, The Best a Man Can Get. Strong brand campaigns lead to producing fewer original ads, using shorter length ads, and running the ads for longer periods. That means lower production costs, lower agency fees, fewer agencies and suppliers, fewer spokespeople, and less spending on changes that don't add value while being more effective with consumers. Some of the savings we're achieving will improve operating margins, but we're reinvesting the majority to create greater consumer awareness and trial.
We're using non-advertising savings to increase investment in advertising and critically important point-of-market-entry trial programs, such as Pampers hospital sampling for newborns, Gillette's 18th birthday razor sampling, Tide sampling in new washing machines, Tide, Dawn, Swiffer, Febreze, Pantene, and several other brands sampled in new homes, and Crest and Oral-B dental professional detailing. With past 12-month trial levels under 30% on many of our brands in both developing and developed markets, we see a long runway ahead for increasing trial and sales growth. Delivering more with less makes our organization more effective and efficient. We've combined four separate brand-building functions into one, returning single-point responsibility for brand building to brand management. We're staffing brand managers where it matters most, for the top 70-80 brands in the markets where the most value is created.
We're eliminating organization duplication and work processes to create a direct line of sight between brand planning and execution in-market for consumers.
These steps are clarifying accountability, eliminating extra work, and reducing unnecessary touches with a third fewer resources. Jobs are richer, more meaningful, with greater responsibility and more direct contact with the consumers we serve. In summary, by following the consumer, we're confident that P&G brands will continue to improve marketing spending effectiveness and efficiency to deliver more sales growth and value creation for consumers and shareowners.
As Marc said, our marketing effectiveness and efficiency efforts enable us to take full advantage of investment opportunities. We're making targeted reinvestment to support strong innovation. We increased marketing support behind the Tide brand in the U.S. by 60 basis points last year and increased Pampers marketing by 230 basis points. As we generate efficiencies in marketing spending, we'll look for good opportunities to put some of these savings back to work to drive top-line growth. Now moving to overhead. We've reduced non-manufacturing enrollment by more than 16% in three years, enabled by several important organization design choices. In the first quarter, we again reduced enrollment versus the prior quarter, despite the addition of many of this year's new hires to our enrollment ranks. We've organized around four industry-based sectors, with each sector having primary responsibility for business choices affecting their categories.
We've reorganized our markets into five or six regions to increase scale, for instance, across Europe, drive faster-growing emerging markets, and leverage scale further across the support activities that span multiple regions. We've refocused our Sales and Marketing Organizations on selling products and refocused our business units on designing, making, and marketing products. As Marc said, we've consolidated four brand-building functions, marketing, market research, design, and communication, into one brand management function. We've continued moving work from individual countries into our regional service centers, which drive standardization to best-in-class work processes and cost savings. We've developed flow to the work systems in areas such as financial analysis and forecasting and moved to centralized supply planning centers. We've reduced hierarchy, and we'll soon have a top team that is smaller than in the year 2000, leading a company with double the annual sales of 2000.
Each of these changes I've just talked about reduces complexity, and each creates clearer accountability for performance and results. A more focused portfolio of brands and businesses will enable further change. In addition to driving savings, we're making targeted investments in several important areas such as innovation, R&D, sales, and IT. We're making good progress towards our objective of best-in-class scale and mix-adjusted core SG&A costs as a % of sales. We'll exceed the high end of our revised overhead enrollment reduction goals, and we'll accelerate this progress. We're also making strong cash productivity progress. We're driving the new supply chain financing program, which was a strong contributor to improved payable results in the first quarter. We continue to be best in class in receivables and many elements of the supply chain reinvention work that improve free cash flow by reducing inventory and improving capital efficiency.
I hope these examples bring to life how we're driving savings up and down the income statement across the balance sheet to become more productive in all areas of cost and cash.
The final priority area that I want to touch on this morning is execution. Execution is incredibly important in this industry, and it's the only strategy our consumers and our customers actually ever see. We're bringing renewed focus to brands. When we get it right, we deeply understand consumers, and we create leadership brands with iconic equities that become the prototype often in their categories. We consistently express the brand promise with ideas that attract consumers to the brand's superior benefit to create trial, ongoing preference, and ultimately lasting loyalty. This brand focus allows us to improve execution and build our most strategic brands. Building trial is a significant executional opportunity, as Jon said, for many of our big brands. Despite their size, increasing trial rates is a huge opportunity. We're working to grow these trial rates with targeted advertising and sampling programs.
We're focusing selling resources to improve coverage, expertise, and execution in key retail channels, wholesalers, and distributors that make a difference. This should lead to improved distribution, shelving, and merchandising to consistently win at the first moment of truth. We are and will continue to increase the amount of sector and category dedication of our sales force to improve category expertise and experience and to increase channel coverage. Here's Carolyn Tastad, currently our Global Customer Business Development or Sales Officer, and soon to be our Group President for the North America Sales and Market Operations. She's going to talk about the strategic importance of selling and execution.
As AG often says, execution is the only strategy our customers and consumers ever see. It brings to life how we innovate, communicate, and sell. No value is created at P&G until our brands win at the zero moment of truth and the first moment of truth, when shoppers learn about and then purchase a P&G product, whether online, on a mobile device, or in a physical store. Every day, our people sell and execute plans that drive profitable category growth for our customers, more trips, higher closure rates, and bigger, more profitable baskets. These same plans increase trial and penetration for our brands through better distribution, shelving, and merchandising support, and winning pricing execution. This is how we sell. It's how we create value. One example is Pantene's recent product upgrade in North America, which promises healthier hair with every wash.
Our customer teams brought this promise to life with outstanding sales execution and customer support. We built comprehensive plans to drive trial of the new product technology, trade up to premium products, and trade across with regimen programs. As Colleen shared, early results are encouraging, with U.S. Pantene as a bright spot in the September quarter. Sales were up 6%, with double-digit growth in September, and value share is starting to grow, and once again, over the 10 share mark. We have many examples like this, with large and small customers, and in stores around the world, all illustrating the power of selling and the power of execution. Selling and execution are about winning with our customers, and for that to work, it has to be about winning with our shoppers. The consolidation of our brand portfolio is a major enabler of this, and our customers see it.
They understand that less truly is more, that fewer leading brands will simplify the shopping experience by making it easier for people to shop the category and purchase the brands that they want and need. Focusing on fewer leading brands has two key benefits for the retailer. It allows for more investment in our leading brands, delivering stronger innovation and sales plans, which then drive positive category growth and value. It enables a more dedicated sales team, which drives more focused effort on solutions that grow our brands and grow categories. Our consumer research has shown that when a customer simplifies a shelf and reduces the clutter, shoppers feel that they have more choices. They purchase more, and sales of the category grow. This is perhaps the most important benefit of all.
An example of this work is what we've done with a major retailer on our feminine care business. This customer was losing feminine care sales. People were still coming to their stores, but they were choosing to buy their feminine care products somewhere else. The main reason for this was that shoppers were having difficulty finding the product, either because the assortment on shelf was too complex or because out-of-stocks were too common. This was a clear opportunity for better execution and to demonstrate that less really is more. We gave the retailer suggestions for how to optimize their overall assortment, tailoring the product mix by store based on specific shopper demographics.
Based on the retailer's assortment strategy, the retailer reduced the number of items by nearly 10%, and we worked with them to design the right product shelf layout so shoppers could find the product they wanted quickly and easily. We improved in-stock conditions and created a much better shopping experience overall. Our customers saw a three-point increase in their feminine care category, with P&G leading the way, increasing both sales and household penetration for our brands. A big win for the retailer. A big win for P&G. The third area I want to cover is the growth potential available when we follow the shopper and execute with excellence. There are two significant shifts happening. Around the world, drugstores, pharmacies, dollar stores, discounters, mini markets, and proximity stores or convenience stores are growing. We're going after this opportunity in a big way. We're making tremendous progress.
Over the past three years, we've delivered on average high single-digit growth in pharmacies and nearly 50% growth in dollar and discount stores. Still, we have more to do. Broadly speaking, we're underdeveloped in these small box formats. We have a multibillion-dollar opportunity in the next few years by taking advantage of the growth as shopping patterns shift, on top, growing share to our best-in-class levels. A second pocket of growth is winning online. E-business is becoming increasingly critical for our brands. Today, while less than 5% of consumer goods are purchased online, 50% of all purchases are influenced online. This is important. It's not really about the size of e-commerce as a separate channel. It's more about how digital is influencing shopping habits and purchases both online and offline. This is an area where we're developing significant capability and shopper understanding.
We're learning and showing customers how to win the shopper path to purchase in the digital world, where the zero and first moments of truth are converging. We're helping our customers thrive in multi-channel formats. In our most developed regions, over 80% of our sales are with omni-channel or multi-channel customers. Customers with a variety of formats, big box, small box, and online. The latest global customer survey from McKinsey put P&G in the lead in this space, and we're committed to stay there. At the end of the day, the value we create comes down to a few fundamentals executed with discipline and excellence by our people, in the field, in the stores, on the front line. We're proud of the selling organization we've built at P&G.
We know that our SMOs and sales teams are a great source of value creation for our shoppers, for our customers, and for our shareholders.
Improving our branding and selling execution will be significantly enabled by the portfolio focus we've embarked on and talked earlier. There are two critical areas that directly impact our ability to win the first two consumer moments of truth. If we do these two things well, we'll earn more chances to win the third moment when consumers use our brands at home and are delighted with the benefits and the value our products offer. Hopefully, you can begin to see that we're making improvements in every area that drives success, from strategy and structure to leadership and culture, to clearly defining what winning means for every business at P&G. We're trying to make good progress in every area.
We're now going to shift to address some specific questions which we think are on your minds. Of course, we'll close and take questions from you. The first topic I wanted to address is gross margin growth. While all-in gross margin has declined over the past few years, we are making strong underlying gross margin progress behind all the elements of the productivity program that we talked about earlier. Last fiscal year, we delivered over $2 billion of productivity savings, averaging 270 basis points of cost reduction each quarter. If not for FX and commodity impacts, and I'm not making excuses for them, but if not for those, gross margin progress would have been positive in each and every quarter last fiscal year.
We delivered positive core gross margin growth in the first quarter this year, and while it won't be a straight line quarter by quarter, we expect to see positive gross margin growth for the fiscal year. Going forward, there are several large enablers of gross margin expansion. First is the continuation and the acceleration and strengthening of the cost savings program that Yannis discussed earlier. We'll continue to deliver meaningful savings for the foreseeable future with the productivity improvement and localization work we're already doing with the growing contribution from the total supply chain redesign. Another source of gross margin improvement will be pricing to offset foreign exchange. While not in our control, stabilization of FX trends, should it occur, would help significantly. A third enabler of gross margin improvement is the stabilization and potentially modest improvement in commodity prices that we're seeing currently.
Crude oil and diesel prices are down, and we expect this will begin to carry over into our oil-based derivative materials later in the fiscal year. A fourth important driver of gross margin improvement is something we've been talking a lot about today, which is innovation. Innovation, especially at the premium end, is often gross margin accretive, and more importantly, gross profit accretive. Finally, the work that we're doing to improve the profitability of our developing market businesses, which I'll talk about in more detail in just a minute, will reduce negative mix impacts and increase gross margin growth. Each of these enablers should help to drive future gross margin improvement. Let me come to the question of developing market margins, which are a question in and of themselves, but obviously impact the gross margin growth equation as well.
Our developing market margins are pretty good by most comparisons. Several of our most developing markets have after-tax margins that are at or above the company average, and many P&G businesses hold the highest margins in their respective markets. In other developing markets, though, we've been investing and should now begin to earn returns. Encouragingly, in many developing markets, the fastest growth is occurring in the super premium and premium price tiers. We position ourselves well to take advantage of this growth. In Brazil, close to half of the market is in the super premium and premium segments, which are growing faster than lower tier segments. We currently hold leading positions across those higher tiers. In China, over 50% of market sales in the categories that we compete are in the super premium and premium tiers.
These premium tiers are again growing volume and value double digits, while the lower priced tiers are essentially flat. This trend is also similar in Russia, where the premium and super premium and high tiers represent nearly 50% of total market sales, and the premium and high tiers are growing well above total market average rates. We hold the number 1 share position on average across the categories in which we compete in mid, high, and premium price tiers. Another developing market margin improvement driver is localization of manufacturing. We currently have around 15 greenfield and brownfield sites being developed in developing markets at some stage of design, construction, or qualification. We've recently started up plants in South Africa, India, Nigeria, and Brazil. Local production enables margin improvements of a few hundred to as much as 1,500 basis points behind reduced transportation and warehousing costs, lower duties, lower taxes.
Shortening the supply chain to our customers and consumers improves customer service, reduces out-of-stocks, and improves cash productivity by reducing inventory. Localization also creates an operational hedge against foreign currency movements. We've made good progress on developing market local currency margins, growing profit twice as fast as sales in fiscal 2012, growing profit on a constant currency basis four times as fast as sales last fiscal year. This year, again, we're forecasting constant currency profit growth at double the rate of sales growth in developing markets. Over a longer period of time, with some cooperation from foreign exchange rates, developing market margins should approach those of developed markets. The last question I want to address this morning relates back to one that was asked by Steve Powers on the last earnings call. I thought it was a very good question. I'll paraphrase his question.
It was, "To get back to your long-term growth objectives, how much is in your control, and how much is dependent on improvement in the macro environment?" First, I want to put the gap between our recent results and long-term goals into perspective, starting with the top line. We need about one more point of growth. Last fiscal year, our markets grew a little over 3%, and we grew organic sales at 3%. We'd be better off at 4%. We have a number of opportunities to accelerate top-line growth. As I mentioned just now, the premium segments of the market where we're overdeveloped are growing faster. We're entering, creating, and growing new categories with innovations like laundry scent beads, Crest Sensi-Stop Strips, and Always Discreet. We're improving our brand building and selling execution. We're strengthening our presence, as Carolyn said, in faster-growing channels, including e-commerce.
We're making improvements in a few key brands in a few key markets. We're focusing the portfolio. As AG said earlier, that should enable us mathematically to gain a point of top-line growth while focusing on our biggest opportunities, which should further accelerate growth. Any one of these items I've just mentioned could add half a point or more to top-line growth. Collectively, these items should enable us to get back to our goal of growing organic sales modestly above underlying market growth rates. On the bottom line, we've been growing at or above our target rates, excluding FX on a constant currency basis. With FX included, we need two to three points faster core earnings per share growth to get back to the high single-digit range that we're targeting. Each of the top-line opportunities I mentioned will drive, obviously, better bottom-line growth.
In addition, the portfolio work will improve our underlying margin structure, and therefore, the rate of profit growth. We're accelerating and increasing our productivity savings to enable faster earnings growth and provide insurance against foreign exchange and commodity cost headwinds. Again, the combination of these improvements should enable us to get back to our goal of high single-digit core earnings per share growth. Finally, free cash flow productivity has generally been at or over our target of 90%, but we see improvement opportunities here too. The supply chain redesign will enable lower inventory levels while delivering better customer service. We'll continue to drive improvement in payables with our supply chain financing program. As I mentioned earlier, we're already the best in class in receivables management, but we're still finding improvement opportunities. Finally, the manufacturing platform standardization work will improve the productivity of our capital spending going forward.
We're maintaining our external commitment of 90% or better free cash flow productivity, as I said earlier, we're targeting more internally. Of course, we would welcome a better macro environment, we aren't making excuses, and we aren't waiting for the environment to improve. We're accountable for our results, and we're in control of getting them back to target levels. All of the factors I mentioned offer opportunity for improved results. Addressing each of them should get us back to our long-term growth objectives over time. With that, let me turn it back to A.G.
Thank you, Jon. A problem well-defined is half solved. An opportunity well understood, half realized. Most of our problems are opportunities, and there are plenty of opportunities in addition. As we work them, they are better defined, better understood, and they are being solved and realized one at a time. We are not naive about the marketplace and its realities. It continues to be tough going in the real world. We believe we're learning how to grow and create value when markets and categories don't. We have a much clearer, more balanced, consistent, and sustainable view of what constitutes growth. On the third try, we have moved to one single coordinated and integrated measure of growth and value creation in Operating Total Shareholder Return. There are three drivers.
The ultimate foundation is operating cash flow, the financial lifeblood of our business, which enables a robust capital allocation, including a strong annual dividend, a reliable return of earnings to share owners in the form of share repurchase, and the optionality to make strategic bolt-on or fold-in acquisitions to core businesses. P&G is a strong cash generator among peers and comparable companies. We've been delivering $10 billion to $11 billion a year in operating cash flow, free cash flow over the past four to five years. We believe we can deliver more as we improve capital cash conversion. Sorry, as we improve working capital cash conversion, operating profit performance, and the free cash flow productivity further over the next few years. The second key to Operating Total Shareholder Return is gross and operating profit margin expansion.
Leverage from sales growth, combined with savings from our ongoing productivity plans, driving them to completion, are reliable enablers of margin expansion. The third key is consistently growing sales by staying focused like a laser on the shopper and the consumer. We grow when and where consumers prefer our brands and products. Consumer preference enables our brands to become leaders in their categories and segments. Delivering consistently strong Operating TSR performance requires balance, reliable sales growth, consistent margin progress, and asset efficiency that generates operating cash flow like a clock. Whether we achieve top third industry Operating TSR and ultimately market total shareholder return on a consistent basis will depend on the choicefulness and the clarity of our business strategies and the precision and robustness of our business models and the excellence of our execution.
The company portfolio move announced in August strategically resets P&G's where to play choices for the next five or six years. The disposition of 90 to 100 brands that are no longer strategic not only enables stronger net sales growth and better before tax margins, but also enables focus. Focus on the core strategic brands and businesses. When we are crystal clear on what is winning, attracting consumers who matter most to each of our brands, we trade those consumers into our categories, our brands, and product lines. We trade them across regimen product offerings that deliver better performance and value and experience, and we trade them up to brands, products, and pack sizes that better meet their evolving needs and wants. We've been working our way through our core brand and category problems and opportunities in a very focused and deliberate way.
I want to take a few more minutes to go a little deeper on a few specific brand businesses that the team talked earlier. Pampers is our biggest brand with over $10 billion in sales, growing at 5% over the past three years. The U.S. is our biggest Pampers market and one of our more profitable. We lost share leadership here over 20 years ago when our principal competitor brought a pull-on diaper to market and built a strong point of exit position with their trainers. In the meantime, we were struggling in the U.S. post the financial crisis and global recession. Births were declining. Competitors and retailers were driving category sales down with heavy price discounting and a 25% increase in promotional deals.
Pampers set out to rekindle category growth and to change the game back to one of consumer value creation via brand equity building, product differentiation and superiority, marketing, and selling execution. Given the competitor's strength at the point of exit, we focused on the point of entry. First, on new mothers coming into the baby diaper category. We redoubled our efforts to sample new mothers at or before their child's birth. We committed to reaching more than three and a half billion new moms every year or more, if we could. We sampled our mom-preferred Swaddlers product, and we significantly improved our hospital gift pack by offering useful new mom education and information and both samples and coupons on a wide range of other P&G brands and products of real importance to mothers and babies.
In addition, as Martin described, we built our Swaddlers product line over time to the point where mom can keep her baby in Swaddlers until she or he is potty trained. The result, the U.S. baby care category is growing again, profitably for P&G and for retailers. P&G share has been growing steadily with consumers at over 90% of retail customers. P&G has regained category share leadership and opened up the eight-point lead that Martin talked about. As Martin said, Swaddlers has surpassed $600 million in sales and we believe is headed to $1 billion. The learning here is twofold. First, we must take responsibility for the profitable growth of the categories and segments in which we choose to compete. Second, deep shopper and consumer understanding, a choiceful and clear business strategy, brand and product preference, sales and marketing execution.
In other words, playing to P&G's strengths, focusing on these fundamentals can restore growth to the category and enable strong growth and value creation for P&G. Taking responsibility for getting the category growing profitably again has never been more important than in the U.S. fabric care category. Tide is our second-largest brand to Pampers, and the U.S. our largest and most profitable laundry business. This category has been declining since the financial crisis and recession. In fact, this category has been struggling since 2007, when the leading branded competitor chose to effectively exit the U.S. market. The middle of the market disappeared, and all that was left was P&G in the premium end and three competitors in the economy end, all of whom began to take prices down. The U.S. fabric care challenge has been more complex and more difficult than baby care. There were important consumer trends to manage.
Fewer, smaller U.S. households doing significantly fewer loads per week and high-efficiency washing machines. There was a widening price gap between economy and premium P&G brands. This was fueled not only by their competition with us, but also by their competition with each other and by retailers who drove price discounting and promotion in an attempt to arrest declining traffic, boost shopper trips, and spur listless sales. Without an innovation, this category was headed to commoditization. This would not have been in consumers' interests, it would not have been in retailers' mid or long-term interests, and it certainly would not have been in our interest. Again, the situation called for a change in strategy and business model that would take ownership for laundry category growth and value creation. First, as Gianni said, trade in new to the category consumers to Tide.
Category household penetration is 99%, but Tide household penetration had actually been declining for several years. We strengthened our point of entry programs to be sure new washing machine buyers, new home buyers, new apartment renters would all have a chance to try Tide. We also wanted to offer consumers an opportunity to trade into our brand and product lines at more accessible and affordable price points. From Era and Tide Simply to Gain, and we added and continue to add a number of brand product sizes priced at affordable $1-$5 price points. Second, we trade up consumers to premium innovations like the ones Johnny mentioned, the Tide value-added products on heavy-duty liquids, the Gain Flings and Tide PODS. Third, again, as Johnny mentioned, we trade across by encouraging regimen usage across additives and pre-treaters, fabric enhancers, and specialty products.
On-shelf regimen sets, displays at end aisles, and all of our coupons provide incentives to trade across and trade up. The result? Tide and Gain are both growing share. PODS are now 12% of the category, and P&G has a 75%-80% share. In the U.S., beads are 15% of the fabric enhancer category, and again, we have about an 80% share. Together, beads at $250 million of net sales in the U.S. and PODS at $750 million are approaching $1 billion in net sales. Tide's brand equity, Net Promoter Scores are as strong as they've ever been. Tide is building household penetration again, and the category profit and cash flow are coming back. P&G's total laundry share is 60%, and our share of category profit contribution, as I mentioned earlier, at an all-time high, 85%.
Decade after decade in our core categories, we have to find the business strategy and the business model that wins for consumers, wins for customers, wins for the category, and wins for P&G. Another big growth and value creator for P&G is Gillette. For the third consecutive year, our global Gillette business continues to grow share in a growing global category and to expand both gross and operating margins. However, we have a very specific challenge in the U.S., where the male shaving business is under pressure from three different angles. First, shaving incidence is down, driven by societal and fashion trends. Second, an increasing number of consumers are interested in value and having trouble, we believe, perceiving what constitutes real value. As a result, the barriers to trial, and specifically trade-in and trade-up, have increased.
Third, the emergence of new e-commerce shave club competitors leveraging convenience and value is changing the competitive landscape. Again, these three trends are all forces restricting category growth. Since Gillette is nearly 75% of U.S. male blades and razors category sales, P&G growth and value creation, we are incredibly interested in and take responsibility for category growth. To accelerate category and share growth, we are evolving our trade in, trade up, and trade across business model. We're beginning to bring more men into the category and the Gillette brand franchise by shifting our focus from shaving to grooming. Grooming the face, grooming the body. We're driving big and obvious innovations like Gillette FlexBall, which continues to perform strongly as David described. We're transforming our point of our market entry program.
This year, for the first time in several, we will aspire to reach 100% of 18-year-olds with strong trial and education tools and, of course, the new FlexBall razor. We're driving Gillette subscription via our retail partners programs, as well as our own Gillette Shave Club. We're going to trade up within systems and from disposables to systems. FlexBall is the first Gillette system that attracts a meaningful number of disposable users. We're sourcing three times more disposable users than we have from any other prior system. We're using our broad vertical product portfolio behind targeted trade-up offers to encourage trade up and trade in. We've increased our value messaging. You can shave with our best system for as little as $1 a week, and we've lowered our opening price points.
You can buy a two-count cartridge pack now for $10 or a bit less, depending on how the retailer chooses to price it. Finally, we will be trading consumers across by continuing to drive trial behind new Gillette body grooming products and de-commoditizing the preps category with a superior new product coming in January next year. The latest results are encouraging with the U.S. blades and razors category back to growth, up a couple of percent in October, and share up nearly a full point also in October. A fourth big value creator for us is hair. Hair is a $9-plus billion net sales business that is very profitable. With above category and leading competitor operating margins, again delivering very attractive operating total shareholder return.
At the core of the hair business, as was described earlier, are Head & Shoulders and Pantene, both of which deliver about $3 billion in annual sales. Unfortunately, these two brands have been a tale of two cities over the past four or five years. Head & Shoulders has grown consistently, sales margins, profits, cash. Our challenge has been Pantene, as Colleen described, particularly in the U.S. The problem, frankly, as Colleen described, has been primarily of our own making. When we got off track, instead of returning to our consumers and our brand and product core, we chased competitors with SKUs for news and joined in the promotional tit-for-tat game that only confuses consumers about value and performance, undermines brand equities, and erodes category growth and value over time.
The good news is that with a good brand, we can and are beginning to get back on track, and we're beginning to see encouraging early returns, as Colleen described. The even better news is that the renaissance of Pantene has only just begun. One of the first decisions we made last summer was to invest in hair care product innovation. The first major product upgrades will come to market in 2015 and 2016. In the meantime, we designed a consumer-preferred product with existing technologies and rushed it to market this year. We rationalized the product collection so consumers can actually find the Pantene they want and need. We improved the package, got it back on Pantene equity. We're rebuilding behind a superior brand equity, one of the best in the hair category, with a strong Net Promoter Score.
The really good news is that when we get Pantene growing consistently and sustainably, which we will, the higher margins will generate strong profitability and cash flow. Now, I took some time taking you maybe back through these four brand case studies because I want everyone to understand the deliberate and focused strategic and executional approach we're taking to building and rebuilding P&G's position in established core categories on leading brands. We build brands, we build categories. When we do, we build sales margins, profits, and operating cash flow. That's the kind of growth we want. That's Operating Total Shareholder Return growth. We brought and continue to bring the same deliberate and focused approach to building our oral care business with Crest and Oral-B. We are bringing the same deliberate and focused approach to transforming the female incontinence category.
We believe this opportunity is very similar to the one we seized in the 1980s with Always feminine hygiene products. A big, obvious idea or promise that addresses a real consumer need and a full line of superior products consumers prefer, and even in this case, find irresistible and life-changing. Here are a few consumer testimonials. We get a lot of testimonials on a lot of our products, but the ones coming in on Always Discreet are truly extraordinary. Four times in my P&G career, we started a decade off balance and underperforming. The good news is that every time, we learned from our adventures and misadventures and mistakes. I personally learned 10 times as much in my professional career from mistakes as from success.
Every time, we delivered strong growth and value creating Operating Total Shareholder Return, and top third industry market total shareholder return by the end of the decade. I'm looking forward to another good decade for P&G through 2020. That concludes our presentation. We'd be very happy to take any questions that you have. Ready?
Yeah.
Should we
Hi. Thanks. I've got two questions. You clearly highlighted some of your recent successes, I feel like even in P&G's darkest days, there have been some brands and some new products that have been successes, yet I still look at, in your 10-Q for the first quarter, 60% of your business is losing share.
In terms of your confidence in the timing of when that reported metric is going to get better, A.G., where you sit today versus 12 months ago.
Yeah
Is the batting average going to improve? That would be question number one. Just a quick clarification. Gianni talked last night about what sounded like a new strategy to me to have a little bit less tiering in the emerging markets. You're getting out of laundry bars, for example.
I thought you might address that today because that seemed to me to be a pretty big change in terms of how you're attacking entry-level consumers in the emerging markets. Thanks.
Okay. Yeah, good questions. Look, on the first one, I'll just say two things. The first question I always ask is, share of what? The share of what I'm most interested in is the share of the value created in the category. We've had some long-running successes in categories like family care or tissue towel, where if you really look at the market shares over time, they might move a point or two on Bounty or Charmin. What we really do is we stimulate a fair amount of category growth, and with our business model, we're able to take a bit more than our fair share of the category growth, and it ends up with a very attractive run of operating total shareholder return and a heck of a lot of operating cash flow.
The second thing I'll say, Wendy, this will probably surprise some of you, I really don't care about our market shares on a slug of our business. One, the 10% of the business that's headed out the door, really? Okay. Secondly, it doesn't mean that we don't operate those businesses with excellence to the last minute. We do. Okay. Some of those businesses have been in short, mid, and long-term decline, and we're not going to reverse that in the last few months or last year that we operate them. In other cases, I just think it's bad strategy and bad operating procedure to drive for market share until you're ready. I would say, in my experience, if you look at this industry over decades, there are sort of two times when you really build meaningful share.
One is when you have a real disruption. We'll see with Always Discreet, we'll see with some of the product innovations that we talked about, whether it's Sensi strips, whether it's the pods or beads, whatever. The other time that you gain share, I hate to say it, is when somebody makes a mistake. That's when share progress is really made. I pay attention. I guess the real answer to that question is, I'm real interested in Pampers share in North America. I'm real interested in our laundry share in North America. I'm real interested in our market shares on several brands in China, which are not growing right now. Okay? They're either flat or modestly declining. We try to pick our spots. All right?
The last point I'll make, a lot of value creation is shredded in short-term price discounting and promotional battles for one more tenth of a share point, which is like a snake swallowing a frog, right? You see the frog go in one end, it's consumed, and the snake is still the same size, right? Hey, on the second question, look, I think we're sharpening our strategies for developing markets and particularly for what I would call frontier markets. Our game is, in general, win from the top. Where we've been very successful, we've gone in and established the premium brand equity. We've gone in and established a level of product performance that consumers find noticeably better, and the value is created in the brand promise, the product performance, and a premium that is still considered a good value.
I think in a number of cases, and laundry is one of them, we are reevaluating both our brand portfolio lineups, and we're reevaluating our product offerings. We will be exiting and/or deprioritizing ones that don't fit because I think Gianni also mentioned that we've introduced pods in places like South Africa and Brazil, and they're even shipped into Chinese cities on an export basis. We're going to go into developing markets with our best brands and our best products, and we're going to find a way to make them accessible and affordable, but it's not going to be by compromising performance, and we're not going to be terribly interested in product forms that have commoditized. I probably went on too long, but I wanted to make sure that Did that get it? Or at least try to answer it? Okay.
Jon.
Thanks. I want to revisit the trade up versus trade across versus trade in. As you think about the portfolio and your innovation, how do you think about the bucketing of that? How much innovation goes in each of those three tranches? Can you talk about the implications that has on product mix and then also gross margin? Thanks.
You're going to bat that one to me too, right? I probably said this 100 times last night. It's extraordinarily difficult to generalize across industries and categories and even categories and markets. The first thing I will say, it depends. If you think of the four case studies that I chose to illustrate at the end, in the case of laundry detergent in a highly developed economy like the U.S. or Western Europe or Japan, household penetration's already 99% of the category. There's not a huge opportunity to trade into the category. We focus principally on trading into the brands, but trading up once they come into our portfolio and then trading across. The big change we had to make in that category was when the middle of the market disappeared, we had to move to the middle.
Eventually, took us too long, but first we moved Gain towards the middle, then we moved Era and Simply to the middle, and it looks like Simply's found a niche there. I would argue trade into the brand and trade up is really important there. We've actually gotten a fair amount of traction on trade across. Jon or Marc or somebody mentioned, we just have huge trial opportunities. You would be amazed at the number of leading brands that we have in a mature market like the U.S. that have single-digit trial levels. Single-digit trial levels. Okay? Any trial we can generate with products that in testing get 50%, 60% conversion rates, which are pretty doggone high for household products and personal care products. You heard about the conversion rate on the FlexBall razor.
90-plus percent of men who try the razor say it's a better shave than what I'm using now. It's all about trial, and it just depends. In razors, the big opportunity for us is to trade disposable users into systems. Now, having said that, we've also moved into the high end of the disposable business because, if you can't beat them, we're going to join them. It just depends. It depends category by category, situation by situation. That mindset is a great front-end driver of the Operating TSR model, and on some of our businesses, we're to the point where they know exactly how many consumers they have to trade in. They know which segments those consumers come from, and that's the kind of precision I happen to like. We're not there everywhere, but we're there on some of the brands and businesses.
If I could, let me just make a comment on gross margin. I know I don't want to take anything away from the intentionality in which we're trying to improve gross margin, we need to be a little bit careful. I care much more about gross profit than I care about gross margin, there are times, we asked about innovation, where we have a premium price innovation that is gross profit accretive, higher gross profit per case, the margin may be a little bit lower. I'm not going to get hung up on that. Gross profit is the first frame, then margin kind of falls out of that.
Thanks. First question is on the emerging markets. I think in an earlier slide, you mentioned that you are looking for 7% growth this year. In the first quarter, I think it was up four, and you lost share. How do we get comfortable with that reversal? Second, on pricing, that is supposed to be a gross margin driver in terms of offsetting FX. How have your European competitors in particular responded to the strong dollar and the weak euro? Thanks.
You want to talk developing markets first?
Yeah. Look, the developing market story is not unlike the category and brand story. It's a checkered current situation. My focus is where it matters most. I'm conducting monthly and weekly reviews on the China businesses. I'm very involved in the Brazil business. I'm pretty conversant with the India business. I stay on top of the bigger developing market businesses, and we've got some work to do. Okay, we've got some work to do. Even in those cases, I think we're to the point where there aren't any mysteries. We have a pretty good idea of what we need to do, and it's just a matter of sort of lining it up and getting the operating business plan executed market by market. I think it'll come and we have to make it work, and we've made it work in the past.
The reason we have to make it work is because demographics and household formation and household income rising is going to continue to drive there. The other thing that Jon mentioned, which I think is really important to understand, is I think once you get the flywheel turning, it can actually turn pretty fast because some of these markets now have fairly significant premium and super-premium segments. The urbanization that's going on around the developing world, the continued migration to these cities, the rising incomes, they're going to be a help. They're going to be a help for the industry, but they're going to be a help for us because that's where we play. On the European question, Jon, you want to comment on it?
Just want to build on what A.G. is talking about in developing markets. I still continue to believe that we're on the precipice of the greatest trade-in and trade-up cycle in human history. Those developing market populations, you saw those premium price tiers. That's happening as we speak with an accelerating rate, which is very exciting. We have to be disciplined, and we have to approach, as A.G. said, the opportunities that matter most first. On pricing for foreign exchange, the good news is that where foreign exchange is a real issue, it's a real issue. First, as relates to local competitors, inflation that's coupled with that devaluation is driving their need to price. We're seeing pretty good movement on the part of local competitors.
If you look at the major devaluation markets, whether it's Russia, Ukraine, Venezuela, Argentina, their devaluation amounts are much higher even than the EUR devaluation. You still have, while it's not as big of an issue for our European domicile competitors as it is for us, they still have a strong incentive to price, and we see that generally happening.
Our biggest issue on FX, Jon has talked with you a number of times, that's simply our footprint. We have big businesses, the biggest businesses in the industry in some countries that have been chronically devaluing. That's a bigger challenge for us.
A.G., you're probably tired of this question, can you just tell us what your biggest surprises were? It's about 1.5 years back in the company. When you look at the organization, would you guys ever think about going to the outside for talent? Now that you have sort of an outside perspective, is that something you consider? Sort of part and parcel with that, would you ever move businesses closer to the center of gravity for the industry? For example, the beauty business, would you ever move it to New York or L.A. or Paris? Because you think of where people are succeeding, like L'Oréal, for example.
Yeah
that's kind of where their operations are.
Yeah. Okay, make sure I don't lose any of these. I'll do the last one first. Our hair business is in Geneva, and our prestige skin business is in Singapore. We do distribute the businesses. I happen to believe if you're looking at skin, you better be in Japan and Korea, okay? I don't think Paris matters for skin. It matters for fashion and trend. If you really want to get into what consumers care about skin, you really better be in Japan and Korea. We know that, and we have people there, and I sincerely hope we're learning at the rate we need to be learning at. On from the outside, yes, and we are bringing in more people from the outside.
I can't remember if we were chatting this last night, but the big question is to do what and where, but there are active searches going on right now. Sometimes when you get the question, it's, "Are you going to bring in somebody to run one of these major businesses?" We'd certainly look at it if we didn't have anybody that we thought was qualified and ready to go. I'm more inclined to bring them in a level or two below. If you think about Deborah Majoras, our Chief Legal Officer, she came in and spent a year or two. She probably fairly easily could have moved into that job, but give her a year or two to figure out who we are, to figure out how to work her way around the businesses here. She's doing a great job.
Head of media relations, we just hired from Merck. A lot of our digital people, some of our e-commerce people-
Most of our design group.
Yeah, virtually all our design group is hired from the outside. I think we do more hiring from the outside than people realize that we do. Outside the U.S. and inside, but I have no aversion to it. For me, it's an important part of talent flow. Okay? The other thing I'd mention, which I think is really important to understand, we don't have a partnership with everybody, but you'd be surprised with the network. You would really be surprised with the network. We think we're reasonably well-connected, and that's incredibly important. It's incredibly important. In a lot of cases, I'd rather be networked and connected than hire all of that on or hire it in. Okay? The first question was.
Biggest surprises?
Yeah, the biggest surprises. Maybe, if it's okay, I just slightly shift the answer to the biggest changes. Okay? There's clearly been a huge change in shopper and consumer behavior. Okay? This whole zero moment of truth is incredibly important. The whole really understanding what goes on in the digital world is incredibly important. We're throwing a lot of resource at it. We spend a lot of time on it. I think everybody's on a learning curve. Okay? Our shopper behavior has changed faster than our consumption behavior. If you look around the world, the way household and personal care products are consumed hasn't changed very much, but shopper behavior has changed a lot. Right? Who influences and how someone is influenced has changed a lot. Second thing that's changed is, I think there's been a fragmentation in the customer world. Okay?
Not just in the big developed economies, but also in developing markets. When I joined the company, we called on grocery stores, then, oh my God, there were mass discounters, then, oh my God, maybe we've got to call in drug chains. As Carolyn just touched on, the job that our sales and distribution team has to do is much more complex. It's much more fragmented. Frankly, we have a lot of opportunity in the new and growing channels. Our share is pretty much fair share in e-commerce. That's not one that I worry about that's as big an opportunity. It's variable. Okay? We're below fair share on some categories and above fair share on others, but that one, we're sort of scratching our way up the learning curve.
There are a whole bunch of other channels where there's a lot of business out there for us if we get organized to go after it. Consumer, customer. Big change in the competitor set we talked about last night, although it's not really a change. I think it's more of a change in developing markets, but it's always been there and developed, is the strength of local competitors. Our best competitors in Germany are often German. I think our best competitors in places like China and Brazil over time are going to be Brazilian and Chinese, just like they're Korean or Japanese. I think where you have a strong economy, where you have a vibrant population, where people are moving up the education and economic curves, that's just going to be the natural outcome.
I guess the last thing is, again, we talked last night, from 1982 to 2007 or 2008, we were essentially in a relatively benign world. There were occasional economic flare-ups in the world. Okay? The Asian crisis in the late 1990s. Brazil would flare up once a decade, et cetera. This constant pressure of currency and commodities, it's obviously something you've got to manage against every day and every week. We're hoping, and we're watching to see whether we get a little bit of commodity help here, which would be nice, but that's been different. That pressure's been on since 2008, and I think we got one year off. I was looking at the last seven years.
We got a break one year, every other year, we've had to absorb well over $1 billion of some combination of currency and commodity, which is a big number. Big number on a $10 billion-$11 billion operating cash flow, right?
Jon, can I ask a follow-up question on your comments regarding cash flow productivity? You said you're already at 90% or above, and you're maintaining that target, it sounds like from the various cost savings, from the incremental productivity savings, the asset disposals, and so forth, there should be more offset to that target. I wonder, what are the offsets that prevent you from raising that objective?
Well, when we talk about that objective, it's a sustainable objective. The divestitures, for example, will be episodic. We wouldn't put those into a going target. You're absolutely right, that'll be an additional source of cash, which we'll put to work. Then just generally, it's just a question of timing. This year, I feel reasonably confident that we'll be able to get between 95 and 100. Our internal goal is 100. I think you should hold us to something between 90 and 100. Think of it as raising or establishing a range. How about that? That's a partial give.
We're definitely keeping the focus on there.
Thank you. A.G., you closed by talking about decade spans. Around this time last year, you characterized what a decade of success looks like for you. You talked about driving improvement or acceleration in the core. Check. We covered on a lot of it today. You talked about opening up new markets or new channels. Again, check. We talked about that today. You talked about productivity, which has been part of the dialogue here for a while. The one ingredient that we aren't talking about has been bringing up something new into the core.
Can you talk about whether or not you think you could achieve your ambitions without that ingredient, or whether you do need it, and if so, what might it look like, and how might you go after that?
Yeah. Okay. Yeah, because to be fair, Always Discreet could be considered an extension of the feminine business. Although, I think if it's successful, it could be a fairly healthy extension. I think it's first things first, and I'm a big believer that on established business, you fix the base and you fix the core, and then and only then, when it's fully performing, do you begin to consider extensions and expansions because extensions and expansions are far more difficult and far more risky, and you've got to really be ready strategically and operationally and executionally to go there. We did, on the one hand, weed out our new business group projects. We kept a handful, which we, I think, are promising, most of which would create a totally new category of business for us if they end up being commercialized. We're actively working those.
We kept and increased some of our investment in very interesting new technologies, more than one of which would have an impact on not only existing categories, but also give us an opportunity to get into new. Again, my view is you've got to deliver in the present, you got to manage for the midterm, and you definitely cannot be eating your seed corn. You've got to be sowing crops that are going to deliver five, 10, or more years down the road, and we're making those investments. Again, we sort of sorted through that portfolio the way a venture capital team would sort through their portfolio, narrowed it down, and now we're doubling down on a couple of technologies that we think are interesting. The big issue there is success rate, right, and timing.
The early returns look good, and we're at least in early consumer. We have product prototypes, right? It's not just a molecule. Right? In some cases, we have product prototypes, and we're actually beginning to interact with consumers, and those are early stages of development. I tend to be optimistic, but I also know that if we get one or two out of five commercially successful, I'll be pretty happy with that.
The other thing I would say is if you think about the things that I was talking about in terms of how we could incrementally improve our sales growth rate, incrementally improve our core earnings per share growth rate, there were a number of items there on both the top line and the bottom line, all of which I think are viable and none of which, in the near term, required that. I view that in the near term as very doable.
Yeah. I think that's a really important point. We showed at CAGNY an exhibit where we were trying to show you that there are at least 10 product lines that are still unique and superior and frankly, pretty dramatically consumer preferred, whether it's the foam pads on Always, whether it's the Swaddler line in baby, whether it's the pods or beads, whether it's the Crest Sensi-Stop Strips. I don't think we've taken the strips technology. Because if you think about if you're really going to treat a whole bunch of oral issues, you can't do it in a two-minute brushing. Oh, by the way, most of us don't brush for two full minutes, all right? I do think in our current portfolio, we have 10 or 12 products that we've come nowhere near close to realizing the trial potential of.
We've had Swiffer in the market for 15 years, okay? You wouldn't believe how low the trial rate is, and it's a billion-dollar business. Right? We have to be careful. I think we have to be intentional about making sure that we get product lines and brands like that tried by consumers who may very well be in the target. That doesn't mean we're not doing the investments in core technologies for the future. That doesn't mean that we're not going to place the bets on totally new categories. It just means that we have other options.
Thank you. Congratulations on Duracell and that change in the portfolio. Building on the comment of the fragmentation of retail-
That was a 9.9 dive on behalf of Jon and the team. Well done.
Coming back to changes in the portfolio and the changes that you made in the SMOs. Right. Building on the comment of fragmentation of retail, one of the things that is happening also that that fragmentation of retail is also bringing fragmentation of the brands. There is a lot of niche brands that these new retail outlets are bringing.
Now with the new SMOs, do you think that they will be able to deal with these more fragmented retail? Because if you step back and see, for instance, your prestige business, for some of your competitors, specialty retailers, freestanding stores, travel retail, are more than 30% of their business, and we don't see that. At least we don't hear you talking about that for SK-II, for the fragrance business. Would you consider divesting those businesses if these SMOs cannot realistically support these fragmented channels that are growing so importantly?
Yeah
In these categories? Thank you.
Okay. I think there are three things that I hope we're clear on. One is, 80%-90%-plus of the resource in a sales market operation or region will be sales. Two, we will use more distributors, more wholesalers, and more partners to either reach some of those channels, or we may do the headquarter selling. Sometimes it's bought very centrally. Our partners will do the in-store coverage, detailing, and merchandising. We're going to build a network. Okay? Three, I really like some of those businesses, right? SK-II is well above $1 billion. I think it could double, not this year. Okay? It certainly has the potential to double. You're right, although we're represented in several of the specific channels you mentioned, you're right, there's still an opportunity for distribution on brands like that.
A quick comment on niche brands, because we often get this. I like focused niches where we're well-established, and they're adjacent to our core. Frankly, we were performing better in the fragrance business when we were very focused on three or four, Hugo Boss and Lacoste, Dolce & Gabbana, and Gucci, than when we ended up with an assortment of 20-plus. In general, that's not our forte, running a dozen little brands out. That's not what we do really well. In fact, in a number of household categories we're in, I like one brand. Okay? One brand, multiple product lines. When you get into beauty and healthcare, it's different. It's a portfolio game. I can think of maybe one case where we maybe need a bit more portfolio, for the most part, I think we have plenty of portfolio.
I would go back to where I began. We're going to have sector-dedicated. We're going to be 90%-plus sales and distribution in these countries and regions. We're going to have partners to help us get the coverage and get the retail-intensive merchandising that we need, That's an area that we have to invest, as Jon has been saying, I think for over a year, We are investing. We're not all the way there, We are clearly rotating in that direction, It's just moving at different rates in different businesses in different countries. Okay. Yeah.
Eugene.
Yeah.
Sorry. I have, I apologize, three questions. One is, how do you feel, how should investors interpret on the Duracell deal, that Buffett is essentially saying, "I'd rather own and run Duracell seven times versus owning P&G"? How should we think about that?
Yeah.
Two is
I think he's smart not to not own P&G, but it'd take you 30 seconds to figure out that that was a good deal for him. If you look at Berkshire's strategy, I think it's pretty clear that Warren and his team have been shifting out of equities and shifting into businesses that they can own. Thirdly, I will be on the phone and out there on a regular basis to convince him that we're still a very good investment.
Okay. That's very helpful.
Yeah.
On taking what you've been saying today and what the presidents have been saying today
Yeah
Bringing that down to a GM level and below.
Yeah.
What accountability tools do you have today that you don't think were in place a year or two, three years ago?
Yeah. I think you asked a couple questions in that regard last night. I guess I would say, in my view, there are sort of three or four fairly simple things, but powerful things that we're trying to activate around here. The first one is, I only want to talk about your Operating Total Shareholder Return. Don't give me a dance on any other metrics. I don't want to ever hear about volume again. I can't turn volume into cash, right? I think that's incredibly important. The second thing that I think is incredibly important is we're chasing shoppers and consumers. We're not chasing competitors. Without going into all the details, I think in a number of cases, we were chasing competitors, and that makes you very short-term, makes you very reactive, and it drives activity and a lot of SKUs for news.
It doesn't drive what we're trying to drive, which is really understand what the shopper and consumer wants and then give it to her or him with our brand and product in a very intentional and very powerful way. The third piece I think that's important is, yes, we're a team, but job one is play your position and do your job, okay? We've been talking about that since the moment I arrived. It's really important because, by the way, I think it's fairly human and fairly natural. This isn't the first time I've been involved with a business that was struggling a bit. You become more internally focused. It becomes more intramural. You become more concerned about things that are outside of your control and influence.
If you're selling into the travel retail channel or you're selling into small box discounters, whatever their form is in some country around the world, that's your job. These are the brands that are on the list, these are the product lines to sell. Operating TSR, one goal has been important. The consumer and shopper centricity has been important. I think the other point I was trying to make is when you're in the activity churn and you're running around chasing activity, you're watching every move a competitor makes, you don't take the time to think the strategy through. You don't take the time to think what the business model is really going to be. Then and only then, okay, let's get an operating plan together, then let's go through the details of the execution.
I went through every retail account in North America on the sell-in of the laundry bundle, not because I didn't have tremendous confidence in the team, that was an incredibly strong team that we had working on that, but just to make a point that it doesn't even begin until we're in distribution, shelved in the right place, with the right position, with the right space, et cetera. I think that driving it all the way through to execution is the last piece. You have a third question?
I do. Sorry.
No, go ahead.
I apologize. Thank you.
Yeah.
Talking about the tax structure-
Tax structure? Yeah
tax structure.
Yeah.
want to understand the risk you see from a regulatory perspective on the one hand.
In the news again this morning.
Exactly. on the other hand, risk from an operational perspective, not having decision-makers close, right? You have them in Panama and Singapore and Cincinnati.
Okay.
Geneva, not close to perhaps where the actual operations and accounts are, et cetera.
Yeah.
Thank you. Thanks for the service.
Probably three things I'd comment on there, A.G. can build. First, and it's our fault, we've done a poor job of communicating. Our Global Business Units have global personnel, they have regional personnel, and they have Local Business Units personnel, what we call LBUs, Local Business Units. In all of our big, important countries, for each of our big GBUs, there's somebody on the ground. We're not sitting in Singapore, Geneva, et cetera, exclusively. I think that's important. I'll come to policy in a minute, but I want to make one other comment because we've received a fair amount of questions on it. From the standpoint of how we operate and whether that creates any exposure in itself, outside of policy change, I feel extremely comfortable. This is a business model that we've been operating now for 15 years. We've gone through numerous rounds of very supportive audits.
We have a very high level of what we call APAs, or Advanced Pricing Agreements, between different markets, where the two countries agree with each other, not with us, how we're going to operate and conduct transactions. I feel very good about the viability and the sustainability of our operation. The other point that you bring up is something that you deal with in the world we live in, which is policies can change, and the ways that governments choose to interpret policies can change. We try to be very transparent. We try to be an active dialogue so they understand what we're doing, they understand why we're doing it. That doesn't mean we're immune to a desire on the part of a government to change the way that they want to look at the world.
I think we're in as about as good a shape as we can be.
Yeah. Really, when we started this 15 years ago, we said we weren't going to do anything on the tax front that wasn't supportive of the business objective and the business strategy. Actually, the move to Geneva was a consolidation of three or four separate centers in Europe that was more centrally located. I think the part that is not well understood is the people that actually run the business in China are on the ground in China, right? The people that run the business in Mexico are on the ground in Mexico. We do have to have certain functions done in the regional centers that you talked about, but it's not constraining the way we operate the business. Last point, this is fairly obvious, right? Governments need more revenue. There are big corporations and high individual earners, and that's where they're going.
I don't think that's going to change. Yes. Jon? Oh, sorry.
No.
Okay.
A.G., could you elaborate in more detail about what's going on in China? You said that's one of the places where-
Yeah.
You do look at share. Why are you losing share? What did you miss that led to losing share? What are you doing to change that?
Well, first of all, the basic story in China, I think I mentioned this. I can't remember now. About a third of our businesses are growing share, about a third are holding, and about a third are losing. In some cases, we're out of position on product. Martin Riant talked about that. There's been a flurry of imports, mostly from Japan, in the baby diaper business. We had quite a strong Pampers share in China that we built over a decade. We still have quite a good share. I count 35 to 40, somewhere in there. That'll be approximately right. The fastest-growing segment of the baby diaper category has been pull-ons. Most of them have been exported from Japan. We've been working a long time to catch up on pull-ons. I won't take you through all the gory details.
The important thing is we have one that moms prefer. We have one that has incredible fit and finish and fits like underwear. More importantly, we have one that we can run on our high-speed lines around the world. It's going to roll out pretty fast over the next year or two. I don't get too excited about the baby market because it turns over completely every three years, right? It's tossed up. I'll mention the problems, okay? We're out of position in laundry. That sort of relates to Wendy Nicholson's question. We frankly were stronger in the low end of the business, bars and powders. We were, don't ask me how this happened, the last one to move, not the last one, slow to move into heavy-duty liquids.
What we've done in the last 18 months is we made a fairly big commitment there. It's one of the local manufacturing sites that Jon alluded to. I think it's going to be up and running sometime around mid-year next year, and we'll be in that game. In the meantime, we've been exporting or importing, depending on if you're in China, importing pods and beads, right? It's not a big business, but we're trying to understand sort of how quickly will she move up the ladder, right? Washing machine penetration is reasonably high in China. I'll just mention a third one, but I could probably scarily go through all 20 brands. In fem care, it's a somewhat unusual market for a market that's this developed. Most markets that are this developed are predominantly in what's called the mesh form, which has always been our long suit.
Mesh moving to foam. That market is still in what's called cotton, okay? Cotton is non-woven predominantly and still a fair amount of pulp in the product. It's a bulkier product. We're working on two things. One is we're working on conversion, trading new consumers directly into mesh or foam. The second thing we've done is we said, "Okay, if you can't beat them, join them." We've introduced our own non-woven product, and I think we have a non-woven product that's pretty competitive now. It sort of depends. We're doing quite well in some businesses. Those are three pretty good-sized ones, important ones to us. We still have a very high share of the hair care market, although it's predominantly a shampoo share, and we think there's a tremendous amount of opportunity in conditioners and treatments.
We have the best Vidal Sassoon business in the world there. We do over $300 million. It's premium positioned, premium priced, premium packaging, and our best products. The reason I tell you that is I'm not discouraged by China. It's just that we've got to get it going on more categories and more brands. We know what to do, as I said earlier. We've now just got to do it and bring it to market.
Time for one more question.
Thanks. Jon, two questions. One, can you just sort of talk about when the shares come in terms of the Duracell deal, and how you see that affecting the share count going forward? Then you talked about the ability to take the developing margins up to developed markets. You also talked about the greatest trade-up cycle in history. How much of that movement, because it's a pretty big gap right now, is going to come from just simply things that you control, going back to what you talked about before, versus needing the markets to continue to trade up? If the trade-up cycle doesn't happen, do you still feel like there's some pretty significant margin opportunity there?
First, kind of on the housekeeping question, relative to share count and the impact of the Duracell exchange. Those shares will come out at the point that the transaction closes. It won't affect share count in the current fiscal year. It'll likely affect share count in the following fiscal year. On the question of if trade up didn't occur in developing markets, where would we be left? I named several additional things beyond that. I think those all provide us the levers to get margin to a much better place than it is today, even absent a significant consumer move. The way to conceptualize it, I think, is we did it in China, we did it in Russia, we did it in Saudi, we did it in the Philippines before this dynamic occurred. We did it with the levers that I talked about.
I think, again, the big question there in the near term, I talked about the underlying progress we're making. 2 times the rate of sales growth two years ago, 4 times last year, 2 times. The big question in the near term is just FX.
The simple answer is we have to get it up. The other thing I would say is a big chunk of getting it up is concentrated in a couple of categories in a few markets. We know where the big opportunities are, right? We're getting after those.
Thanks a lot. I think we're going to have to break at this point. That concludes our session and the webcast this morning. Thank you very much for joining us. Thank you for your time. Thank you for your engagement with our management