P and G would like to remind you that today's presentation includes a number of forward looking statements. If you will refer to P and G's most recent 10 ks, 10 Q and 8 ks reports, you will see a discussion of factors that could cause the company's actual results to differ materially from these projections. Also, as required by Regulation G, Procter and Gamble needs to make you aware that during this presentation, the company will make references to several non GAAP and other financial measures. For completeness, P and G has posted on its website, www.pginvestor.com, a full reconciliation of non GAAP and other financial measures. Here is Chairman, President and Chief Executive Officer of the Procter and Gamble Company, David
Taylor.
Good afternoon, everyone. Welcome to Cincinnati, and welcome to all of you joining on the webcast. We're happy you can join us for this presentation, and we're looking forward to talking with many of you at the reception this evening. If you've joined us for any of our investor presentations over the last 3 years, you've heard one consistent theme, a focus on balanced growth and value creation. The same theme has been the focus of each of our internal strategy sessions, leadership team meetings and employee webcast.
We are seeking to improve the lives of the world's consumers in the world in which we live with consumer preferred brands and products that create and grow categories, generate sustained top line and bottom line growth and cash, delivering operating total shareholder return in the top third of our peer group. To deliver this objective, we're focused on creating and extending noticeably superior brands, driving productivity improvements and cost savings to fuel investments in margin and transforming P&G's organization and culture. These will continue to be the focus areas going forward and there's a good reason for that. They're mutually reinforcing. They enable and build upon each other.
Together, they contribute to stronger balanced top line growth, bottom line growth and cash generation. And we've made good progress in each of these areas, which is showing up in our results. Consumption of P and G products is increasing, market shares up globally, and translating into faster top line growth, but we need to do better in an even more dynamic environment. Geopolitical volatility, including tax, trade and privacy, retail transformation, disruption of the media ecosystem, rising input cost and strong foreign exchange headwinds, as well as highly capable and agile competition, whether it be multinational, regional, or local. We must and are accelerating the pace of change and stepping up our execution to meet these challenges.
Winning in today's dynamic world requires us to lead this disruption to create, maintain and build advantage. Now we've changed considerably over the last couple of years, which has allowed us to maintain value. This rate and magnitude of change must accelerate for us to build value on a relative basis. We are leading disruptive change along the entire value chain, improving the lives of the world's consumers, the world in which they live, and our relevance in it. These strategic focus areas and the disruptive work we are leading form the agenda for our time together this afternoon.
John and several of our business unit leaders that are here today will first lead a discussion on our world and our company, highlighting the progress we've made to strengthen the portfolio, drive productivity and superiority, and improve organization design and culture. I'll then lead a discussion on the next wave of change in innovation, brand building, supply, digitization, organization, and citizenship, all designed to further strengthen and sustain our results. We'll take a short break about halfway through the discussion, and then we'll finish with your questions. Later this evening, you'll have an opportunity to talk with nearly every one of our top leadership team at our reception and booth displays. Thank you again for joining us.
Here's John.
Thanks, David. Good afternoon, everyone. I want to start our discussion this afternoon with a description of our world, the way that we see it, how quickly things are changing and the challenges and opportunities this presents. Our world has evolved significantly over just the last 10 years, starting with the financial crisis and followed by a decade of increasing and dynamic change that will likely continue to accelerate for the next 10 years. The market for Consumer Products has grown over the last 10 years along with populations and incomes.
This growth is forecasted to continue. What was a $300,000,000,000 global market in 2,007 is a $470,000,000,000 global market today that is forecast to exceed $540,000,000,000 by 2022. Population has grown from 6,100,000,000 to 7,000,000,000 over the past decade, an increase of 15% and is expected to exceed $7,600,000,000 another 9% increase by 2028. Per capita income in 2,005 constant U. S.
Dollars has increased from $5,100 in 2,007 to $6,000 in 2018, an increase of about 18%. It's forecast to reach $7,400 another 23% increase by 2028. Global GDP is following suit, increasing from $49,000,000,000,000 in 2,007 to $65,000,000,000,000 in 20.18 to $85,000,000,000,000 in 20.28. The number of middle and upper income households has increased by 65% and is forecast to increase by another 50% by 20 28. Our markets, while volatile year to year, are growing between 2% 4% globally.
This is down from 5% during the prior decade, but it's still very healthy growth. Importantly, P and G and the Consumer Products Industry will benefit from more population income and middle income household growth in the next decade than at any time in our company's 181 year history. The world's population continues to urbanize. Urbanites constitute 50% of the world's population with 180,000 people moving to cities every day. 63% of households will be urban by 2025 70% by 2,050, with the largest increase as you'd expect in Asia.
The number of people living in cities with average per capita incomes above $10,000 per year has grown from about $800,000,000 in 2,007 to $1,100,000,000 currently. It's expected to increase to nearly $1,600,000,000 by 2028. This is 13% of the population in 2,007, 21% in 2018 and 29% in 2028. McKinsey projects that 600 cities will generate more than 60% of global economic growth in 2025, and 100 cities within this will contribute 35% of all global growth. This is both an opportunity and a threat.
Urbanization fundamentally changes shopping economics and habits and shapes a new economic reality, making service of all kinds abundant and cheap. The world's population is aging. There were 1,200,000,000 consumers over the age of 50 in 2,007. Today, that number is 1,600,000,000 with a forecast of 2,100,000,000, an increase of 26% by 2028. This dynamic is most pronounced in Japan, 42% of the population was over 50% in 2,007, 46% today, 51% in 20 28 Europe, 32% to 41% to 45% China, 22% to 31% to 39% and North America, 26% to 31% to 34%.
By contrast, the population cohort aged 18 to 34, usually the point of market entry target audience in many of our product categories, declines as a percentage of total population Japan from 20% in 2,007 to 14% in 2028 Europe from 22% to 17%, China from 24% to 17%.
Aging changes
physiology, needs and therefore jobs to be done, product usage, all of which shape habits and consumption levels. Aging hands carry less and have more difficulty opening and holding our packages. Aging eyes strain to read our packaging. On the positive side, aging effectively creates a new point of market entry for some needs, for example, adult incontinence. In other cases, aging creates a point of market change for consumers, redefining what superiority means now for them.
We're identifying and capitalizing on these new points of market entry and market change, attempting to delight aging consumers in a new resistibly superior way. Consumer preferences are changing, giving rise to new fast growing segments and forms and disrupting others. Millennials are often credited or blamed for these trends, but these needs and desires aren't necessarily contained to that age group. Consumers of all ages increasingly want and performance and natural performance and sustainable and they're often willing to pay a premium to provide these benefits to their families. Ingredients, ingredient sourcing and perceived safety are taking on are taking on increasing importance.
Objective safety is no longer the only priority. Consumers to varying degrees around the world are unwilling to accept impurities or perceived contamination of any kind. Perceived shortfalls in the eyes of consumers, a government or an NGO, risk shutting down a business and severely threatening brand equity. These are challenges, but there are also opportunities to make this new definition of product quality a competitive advantage for P&G. The retail environment is being disrupted and is under significant pressure.
E commerce is growing globally at 18%, while hyper super and mass channels are growing at 1%, declining in many markets. Small format channels, discounters, specialty beauty, drug and pharmacies are growing generally at the expense of larger formats. Each market has its conception and we have a few here in the U. S, but these are the prevailing global trends. The emergence of e commerce offering low prices, free shipping and enabling price transparency has challenged the economic model of traditional retail.
E commerce has enabled the proliferation of small brands and niche players, some of whom are choosing to circumvent retailers altogether by selling direct to consumers. Economic pressure on traditional retail and price transparency has heightened the need for unique differentiated offerings and elevated expectations on supply chain execution. Again, these disruptions create opportunities for P and G to set itself apart from competition, but we won't win with our old ways of operating. We must disrupt ourselves to capitalize on these opportunities. Another challengeopportunity, the world's rapidly digitizing.
1,200,000,000 people had access to the Internet in 2,007. It's up to 3,600,000,000 currently with 10% annual growth. Only 100,000,000 people had access to mobile technology in 2,000 and 7. 3,000,000,000 people have mobile access today, and this is also growing at a 10% annual rate. The market's collective percent advertising spent on digital media has gone from only 8% in 2,007 to 42% today and will soon exceed 50%.
70% of today's digital media is consumed on a mobile device. Wearable devices are projected to grow from $1,000,000 in 20.15 to $200,000,000 in 2,001. Price discovery and comparison as well as sourcing was largely local in 2,007. It's moved national, is expanding to mega regions and is moving global. Power is moving to consumers.
Personal voice assistance in the Internet of Things just intermediate shopping lists and path to purchase. Connected devices, the current estimate of connected devices is 23,000,000,000, 3.3 devices for every person on earth, redefine the shopping experience and blur the lines between what we call moments of truth, when and how consumers learn about our products, decide to make a purchase and actually transact. Algorithms behind digital merchants are continuously making assortment and pricing decisions. Autonomous vehicles and drones are positioned to become the modern backbone to logistics. The size and cost of connected sensors, now estimated at 30 times the global population, is approaching the point where anything and everything can collect and report data, redefining jobs to be done and measuring how well we do them.
More disruption, more opportunity. Geopolitical and economic volatility continue to increase. P and G was operating in 0, what we call crisis markets in 2,007. Today, we operate in 15. Sales in these difficult markets account for 13% of our revenue.
Trade barriers as well as exchange, capital and pricing controls have increased significantly, a large shift from 2,007. Foreign exchange is extremely volatile after being largely a non event from 2000 to 2,006. There are negative interest rates in 9 countries, not good when combined with aging demographics. With continued pressure on commodities and U. S.
Monetary policy likely running against the balance of the world for the foreseeable future, we see no abatement in this geopolitical and economic pressure. Nationalism and attendant protectionism are resident just below the surface in many markets. All of this increases the risk of higher transaction costs, regulation and consumer driven market disruptions. Through all of this, competition has gotten stronger and is more varied. Our multinational competitors have upped their game.
Our large Japanese competitors are expanding across Asia and are making four ways into Europe and Africa. While we faced local competitors in most markets forever, the number of them and their capability has been increasing. 450 hair care brands launched in the China Tmall flagship store last year alone, 450, 990 hair care brands in China e commerce as of December last year. The success of local brands in China is notable, whether it's Blue Moon in Laundry or Yunnan Baiyao in toothpaste. These smaller or regional competitors are the fastest growing players in many markets, and it's likely their aspirations will eventually extend beyond their home country borders.
As I mentioned, our digital access has led to a number of direct to consumer entries across our categories. Some of these are well funded startups, marketing and anti establishment agenda. Some have generated attractive exit values, incenting even additional entries. While top brands in most categories are maintaining share, small emerging brands have established a stronger foothold. Recent research report compared share positions in the U.
S. From 2013 to 2017 in our categories. Leading U. S. Brands held a 34.5% share in 2017, unchanged from 2013.
Emerging brands were at 5.4%, adding 2.5 share points over this time period. Private label retailer brands were at 17.6%, up about half a point. All other brands were at a 42.5% share, down 3 points. The situation, of course, varies by category, but the broad trends are similar as are the remedies. When our top brands deliver across the 5 key superiority vectors, they deliver strong results even when emerging and private label brands grow.
When they don't deliver superiority on at least 4 of the 5, we lose ground. Finally, our world is being impacted by both the reality and the perception of resource depletion. These challenges are most acute where population and consumption growth are largest. By 2,050, the United Nations estimates that more than 5,000,000,000 people or half the global Air pollution is linked to 1 of 9 deaths worldwide. Air pollution is linked to 1 of 9 deaths worldwide.
These dynamics are increasing consumer interest in environmentally sustainable products, packaging and business models and strengthened interest in natural products. Each of these forces that I've talked about are creating waves of change, and with this, new opportunities and new challenges. We're positioning ourselves as the constructive disruptors in our industry to prevent becoming the victims of these changes, seizing and capitalizing instead on the opportunities. We need to work at the same time to filter the signals, avoiding the temptation to chase every bright shiny object or fall into the trap of change for change sake. We will continue to define winning by endpoint results, not in process metrics or some inventory of capabilities or brands.
We'll deliver balanced growth and value creation and we'll do it the right way, consistent with our purpose, values and principles that have guided P and G throughout its successful 180 plus year history. We've been working for some time to shape our portfolio, hone our cost structure, strengthen our organization creating a more simpler, focused and stronger P and G to win in this exciting dynamic new world. I've just described our world as we see it and I want to now move to our company. P and G, as David said, is a very different company than it was prior to the financial crisis and subsequent portfolio cost and balance sheet restructuring. We're much simpler, more focused, more profitable, better positioned to win.
Since fiscal 2007, we focused our efforts on our strongest businesses, reducing the number of categories in which we compete by 60% and brands by 70%. Significantly lowered cost by reducing the number of manufacturing sites by 20% and the number of manufacturing platforms by 50%. Core profit per employee is up 50%. We've reduced P and G rolls by 23% on an apples to apples basis, including divestitures down nearly 30%, including contractor rolls down 35%. We've increased investments in advertising reach and trial building product sampling by cutting the number of advertising, public relations and other agencies supporting the business by 60%, reducing non working media costs by over $900,000,000 We reduced the number of office buildings and research and development centers by 65% 30%, respectively.
We restructured to reduce the number of legal entities by 60%. Within the 10 remaining categories, we've simplified and strengthened significantly. In Fabric Care, for example, 35% fewer and much stronger brands, 30% fewer SKUs, 35% fewer more cost efficient manufacturing platforms, 40% fewer packaging formats. And hair care, fewer and stronger brands, 40% fewer SKUs, 25% fewer formula platforms. Across the 10 categories, SKUs are down 24% and are much more productive.
While dramatically focusing and strengthening both our portfolio and our operations, we've maintained most of our sales, grown profit and profit margin and increased the market value of the enterprise. P and G is a highly profitable and cash generative company. Before tax operating margins are among the highest in our industry behind only Reckitt and Colgate, whose margins reflect their concentrations in health care. We have significant below the line advantages, operating with 1 of the lowest interest expense percentages and one of the lowest tax rates, putting us at the top of our industry and after tax margin. We've averaged 100% adjusted free cash flow productivity over the last 10 years, enabling us to return $120,000,000,000 more than 100 percent of adjusted net earnings to share owners through dividends, which have increased for 62 consecutive years and share repurchase.
We've returned additional value through share exchange from the coffee, beauty and battery transactions. Over the last 10 years, there are only 13 publicly traded companies across industries and markets that have generated more cumulative and more cumulative profit and cash than Procter and Gamble. Only 3 have returned a higher percentage of earnings to share owners. That being said, returns have lagged the peer group and the broader market indices. We've lacked balanced growth, sometimes too much emphasis on top line with inefficient delivery on the bottom line, more recently too little top line.
We need to sustainably improve top line growth along with continued margin progress to return to a leading total shareholder return position. We've structured a portfolio that is designed to do just this. The 10 category portfolio historically has grown a point faster and is 2 points more profitable than the old company. We're global market leaders in 7 of the 10 categories and number 2 in the other 3. These are categories where purchase intent and choice are driven by a specific job to do and a product's effectiveness in doing that job rather than by self expression or fashion trends.
About a third of our categories were driven primarily by Fashion, Fragrance or Flavor in 2,007. It's effectively 0 today. Even our remaining beauty brands are driven primarily by fundamental product performance against an important benefit or need. Think Head and Shoulders, SK II, Safeguard. Consumers use these categories on a frequent basis, typically daily.
Over 80% of the current business is now daily use versus about 60% in fiscal year 2007. Daily use categories are more important to our retail partners, they drive shopping trips and dollars, loyalty is often higher, the brand relationship is a closer one and we sell more product. These categories leverage P and G strengths, consumer understanding, branding, product, package innovations and our go to market capabilities much more fully than the businesses we've divested. We have created a much stronger and more focused company. One of the strategic choices each company must make is what will be its basis for competitive advantage, its basis to win.
In slow growth, highly competitive categories were sometimes pushed to lower prices, increased promotion and tear down, a race to the bottom. We've made a different choice to double down on meaningful superiority of products, packaging, brand communications, retail execution and superior consumer and customer value in each price tier where we compete with productivity to fuel investment and margin growth and a stronger, more focused, more agile and accountable organization. While we've made significant progress, we must further improve superiority across our business to meet the external challenges we face and win against increasingly able competitors, all to enable stronger sustainable top and bottom line results leading to leadership levels of total shareholder return. Using our new body of evidence methodology self assessed by each business unit, nearly 60% of tested products are now clearly superior, up from 30% 2 years ago. We've made similar improvement across other superiority vectors.
While superiority metrics can often be disputed, the end results cannot. Where we're delivering superiority on 4 or more of the 5 vectors, we are consistently driving all business success metrics: sales growth, profit growth, value share growth, household penetration and very importantly market or category growth. Where we deliver superiority on 3 or fewer vectors, we're almost universally unsuccessful in driving each of these success measures. I'm going to ask some of the business leaders to share examples of how improvements and superiority have driven outstanding results, and we'll start with Shailesh Jhurukar, President of Global Fabric Care and the Fabric and Home Care Sector.
Thanks, John. As I shared with you in the same investor meeting 2 years ago, our strategic imperative is to deliver strong growth in our priority markets, which account for 65% of sales and more than 90% of our profit. Our focus on driving noticeable superiority is delivering market growth and share growth. Market growth is accelerating, and consumption of our products is up 4% over the past 3 years, while share is up almost 3 points across these markets. We've improved our percent of business with noticeable superiority, as John said, from about 30% of sales to 80% during this time.
And in markets where we are at 90% of sales with superiority, sales growth has gone as high as 8%. PODS is a great example of delivering product superiority. UNI Dose products now account for nearly 20% of laundry detergent sales in the U. S, 35% in the U. K.
And over 30% in France. The form is growing globally at a double digit rate. Our superiority has earned us an over-seventy share of this segment globally. Even with this success, we've raised the bar further with our latest upgrade. The new pods are hands down winners delivering a 15 point advantage versus our own previous pods.
We've grown share 3 points in Japan behind the new pods upgrade, and we've accelerated growth in U. K, France and Poland. The new innovation will be available in the U. S. Early next calendar year.
The upgrade also enables us to deliver much better performance in quick and cold conditions, which by the way is also the biggest positive impact we can make from an environmental sustainability standpoint. It delivers a step change in performance on new emerging spaces like Malodor, which has now seemed to be as big a challenge as tough stain removal. Let us see an example of how we are bringing this to life. Beads is an excellent example of delivering noticeable packaging superiority with its squeeze scent release that allows the consumer to experience the scent in the store. It is now a $700,000,000 product growing at a 27% average growth rate over the last 3 years.
New packaging innovations like Tide Bag in a Box is focused on superiority in the e commerce environment, improving shipment safety while also improving the in use performance on dosing and pouring. We've made our consumer communication for even our well known brands much more memorable. Let me make the point by showing you my favorite ad and hopefully yours too.
Just a typical Super Bowl car ad, right? Or hilarious mirror ad. Or whatever ad this is. Whatever. But it's a tie ad.
What?
It's a tie, dad.
What makes it a tie, dad?
There are no stains. Look at those clean clothes.
What else would this be an ad for? Diamonds.
A gift that lasts for a no. It's time for
a cobra. No. Tie that.
Fall into the sleep of No.
Tide. No. Tide ad. Extreme. No.
Tide. Tide.
Tide. Meet the all new. No.
It's a Tide ad. Tide.
So does this make every Super Bowl ad a Tide ad?
Dad? I think it does. Watch and see.
Hello again, ladies. Is your man the kind of man who would climb the height I'm in a tight end.
Nice pants.
Get off my horse.
Tie hat. Sara, Sara.
It's a tie down. Sometimes the signs are hard to ignore. Whenever you see clothes this clean, that's a Tide add.
Clean clothes may be an indication of a Tide add. Tide users experience 10 times more cleaning power. Tide is America's number one detergent in America.
Hopefully, you got to see it during the Super Bowl. This one has won multiple awards and driven gains, most importantly, on our core cleaning equity. We are making our advertising work harder by investing significantly, as we have done in the U. S. On better reach and leading the way on new approaches as we've done in China by moving 100% of our media to digital with no TV advertising, enabling us to grow the base business strong double digits while cutting costs 40%.
A great example of how we are improving retail execution is the work we've done on Better Together in the U. S. Market. This shelving and merchandising approach drives regimen and triples the size of the FabricAir basket, growing the category for retailers and growing sales and share for P and G. The biggest role we do and we can play in creating value for our customers is by growing the size of the pie.
We continue to drive this in a variety of ways. We're focused on increasing the load penetration of fabric enhancers, which are used still in less than a third of laundry loads today. In the U. S, the category has grown at a 6% average rate over the past 3 years, and our share of it has increased close to 4 points. In Japan, the category has grown at a 7% rate, and our share has increased nearly 3 points.
We also continue to drive a premium mix. In the U. S, the Tide value added pods are a 25% premium to the base Tide pods, which in turn are a 25% premium to Tide Liquids, which itself is 100% premium to the balance of the market. Close to 40% of our ports business is now in the value adds, a big value for retailers and P and G, and most importantly, a superior experience for our consumers. I am confident that this very focused plan will drive noticeable superiority in key markets and accelerate our growth for better shareholder value while delighting consumers and customers.
Now Jen Davis, President of Global Fem Care.
Thanks, Shailesh. Another category where meaningful superiority is driving results is Feminine Care, which has delivered 12 consecutive quarters of organic sales growth that's averaged over 3% during this time period. The global feminine care category is over $20,000,000,000 with a market growth rate of around 5%. With our big brands Always, Whisper, Tampax and Always Discreet, we're the global leader in the feminine care category, sold in more than 130 countries worldwide with nearly a 30% value share. With roughly $4,000,000,000 in sales, these brands are category growth and consistently growing value share over the past 2 years.
Always Discrete adult incontinence products are contributing to these strong results in a category where we can make a real difference for women. Always is a proven brand that she has known and trusted for years And our discrete product is significantly preferred versus competition because of its strong protection and odor control and a thinner and more discrete design. This superior usage experience is exceeding her expectations and helping to normalize the condition of bladder leaks. Before we launched Shelvey's Discrete in the U. S, 1 in 3 women stated they experienced bladder leaks, but only 1 in 9 was using an incontinence product designed for her needs.
Now 4 years since we launched, our research shows that 1 in 6 women are using the category. All these discrete sales are growing more than 20% and value share in the 14 countries where we compete ranges between 10% and over 20%, disproportionately attracting new users to the category. In those markets, category growth has accelerated as much as 50% post our launch, creating tremendous value for customers and shareholders. In the U. S.
Alone, Always Discreet has delivered 60% of the category growth over the past 3 years. In Feminine Care, we're accelerating growth by driving superiority across all five vectors of our brand propositions: product and packaging, communication, in store execution and value. Always Discrete has built and is extending its advantages in ways that accelerate our brand growth and the category. A great example of this is our most recent innovation, Always Discreet Boutique Underwear. Once bladder leaks reach a degree that the underwear form is needed, many women experience a massive load of their confidence, saying they don't feel like a woman wearing diapers and they're embarrassed to put them on.
This led us to the insight that what women want more than anything is to wear their real underwear. When they can no longer do that, they no longer feel feminine. So our scientists work to design a consumer experience that looks and feels like my real underwear, and that inspiration is what led to the creation of Always Discreet Boutique. Boutique is a superior product. It combines our best absorbent technology with our thinnest core in the world.
And we paired our scientists up with lingerie designers to construct the shape and the cut of the underwear so that it fits much closer to the body. They chose a fabric that's much softer, has feminine details like different colors and prints. The packaging The packaging for Always Discreet is also much more feminine than what you would typically find in the incontinence aisle. And just like real underwear, we showcase the product rather than hide it within a delightful design that helps women feel good about buying it. This has helped Always Discreet grow household penetration more than 15 points in North America and Western Europe the past 12 months compared to modest single digit growth for competition.
Our holistic communication focuses on the promise that she can finally have bladder leak underwear that not only protects her, but helps her feel beautiful. Until now, other products have required her to make a trade off between 1 or the other. And because the product looks and fits so much like real underwear, we haven't been shy about showing it off in our advertising. And in the U. S, we chose an African American talent as the incidence of bladder leaks is 50% higher among these consumers who also over index with the usage of the underwear form.
Let's take a look at the boutique advertising.
Okay. I never thought I'd say this, but I found bladder leak underwear that's actually pretty. Surprised? It's called Always Discreet Boutique. It looks and fits like my underwear.
I know what you're thinking. How can something this pretty protect? Hidden inside is a super absorbent core that quickly turns liquid to gel for incredible protection. So I feel protected and pretty. New Always Discreet Boutique.
Strong in store execution has transformed this historically clinical and often bleak adult incontinence aisle into something that's inviting and approachable. We brought the product out of the bag, and we've had in store displays where we actually put product on mannequins for shoppers to touch and feel just like how real underwear is sold. This together with the packaging helps to remove the stigma of shopping the category. Altogether, Always Discreet boutique is a superior proposition that delivers on its promise of maximum bladder protection made beautiful, leading consumers to find its value superior despite being 60% premium to our base underwear offering. Consumers have thanked always by saying, I finally feel confident leaving my house again.
And the results from boutique are very encouraging. This premium line extension has been 100% incremental to our base always discrete underwear and its accelerated household penetration of the brand and this form. Boutique now represents more than 20% of our underwear business and has added 2 points to our total brand share. In the U. S, adult incontinence category volume, has accelerated since the boutique launch with boutique driving the majority of the underwear form growth.
At the same time we launched Always Discreet boutique underwear, we also improved brand communication and value on the Always Discreet pad business. We learned that because always discrete pads spinner profile results in a smaller package, it compromised value impression with consumers at the first moment of truth. So we created new advertising to address the issue head on, reframing that smaller is better. Let's take a look.
Let's see. If these packs have the same number of bladder leak pads, I bet you think bigger is better. Actually, it's bulkier. Always Discrete doesn't need all that bulk to protect because it's made differently. The super absorbent core quickly turns liquid to gel for drier protection that's a lot less bulky.
Looks like good things really do come in small packages. Always discreet for bladder leaks.
This advertising tested significantly superior versus competition in our previous campaign, and it's driven a 10% acceleration in our pad run rates since it went on air. Driving innovation on our core business and new products with new benefits and improving superiority across all 5 vectors has led to record sales and share growth for Always Discreet. Thank you. Now I'll turn it over to Alex Keefe.
Thanks, Jen. Good afternoon. 2 years ago, I stood on this stage and outlined the work underway to focus the Olay brand, elevate its presentation back to prestige benchmarks and make its innovation more relevant and sizable and speak to a new generation of women in more emotive and powerful ways. At the end of that talk, I told you I was confident that the program would return Olay to growth as it came to life. As you might imagine, I'm happy to be here today tell you that confidence was well placed.
Olay Skin Care delivered double digit growth in fiscal 2018, growing organic sales in the 2 largest regions, China and North America. These two regions represent nearly 80% of global Olay skincare sales. In China, Olay has grown double digits for 6 consecutive quarters, a year and a half of double digit growth in one of the world's most contested skin care markets. And in North America, Olay has grown double digits over the past 12 months after multiple years of decline. The successful programs initially developed for China and North America are also delivering growth in smaller Olay markets around the world, with the next six largest countries all growing sales last fiscal year.
The work to reinvent Olay and return it to growth was broad and deep in scope, raising the bar across all elements of noticeable superiority. First, the product. Olay Cell Science, Olay's first ever super peptide formula delivering visible skin transformation in 28 days. Cell science further accelerated Olay China's growth since its launch 9 months ago. In North America, we launched Olay WIPs in January of 2018.
WIPs was designed to appeal to women who don't like the heavy feel of typical moisturizers. These consumers tend to be younger than the average skin care user. Whips feels light as air with instant absorption and a matte finish. Let's look at the current creative that brings the product feel to life
in a powerful way.
So we're going to do a little experiment. I've got 2 moisturizers here. Which product do you prefer the feel of? Oh, definitely this one.
It just kind of melted into my skin better.
This one's much heavier. It just feels thick and greasy.
Like, I can't breathe. I'm gonna reveal to you the product you prefer. Okay? Okay.
Oh, no way. It's LA. I was expecting it to be, like, a high end $100 moisturizer. Does this really have SPF? Can I have it?
I would definitely swap to Olay WIPs, yeah. 100%.
WIPs is winning with consumers. It is currently the number 1 and number 2 top selling item new items in the category. On packaging, we've upgraded Olay packaging to prestige like quality and attractiveness. Around the world, we have introduced boldly simple and elegant cartons for the mass market shelf. These changes make the brand easier to shop and also to repeat purchase in a self-service environment as the primary package is prominently and beautifully featured.
On retail execution in North America 2 years ago, we significantly streamlined our lineup, eliminating 20% of our SKUs. That has been a headwind since the discontinuations, but we have now fully worked our way through it. We have a new shelf architecture designed to guide shoppers to our best selling items and our new launches. This approach is proven to deliver overall category growth driven by Olay. In China, over the last several years, we closed unproductive counters, completely revamped our Olay beauty counselor program and upgraded the remaining counters significantly with higher and tighter standards shown here with before and after images.
On value, as we holistically elevate the brand in the eyes of the consumer, we are able to command higher pricing and reduce the discount levels that had become part of the brand prior to its reinvention. Our recent product innovations have all launched and are successful at premium prices to our core REGENERIST offerings. Globally, Olay Whips is priced at a 10% to 20% premium to Regenerist. And in China, Olay Cell Science and Olay Eyes launched at 60% 25% premiums, respectively. We are also offering her value through service, helping her match her skin needs and wants with the best products from Olay with Olay Skin Advisor.
Olay Skin Advisor launched in August 2016 and has reached 3,500,000 women thus far with AI enabled diagnostic experience leveraging our intellectual property of comparing skin to a database. This tool is now the cornerstone of our Olay direct to consumer engagement and is posting key performance indicators well above the industry average. You can experience it yourself tonight if you visit the beauty booth. Finally, brand communication. China pivoted its media model and creative in March 2017 and has been growing ever since.
The other superiority vectors have played an important role, but the media shift was the catalyst to reach new younger consumers with relevant and powerful messages in a way that she naturally engages with media. The Fearless of Age campaign has driven consumption and contributed to e commerce sales growth of over 80%. The Women's Day execution delivered share growth across all main channels by achieving the number one share of voice. The creative is based on the idea that the number that defines a woman is not her age, but the number of her fearless stories. The actress featured in this spot is actually 42 years old.
Let's watch. We have also changed the creative and media approach in the U. S, learning from China, but adjusting for different consumer and market dynamics. The U. S.
Olay media mix is now a combination of powerful brand and product reframe stories, which have always been at the core of the brand, as well as new pull media content. We are seeing success with pool content, including a millennial focused musical series for daily facials facial cleansers, which has grown 11% over the last year, and Olay's recent face anything campaign launched last month. You might have seen it in Times Square. Let's look at both the surprising reframe creative as well as our Face Anything spot.
Olay Regenerist wipes out the competition, hydrating better than 100, 200,
the
lot of things. Too emotional. I was always viewed as someone that was too ambitious.
Too opinionated.
Told me
that I was too strong. Too fat.
Too bossy. Too confident. People have said
that I'm too vulnerable. Too short.
Too tall.
Too defiant. That I'm too driven. I'm not too defiant.
Too loud to have spoken, too energetic, too opinionated, too sassy. Too everything.
I think too has a judgment attached to it. When you say you're too something, it puts a negative connotation on it.
It's not like you're a 100% something. It's like you're 500% something, and it seems like a bad thing. People are not comfortable with those sort of treats when it's coming from a woman. Oh, I just don't fit the box that you have in your mind. So what we'll have to do is just change your mind.
I am opinionated. I'm vulnerable.
I am driven. I am confident.
I am outspoken. I am defiant. I am strong.
Olay's new media platforms are activated by 200 influencers across traditional media such as Doctor. Oz and the digital social ecosystem. With these changes, USLA is growing sales, category growth is accelerating, and share trends are improving, up a half a point over the past few months. I left brand communication to the last point as it was one of the hardest to crack given the massive change in the media and brand landscape over the last several years. We learned from and reapplied the tremendous work that SK II had already done in this area under Marcus Strobel's leadership.
His expertise and creative passion are helping us to accelerate Annalay and across skin and personal care in the last year as he took on leadership of the total global category. I'd like to turn over to him now to tell you more about SK II. Welcome, Marcus.
Thanks, Alex. Hello, everybody. SK II superiority has driven outstanding results. SK II sales have grown for 16 consecutive quarters at an average rate of over 20%. The prestige beauty market is growing high single digits and SK II growing share within the category.
SK II's superior product is based on a proprietary formula and a unique ingredient called Pieterra. Pieterra works to dramatically improve the skin's natural rejuvenation process. It is not hope in a bottle. It's a product that solves problems for consumers in a noticeable superior way. We are in a unique position to have conducted an over 10 year longitudinal study with more than 100 women demonstrating that Piterra delivers results in the short term and over the long run, and our consumers experience these results.
SK II is presented in prestige packaging that builds the brand's equity and consumer confidence in the product. In fact, the packaging of our facial treatment essence and our Genaptics AURA product are so loved that Chinese consumers have given them nicknames. They call them the miracle water and the little light bulb. SK II's long term success has been supported by many passionately loyal users, But the challenge to sustain leadership growth rates has been to attract new users to the brand, ideally younger users who we can add to the passionately loyal base. SK II has been on a mission to increase new users among a target group we call the Young Executives.
To make skincare exciting for this group, we have invested heavily in packaging decoration technology, which enables us to come up with eye catching limited editions in key consumption periods like Christmas, Chinese New Year or the cherry blossom season in Japan. Here's one of our most recent examples where we have combined the packaging design with our successful Change Destiny marketing campaign. Talking about Change Destiny, compelling consumer messages have been critical to driving growth, setting SK II apart from competition. The SK II Change Destiny campaign was introduced about 3 years ago to challenge the belief that destiny is set at birth. The campaign celebrates women who have gone beyond limitations to follow their dreams and achieve success.
Let's take a look at one execution that's called I never expire.
Are we all born the same? Do we share the same dreams? What is expected of us? Will love always be carefree? Through whose eyes do we see ourselves?
Do we have an expiry date? And if we haven't ticked all the right boxes, are we worth less after turning 30? Or can things be different? Can we decide for ourselves? We aspire to
be.
What really matters? The messages we pass on to others. Can we change destiny by changing our
thoughts?
This compelling marketing campaign has delivered over 23,000,000,000 impressions since its launch, with close to 300,000,000 views to date. Most importantly, this campaign creates high engagement among the young executives, driving buzz and talkability. The campaign delivered strong results, drawing new SK II users by 23% and helping reduce our average new user age from mid-30s to late-20s, contributing to the strong sales growth over the past 3 years. Excellent retail execution in store and online builds the equity of SK II. This is an SK II counter in Hangzhou Tower, one of the most prestigious department stores in China, where we managed to obtain the number one location with our new counter design.
In fact, we have significantly improved space, location and execution in more than 70% of all our top distribution points in the past 3 years. The experience at SK II's high end retail beauty counters includes a beauty consultant who utilizes a state of the art analysis tool called the MagicRing to discover how a consumer's skin fares against the 5 dimensions of skin: wrinkles, texture, radiance, firmness and spots in order to personalize the perfect regimen. SK II is also using digital and data analytics to reach consumers with 1 to 1 precision marketing to enable a very personal and engaging connection with current and prospective SK II users. This targeted approach helps her select the right regimen for her skin and offers a direct to consumer purchase occasion. The combination of precision marketing and immediate purchase conversion has contributed to SK II's strong online share that is significantly higher than our offline share.
We are currently bringing together SK II online and offline experience in a series of pop up stores powered by cutting edge facial recognition technology, artificial intelligence and robots to pioneer the integrated retail experience of the future. We believe this omnichannel approach will be the next frontier in retailtainment. So this outstanding combination of product, performance, package, communication and retail execution delivers a level of consumer delight that supports SK II's premium price. Consumers see the value. In the markets in which we compete, SK II is running neck to neck for the top position in super premium skincare with the likes of Estee Lauder, Lancome and Shiseido.
We're off to another strong start this fiscal year with 26% organic sales growth in the Q1. This puts ST2 well on track to exceed $2,000,000,000 in annual sales this year. Now I'll hand it over to Gary Coombe, President of Global Grooming. Here he is.
Thank you, Marcus, and good afternoon, everybody. Our grooming business has faced serious challenges in recent years, as you all know. We were not noticeably superior at every consumer touch point. And as a consequence, new competitors entered and won share whilst consumption trends reduced overall category usage. To address this, we've refocused all our teams on all 5 vectors of superiority with new strategies and new plans that we are urgently bringing to market across our global business.
We're seeing these interventions begin to bite and results begin to turn, but we know there's still a great deal of work still ahead of us. Now it all starts with product superiority. Quality and performance remain our biggest competitive advantage, and it's the reason why more than 800,000,000 consumers trust Gillette every morning. We have an exciting pipeline of innovation to roll out across the whole portfolio starting right now with our biggest launch since Fusion in 2004. For over a century since our first safety razor was designed by King Gillette, we've been inventing better razors based on more blades or sharper blades to deliver an ever closer shave.
Now today that changes. For the first time, we've designed a whole platform specifically for the 70% of men who suffer with sensitive skin while shaving. And more than half of these men cope by shaving less often than they would want to or not shaving at all. And when they do buy into the category, it tends to be at the lower value tiers. Gillette SkinGuard is a breakthrough in razor technology that changes this.
We've reengineered the whole cartridge, repositioning the blades around our proprietary SkinGuard technology, which reduces cutting force and changes the way the blades interact with skin and hair. Feedback from the broad consumer testing that we've done has been overwhelmingly positive and customer support too has been fantastic. It's going to be in stores in the U. S. And Europe in the coming months backed by heavy media investments that will help drive both our business and the category value forward.
We're pioneering new shaving technologies through our Gillette Labs Venture Group as well. We released a limited range of the world's first heated razor on crowdfunding site Indiegogo to get the products in the hands of and on the faces of early adopters and to gather feedback as we plan for a broader and bigger launch. We sold out in less than a week. Now this is a super premium luxury razor, but we're very encouraged by the early reception and the potential market for this kind of product. Much more to come in this space.
Packaging, however, remains an improvement area for us. We've made some modest headway with recent upgrades, but it's still too difficult for consumers to shop our products. We're taking steps to bring clarity to the lineup that will improve the shopping experience and encourage consumers to trade into the range, trade across adjacencies and trade up in the portfolio. Now for competitive reasons, I'm not going to share those designs today, but we're confident that we will reach superiority in the future. We're also making progress on consumer communication.
Our marketing on both Gillette and Venus had become dated, and we weren't winning the hearts and minds of consumers, particularly the younger generations. To address this, we've refocused on reaching Millennials and Gen Z consumers where they are most receptive through compelling digital and social content and influencer led communications. On Gillette specifically, we're redefining the best a man can get and our place in the conversation about men and positive masculinity, sharing very different stories and using very different aspirational characters. Now our first step in this journey still rooted in Gillette's heritage in sports marketing and exploring the unique bond between a father and a son has been to share the inspiring story of Shaqim Griffin and how he overcame adversity to achieve his dream of playing in the NFL. This is just the 32nd version that I'm going to show you, but I encourage you to watch the full long form available online.
Let's take a look.
Shaquem, get in here.
Take your razor. Yep.
Alright. Up and down, never side to side. Shakeem, you got it?
Come on. Get back. Kim, you're stuck behind your mother. Stay focused.
On Venus, we've made an even more dramatic but necessary change. Previous advertising had only told one story, a slender woman in a white bikini on a white beach shaving already smooth legs. The world has changed and it was high time that Venus did too. Our new My Skin My Way program is made by women for women. It has a female crew behind the camera and real women not actresses on screen.
And it celebrates all women and all types of skin telling real stories, shaving real hair. Let's take a look at the ad.
With Venus, you're in charge of how your skin feels. So when the world expects you to follow the rules, write your own. Because no one gets an opinion on how you live your life, why you shave, or how you show your skin. My skin, my way.
Moving on to retail execution. I'm going to focus my comments today on our online business, which I know is of high interest to everybody. Now this is still a small piece of the global category, but we're committed to win wherever our consumers want to buy. As you know, competitors stole a march on us in the DTC space in the U. S, but we are fighting back.
We've doubled, doubled our total male DTC share in the past 6 months. And our data suggests that we are the only company growing net new blades and razor users in the U. S. We've also launched a new online service on our female business in the U. S.
Called Venus Direct. We're investing in capability and consumer execution to step change our offering across our global markets. Where we didn't have the capability in our organization, we've hired externally to source important skills and expertise. Now to drive superiority in our DTC business, we're doing many things including the following. We've pioneered text to order services to improve convenience.
We're adapting our marketing and commercial operations using real time data and analytics. We don't force subscription when you're on our site, and that's a key consumer tension with other services. And we're offering unique capability for consumers to personalize and even now design their own razors. An exciting new example of this is RazorMaker. People can design their own razor handles online and we 3 d print them in Boston and ship them straight to their door.
The early reception for this has been terrific in the U. S. And demand is growing overseas where people can't wait to try it. Finally, we've made important strides over the last 18 months to deliver superior consumer and customer value in the U. S.
And indeed around the world. We've made significant adjustments to our range and our pricing to address value gaps where we had stepped out of line on pricing. We now have the right product portfolio and pricing ladder in place execute our business model in the U. S, improving customer relationships and receiving strong support for our plans to grow the category. Our focus on superiority is starting to deliver results.
We're growing sales. We're winning share, and we are creating value in the category. Our Q1 marked a solid step forward, but we do know that it's just the start. There will be bumps in the road and competitive challenges still remain, of course, but we're confident we will continue improving performance and we will achieve our goal of consistent reliable top and bottom line growth for the grooming business. Thank you.
Now let me turn it back to John.
As I hope you can see from these examples, we're making significant progress. Still, improving relative advantage, including superiority of execution, remains our largest opportunity. This holds true in both the core and in faster growing more segments, where we're becoming much more deliberate and intentional. We're developing, for example, new superior product offerings that address the needs and wants of naturals consumers, who are increasingly concerned about ingredients that are in their products and sustainability consumers, who are increasingly concerned about the environmental impact of how their products are produced, packaged, used and disposed of. Success is maximized by meeting these emerging desires, while also solving the fundamental problems consumers are trying to address with the product: efficacy and natural or environmental benefit.
We've introduced products in nearly every category to address these emerging consumer needs. Our Natural segment offerings quadrupled sales last fiscal year, and we expect to more than double sales again this fiscal year. We're in the game in this important segment. We're making progress on packaging. 5 P and G Packaging innovations were recently recognized with Dow Chemical Packaging Awards, including the top honor Diamond Award for our Air Assist package.
P and G received 5 of the 29 awards given, no other company received more than 2. We've stepped up retail execution. In the most recent Global Advantage Monitor Report, an independent retailer assessment of manufacturers across 7 key areas, P and G ranked number 1 globally. We are in the highest number of countries ranking P and G as number 1, and we ranked number 1 in all 7 evaluation areas. When we get the product package, communication, shopping and value equation right, we attract consumers of all backgrounds to our brands, including millennials, which account for about 80,000,000 U.
S. Consumers. Over the past year, 17 of our top 20 brands in the U. S. Held the number 1 or new number 2 share position with millennials, including brands like Always, Bounty, Cascade, Charmin, Crest, Dawn, Downey, Febreze, Game, Gillette, Oral B, Old Spice, Pampers, Puffs, Swiffer, Tampax and Tide.
And you just heard a few examples of how our brands continue to find ways to connect with this important consumer segment. Millennials do a lot of their shopping online. Last year, P and G sales and e commerce grew 30% to nearly $4,500,000,000 about 7% of our total business, roughly the size of the next 2 largest consumer e commerce businesses combined. We're making good progress on extending our margin of advantage and increasing the quality of our execution, but we face highly capable competitors who continue to improve their products and their business models. Addressing these challenges and extending our product and package advantages, superior execution and consumer and customer value will require continued investment.
The need for this investment and the need to drive balanced top and bottom line growth, including margin expansion, underscore the importance of productivity. We're driving cost savings and efficiency improvement in all facets of our business, approaching the midpoint of our 2nd 5 year $10,000,000,000 productivity program. We've consistently delivered $1,200,000,000 to $1,600,000,000 in annual cost of goods sold savings. I expect we'll be towards the high end of that range again this fiscal year. Another area of savings is elimination of a delivering nearly $1,000,000,000 of savings and agency fees and production costs over the last 4 years.
We see more savings potentials in these areas along with more efficiency in media delivery. Mark Pritchard will talk more about how we're disrupting the media supply chain later this afternoon. We're continuing to drive savings in the organization, redeploying resources closer to consumers and customers, improving the efficiency and effectiveness of our business to operate at the speed of the market. We've reduced P and G roles, as I said earlier, by 23% on an apples to apples basis, 30% including divestitures, 35% including contractor roles. Of 48 companies with a market capital over $150,000,000,000 only 3 have reduced enrollment more than 20%.
We're focused on cost productivity and cash. We've made great progress on working capital. Over the past 5 years, we've improved receivables by 3 days, inventory by 10 days, payables by more than 30 days. We're driving down costs and inventory with our supply network transformation. We're making progress towards our vision of synchronizing the supply chain with real time point of sales data with the consumer purchase triggering updates to our manufacturing schedules and orders of materials to suppliers.
Our 6 new mixing centers in North America are enabling faster customer response times and optimize mixed product loads to improve customer service levels. P and G consistently holds best in class receivables positions. We're making further improvements by leveraging technology, using robotic process automation to digitize key elements of the work process. Over the last 3 years in North America, we've delivered $100,000,000 in improved cash flow by reducing days outstanding by more than a day, while simultaneously improving productivity, reducing roles by 30% and organization cost by 50%. An important cash productivity project has been supply chain financing, which we continue to expand.
This program, which is a win for suppliers and for P and G, has yielded nearly $5,000,000,000 in cash in the 5 years we've been driving it. We improved payables by 5 full days last year alone on a constant currency basis. Along with our productivity efforts, we're working to strengthen both our organization and culture. As we streamline the organization, we continue to move resources closer to the consumers we serve, creating organizations with higher autonomy, accountability, agility and speed. We supplemented our internal talent with skilled experienced external hiring and improving category dedication and mastery.
We're strengthening compensation and incentive programs, increasing the granularity of annual bonus awards, expanding participation in both the annual and 3 year bonus programs, changing evaluation metrics to focus more on performance relative to competition and performance of local teams. We're increasing the amount of total compensation at risk and widening the payout range to deliver greater upside reward and downside consequence from over or underperformance. Each of these organization and culture changes are aimed at creating a company designed to win in today's market with today's consumer, more agile, more accountable, more efficient, more productive. The steps we've taken so far have been well received by our own organization, bigger jobs, less complexity, faster decision making, more responsibility, greater ownership for results and greater impact on the rewards that can come with it. We're taking further steps to engrain these positive changes more deeply into our structure and how we operate.
David will talk about this after the break. I hope it's evident that we've already significantly disrupted P and G over the last number of years. Productivity, portfolio, noticeable improvement in product packaging, communication, go to market and value equation and a stronger organization and culture. We've made good progress and it's showing up in improved results. We're accelerating organic sales growth, driven by strong volume and consumption growth, with market shares improving.
Constant currency earnings and adjusted free cash flow are off to a solid start towards fiscal year targets. In the quarter we just completed, organic sales grew 4%, driven by strong organic volume growth of over 3%. Pricing and mix were a net positive to top line growth. 9 of 10 categories grew organic sales: Skin and Personal Care grew in the teens, personal health care grew double digits, fabric care, home care, feminine care, family care and grooming each grew organic sales mid single digits. All channel consumption, very strong, up in line with organic sales and ahead of underlying market levels, driving a return to aggregate market share growth.
33 of our top 50 country category combinations held or grew value share, up from 26 last fiscal year, 23 in fiscal 2017, 2017 the year before that. 8 of 10 global categories holding our growing market share. Core earnings per share was up 3%. On a constant currency basis, core earnings per share up 11%. This against the backdrop of significant commodity and transportation cost challenges, about a 5 point headwind, net strong underlying earnings progress.
Productivity savings remained strong, 2.50 basis points in the 1st quarter. This is crucial to mitigating the $1,300,000,000 of after tax headwinds from foreign exchange and commodity cost increases this fiscal year alone. Cash flow remains dependably strong with adjusted free cash flow of 95% in the Q1. We returned over $3,100,000,000 of cash to share owners, nearly $1,300,000,000 of share repurchase and $1,900,000,000 of dividends. In summary, a relatively strong quarter, clear evidence of the progress of progress in the most dynamic and challenging environment we've faced in a very long time.
Still, there is much to do. We're not winning everywhere, not in every category and not in every market. We're not growing our markets consistently enough. We're losing share in 17 of our largest category country combinations. Our world continues to change at a dizzying pace and our ever more able competitors are not standing still.
The work we've done to focus and strengthen the portfolio to establish and extend advantage of our brands, to drive productivity improvement, to fund investments in superiority while expanding margins and to improve the organization and culture has clearly been necessary, but has not been sufficient to deliver superior returns. We must continue each part of this effort, but step up its pace and add to its scope. We must lead constructive disruption in our industry. After a short break, David will lead the balance of our discussion this afternoon focused on how we're doing this, how we're constructively disrupting our industry to return to superior relative total shareholder return.
Great. Thank you. Welcome back, everybody. As John said before the break, the focus areas that have driven the improvement in our results remain our priorities going forward. We're making improvement, but there's still much more work to do.
To win in this highly dynamic and competitive environment we face today and will face for many years to come, we must lead further constructive disruption in our industry. The work ahead of us will be even more important and impactful than the significant work behind us. For the balance of the presentation this afternoon, we'll discuss some of the disruptions we're focused on. 1st, lean innovation that improves speed to market, shots on gold and success rates of new products. Next, we'll talk monetization of internally developed technologies to build value and fund even more innovation investment.
Then brand building 2.0, digitally enabled 1 to 1 mass marketing, followed by supply chain transformation enabled by robotic process automation, then digitization and data and analytics that disrupt all facets of our operation. I'll come back then and cover organization design changes that will prepare us to win with consumers and customers at the speed of the market and at an even more efficient cost structure. Finally, I'll discuss how we're building citizenship in to how we deliver our business results. We'll start with our lifeblood, which is innovation. Kathy Fish, Chief Research and Development and Innovation Officer, will take us through some significant changes we're making to how we innovate.
Kathy?
Thanks, David, and good afternoon, everyone. Innovation has always been the lifeblood for P and G. In the dynamic and competitive world that John described earlier, we must disrupt the way we innovate to drive growth and value creation, delivering irresistibly superior consumer experiences, accelerating the speed and quality of our learning and step changing our approach to open innovation. The traditional view of innovation typically focuses on functional superiority, often measured in a lab and with consumers. A few years ago, if you looked at only our functional superiority test results, you would have thought P and G was growing in every category.
Now you know the truth. Our results were clearly lagging. We had to disrupt our own thinking about what noticeable advantage means, viewed from the eyes of the consumer, in real life, across the entire experience and compared to all competitive options. When we first remeasured ourselves against this higher standard, it was very humbling to find that we weren't nearly as good as we thought we were. We've redefined innovation success as as delivering irresistibly superior experience, an experience so delightful it's hard for the consumer to go back to what they were using before.
To clear this higher bar, products must be meaningfully differentiated. Products and packages must be holistically crafted, where design is fully integrated to communicate and highlight the functional benefits, to deliver a quality experience and most importantly, to make an emotional connection. Delivering irresistibly superior consumer experiences is how we keep our core business and our big brands healthy, relevant and growing. Tide has stayed relevant for more than 70 years by transforming and reinventing itself, offering powders, then liquids, and more recently, UNITOSE. As consumer needs and wants have evolved, we added natural and sustainable options with Tide Pure Clean and Tide Cold Water.
As you heard from Alex, Olay has completely transformed itself, eliminating the signs of an aging brand and delivering outstanding growth. This new definition of superiority has redefined success for what we deliver to the consumers. We're also disrupting how we innovate, leveraging a lean innovation approach to improve the speed and the success rate of innovation on the core business and in developing new revenue streams, either new jobs to be done in our existing categories or new categories entirely. Lean innovation is most easily explained in the context of creating new revenue streams. The objective is to act with the speed and agility of a startup to create the future.
The first step of lean innovation is to fall in love with the problem that we want to solve for the consumer. Then we explore multiple possible solutions with a plan to iterate based on what we learn. The solution process often involves creating minimum viable prototypes, maybe starting with only 10 or 20, testing and measuring their effectiveness with consumers in real life situations. We then apply what we've learned, refine and hone our assumptions. If the project stays on track to meet predefined learning goals, it will be funded to test again until we arrive at the optimal result.
This is basically a pay as you go model. This approach is delivering significant benefits in both speed and cost. We use small, fully dedicated teams that act like owners, very passionate about the work and willing to do whatever it takes to quickly reach the next development step, reducing our learning cycles from months to days or maybe weeks. We have found that metered funding forces real discipline, enabling us to take more shots on goal while reducing the funding per project. Since applying lean innovation principles, we've tripled our end market experiments.
Today, we have over 130 experiments covering all of our categories currently in market with consumers, including 11 that have launched in market. Our lean innovation learnings are also being applied to innovations that are much closer to the core. As we identify consumer problems, we're moving more quickly to solve them. 2 great examples are Pampers Pure Protection and WhisperKoala Overnight Pads. Here is Pama Francisco, President of Baby Care and the Baby Care and Baby and Feminine Care Sector.
Thank you, Kathy. I'm happy to be here again this time to represent our baby care and our feminine care sector. And I'm excited to talk to you about how we use fast cycle innovation to really constructively disrupt the categories that we are in. And let me start with the China Whisper Overnight segment. The China Feminine Care market is probably the toughest and the most dynamic that we have in the whole world.
Here we have competitors that not only have very strong products, but they have very visible features. And our consumer our Chinese consumer is incredibly demanding, not just in terms of quality, but also in terms of trends. And within this market, there is a very sizable segment, which is the overnight segment, which is 20% of the market and actually growing faster than the rest of PAGS business. We only had a 3% share of the overnight segment with Whisper. And so it was very clear that we had to change and we had to change incredibly fast.
Now when you look around the world, there are some common benefits about what consumers want from an overnight pad. And obviously, they want a pad that protects. But with the Chinese consumer, we found there were 3 very interesting much bigger and a much longer pad. The pads overnight pads in China are probably 2 times longer than what you would see here in the U. S.
She believes the longer, the better. And in fact, if you look at the packaging on the shelves, the actual length of the pad is very prominent on the front of the pack. So she knows how long the pads are. 2nd is while she likes these long pads, she's also concerned that they can be hot and stuffy and not very good for her skin. And the third thing that was very unique about our Chinese consumer is that at the time of the month where she's feeling a little bit down because of her period, really little delightful and sometimes quirky surprises help uplift her mood.
And this concept of mood lifting was something that we found quite unique in China. Unfortunately, our previous overnight lineup was not delivering on any of these 3 unique insights for China. So we gave ourselves a challenge and we said in less than 12 months, we need to come up with a holistic proposition designed for the Chinese consumer to win in China. So we put together a team, both our team and our agency creative team, and we put them together on a 3 day immersive consumer creative boot camp. Instead of our normal process, our previous process where we would do the concept, the product and the packaging very sequentially, there was obviously no time to do that.
So we had to do things in parallel and very iteratively, which was incredibly powerful. So within 3 months, we had locked the creative idea, we had locked the product design, we had locked the packaging design and we had agreed the commercial direction. We also did something quite unique, which is we worked with an external supplier to modify our equipment designs so we could go to the market in less than half the time than we normally do. So within actually less than 1 year, 11 months to be exact, we brought to the market the holistic proposition called Whisper Koala hoo hoo, which not only was the longest pad, the longest overnight pad in the market, but it was based on this consumer insight of sleep as deep as a koala because if you know anything about koalas, they actually sleep quite well. So this pad was actually shaped like a koala with koala arms and ears that would wrap around like an adhesive, and it kept her well protected through the night and the pad was incredibly thin and incredibly absorbent.
Now also the choice of the name, Koala HuHu, HuHu actually in Chinese means the sound of sleep or Z. So we call it the Qualahuhu Pad. And in about 6 months after that, we launched Qualahuhu's partner, which is an overnight underwear called Qualahuhu. So we have Qualahuhu and Quala Kuku delivering on the same idea and the same performance and the same delight. So let's take a look at Qualahuhu and Quala Kuku.
So everything again was designed around this unique idea of the sleep as deep as a koala. And you can see the in store execution was very holistic, and it generated a lot of support in store, which was a big source of awareness. Today, we are growing this overnight segment actually 4 times we're growing 4 times the growth rate of the overnight segment since we launched QualahuhuHu and Qualakuku. And it's a great example because at a 50% price premium versus the market average, we importantly have demonstrated that we can grow the overnight segment and we can grow the Whisper share behind it. So another great example in which we really started with a consumer insight for the Chinese consumer, we committed to design to win for the Chinese consumer, and we designed to operate using fast cycle innovation to run at the speed of China.
Another great example that we have on fast cycle innovation, this time from our North America, our U. S. Baby care business is the story of Pampers Pure. So we took a lean approach in which we were able to bring Pampers Pure to the market in less than half the time it normally takes to bring a baby care initiative to the market and with significantly less resources. Similar insight where we started with a consumer in which we found out that among our consumers, most especially the millennial consumers, there's about 15% to 20% of them that really want and have tried natural products, particularly diapers.
But the same amount of consumers also told us that only 3% of them actually make a second purchase or a third purchase because the performance was really not commensurate to what they were expecting. So they felt that they were expected to make a trade off. And obviously, this does not bring the full potential of the Natural segment. So we took again a very, very small team dedicated, as Kathy said, and we gave them the task to really immerse themselves with these consumers. And once again, instead of a sequential process, we did a parallel process in which concept, product, creative execution were all happening at the same time very iteratively with the consumer.
So in March of this year, we launched the Pampers Pure collection of diapers and wipes. Our diapers are crafted with premium cotton, very soft plant based materials and we made it free of the ingredients that this group of consumers told us that they did not want in their products, so free of chlorine bleaching, free of fragrances, free of parabens. Our wipes, Aqua Wipes is made of 99% pure water, also made of premium cotton and has much less ingredients than our regular wipes lineup. Both of them come with a dryness, with a protection and with a cleaning that you would expect from a Pampers diaper or Pampers wipe. And we also developed a communication plan that relied very much on influencer, digital and social.
Here's an example and you'll see it's quite different from what we would normally do on Pampers.
Girls were born early. It was surreal and scary. Once they were here,
I realized
pretty quickly that I had a different perspective. I was interested in more natural products. And as a Pampers scientist, I created Pampers Pure, free of fragrance, no chlorine bleaching, no caravans, and with Pampers leakage protection. No compromise.
This is our in store execution, and you will see the very, very distinctive Pampers Pure packaging as well as the significant amount of displays that we received from our retailer partners was really a major source of awareness and trial for the product. So once we decided we were going to launch this segment, we decided to go fast, we decided to go lean, and I think we've made quite an impact. So since we launched Pampers Pure in the market and you'll see we are the teal line on top, we took over share leadership of the tracked channels in the natural segment overcoming some of our more established natural competitors like Honest and 7th generation within the 3rd month of the launch of Pampers Pure. And most encouragingly and what is most important for us is the total Natural segment since we launched in the U. S.
Has almost doubled in size and continues to grow every month. And the same is true on the share of Pampers Pure. So I'm really confident. I am hopeful that we will continue to appeal to this group of parents who really want the very, very best for their babies in terms of protection and cleaning, but also really not the ingredients that they would not want. And we are right now expanding Pampers Pure in Canada, in the U.
K. And in France, and we will continue to do so around the world. Thank you. Kathy?
Thanks, Toma. I hope you see those are really great examples of irresistibly superior innovation that were created leveraging lean innovation techniques. So many of the rapidly changing demographic trends that John outlined will create new problems for consumers. Take urbanization. Apartments with washers and dryers have significantly higher rent than apartments without that convenience.
So as a result, more and more consumers are choosing to send their laundry out of the home to be done. We're testing a solution in 6 cities brought to consumers by Tide, and we're learning a lot. Another example is resource scarcity, especially water. It's a problem we're working to solve. Let's watch this video on a product that we're testing with Indiegogo, an innovation startup crowdfunding website.
Every year, it takes 1,000,000 plastic bottles and £12,000,000 of CO2 from 100,000 trucks to ship 800,000,000 gallons of water in millions of everyday products. So we can shower 4,000,000,000 times and do 6,000,000,000 loads of laundry. Traveling 73,000,000 miles to bring 800,000,000 gallons to our stores and homes where we already have water. It takes rethinking everything With 10 years of research and over 30 patents. It takes a thin, 2 inch swatch.
It takes removing all the unnecessary ingredients, eliminating 100% of the water, reducing 80% of the weight, and giving you 70% more space, in biodegradable bamboo packaging. Spun layer by layer that lathers and transforms when you introduce it to water. As effective as heavy water based products, but it only takes one little swatch to wash all of this, and these, these, this, and this. Simple, powerful clean for your home and body. Take on a world of waste with DS3.
80% less weight, 70% less space, and 75% less emissions. DS3, enlighten clean. Enlighten your personal care and laundry
So isn't that amazing? I hope you think it's as amazing as we do. The early end market learnings we've received on DS III are significantly influencing our next steps on this innovation. So we've disrupted what superior innovation means and how we're creating it. We're also disrupting our thinking on who we partner with to scale our inventions to do the most good for our brands, our company and for society.
We create some amazing technologies in our innovation process. These technologies are critical to create winning brands but can be very expensive to develop. Many times these inventions are only applied to our P and G products and packages. However, more and more, we are deliberately considering and pursuing external partnerships to monetize P and G innovation in non competing industries and occasionally when we think the benefit of sharing the innovation will enhance value creation and the societal benefit can be meaningful, we may make the technology available to our competitive set. We are creating a revenue stream that can then be reinvested back in the game changing technologies we need to create winning brands.
We're doing this with P and G innovations that provide significant sustainability benefits, and I would like to share 3 examples. First, manufacturers and consumers have voiced a strong desire for more recycled plastics in a variety of industries and products, including consumer goods packaging, automobile interiors, food and beverage packaging, electronics, construction materials, home furnishings and many others. In fact, the Association of Plastic Recyclers has identified £720,000,000 of demand for high quality recycled polypropylene, one of the world's most common plastics. It's a $100,000,000,000 industry requiring new technology to meet a compelling unmet need. Until now, the low quality and high cost of recycled polypropylene have been barriers to its use.
P and G invented a breakthrough technology that removes the color, the odor and the contaminants from used polypropylene to restore it to a virgin like quality resin. This process fully closes the loop in the use of recycled plastics while making it more affordable and more assessable. Now we knew this technology could be a big benefit to P and G, but we also knew it could be a bigger benefit to society. To drive the scale of its application, we licensed the technology to Pure Cycle, which began operating its 1st feedstock evaluation unit earlier this year and plans to open a full scale recycling operation in 2020. We're monetizing this technology for P and G shareholders by making it widely available, and we're helping to revolutionize an industry that reduces waste to our landfills.
Aeroflex or air assist is the second example, packaging which provides a breakthrough in performance and sustainability for both e commerce and bricks and mortar channels. Aeroflex uses 50% less plastic and eliminates the need for bubble wrap to ship. With less plastic, less waste, less mess and lower shipping costs, it's a more sustainable consumer focused packaging solution. We're partnering with Inventure to industrialize, commercialize and monetize this technology. The third example is Influx, a patent protected injection molding technology that provides real time adjustment for mold and material changes.
Using Influx, molders can increase productivity by up to 50% on existing injection molding machines. This process is ideal for most molding applications but is especially advantageous for recycled materials and can help a biomaterial work for many more applications, delivering a sustainability benefit, which is a growing focus for both molders and brand owners. We made a strategic pivot on Influx last year to seek partnerships with press manufacturers in addition to the press operators. This strategy enables partners to share in the installation and maintenance to ensure the technology is applied to the partners' exact specifications. By allowing others to utilize and commercialize technologies we develop will lower costs and unlock value for P and G and improve environmental sustainability of entire industries.
To develop winning innovation in a dynamic world, we are building a culture of disruptive innovation, disruptive technologies, disruptive approaches and finding new ways to innovate faster and cheaper than ever before to deliver irresistibly superior consumer experiences. And now I'll turn it over to Mark Pritchard to discuss Brand Building 2.0.
Thanks, Kathy. Good afternoon, everyone. Mass marketing is being disrupted and P and G's objective is to lead that disruption. There are several trends industry wide. Traditional TV and print media continue to decline and 7 out of 10 people say that ads are annoying.
Digital media now dominates, but 30% of people use ad blockers, which are growing in double digits. And many are cutting the cord completely with over the top viewing and no ads at all. E commerce is growing exponentially and driven more by algorithms and ratings and reviews than by ads. And there's a steady stream of direct to consumer startups, growing users with 1 to 1 engagement, bypassing media networks. The agency world is in flux, with start up agencies everywhere, crowdsourcing models being invented, even consulting firms are entering.
And data, analytics and technology are pervasive, With tech stack, programmatic media, machine learning, artificial intelligence, blockchain, virtual reality and voice soon, I'm told the new CMO is going to look something like this. Now we've started to address this disruption by taking more control. We held digital media players accountable to provide transparent performance data on viewability, audience reach and frequency, bot fraud and brand safety, We're about 90% complete now. It exposed substantial waste and we reduced non productive digital spending by as much as $200 as much as 50% with the big players. So we could reinvest it into better performing media, such as data driven programmatic media, higher reach on primetime TV and even digital audio.
We gathered consumer data on our own platforms, made possible because our brands touch 5,000,000,000 people every day. Our data management platform now has over 1,000,000,000 consumer IDs worldwide. With data that's collected and used in a way that represents consumers' desires for more privacy and transparency, and of course, in compliance with relevant laws. We accelerated performance analytics, hiring our own data scientists and creating new ad tech capabilities such as artificial intelligence and chatbots through access to 275,000 tech companies in our own startup ecosystem. We reduced overall media waste by 20%, while increasing media reach by 10%.
And with this foundation in place, we're reinventing brand building, from wasteful mass marketing to mass 1 to 1 brand building fueled by data and technology. Our goal is to enable sales and share growth, while reducing waste to save $2,000,000,000 to either take to the bottom line or reinvest. And today, I'll talk about 3 of the key actions we're taking. We're reinventing media, reinventing advertising and reinventing agency partnerships. So action 1, reinvent media from wasteful mass blasting to mass reach with 1 to 1 precision.
Now, we still need to reach a lot of people, because billions use our brands every day to clean their clothes, brush their teeth, wash their clothes and wipe their countertops. But data and analytics is facilitating greater precision, so we can remove waste and increase effectiveness. Now in China, 80% of our media is in digital and nearly 30% of our sales are in e commerce. And we have one of the largest data management platforms in the country, which we use for performance analytics and to directly buy most of our media. We get real time behavioral data, which enables us to do propensity modeling, cap ad frequency and engage people when and where it matters.
We've already saved 30% of non productive digital media spending in China, while increasing the number of people that we reach by 60%. In the U. S, we have a data management platform that covers 90% of the population with anonymous audience data, which we combine with purchase data into a data and analytics learning lab. What's this allowing us to do is to move from generic demographic targets like women ages 18 to 49, which is quite broad, to more than 350 precise smart audiences like first time moms, millennial young professionals, first time washing machine owners, so we can reach the right people at the right place at the right time. And what this is doing is helping us stop one of the biggest problems in mass marketing, annoying consumers with too many ads.
Now it's not hard to remember if it's got to be clean, it's got to be tied. But we found that while the average person saw a tied add 3 times a month, the averages hid the fact that too many people were being reached more than 10 times and some as many as 20 times. So we're cutting off that long tail of excess frequency, eliminating 20% of media waste and reinvesting so we can reach more people and it's making the ad experience better for consumers. Now along with media reinvention, we also need Action 2, which is to reinvent advertising. From mass clutter with too many ads to less doing more.
For example, Olayo is running up to 6 different ads at a time in many markets, changing every few months, really adding to the clutter. They decided to do is to focus on 1 high quality national ad and then stick with it over time. So with fewer ads, they started more one to 1 digital engagement with Away Skin Advisor that Alex showed you. This is an AI powered system that enables you to take a selfie, get your skin diagnosed to reveal your skin age versus your actual age, which is a frightening experience, and then get a product regimen and expert advice instantly through e mail from one of our tech startup partners. The algorithm gets smarter with every selfie.
It's actually not an ad at all. It's a useful and engaging experience. And doing less push advertising has led to more pull influencing through talkable branded content. We work directly with professional content producers, so we can create engaging stories. And then we use data and analytics, so we can choose the strongest opinion leaders who start conversations about our brands with their own social media followings.
For example, China Olay developed authentic stories from top celebrities for their No Fear of Age campaign, which Alex showed you earlier. And what they also did is collected 100 Stories from 100 Women for Women's Day, so they can engage millions of people with this talkable content. And it's working. With 50% less push advertising and far more pull influencing, Olay is growing sale in double digits. That's less doing more.
And the shift to more pull content has elevated public relations to a more significant strategic role in how we reach consumers, with less paid media so we can get more earned media. For example, the Super Bowl It's a Tide ad ran once, but it delivered 3,000,000,000 earned media impressions. USOLA's FaceAnything campaign has already generated 5,000,000,000 earned impressions in just a few weeks. And our Olympics campaign, Level Over Bias, helped fuel $10,000,000,000 earned impressions during the Winter Games. Paid media accounted for less than 1% of the views for this content, because others talked about it through PR.
That's less doing more. And reinventing media and advertising has inspired what may be the most exciting part of marketing disruption. Action 3, reinventing agency partnerships, from outsourcing too much of our work to getting our hands on the keyboard. Over time, marketers have steadily delegated too much work to agencies, resulting in too many touch points between brand managers and consumers, and too much project management and not enough brand management. We want fewer project managers and more brand entrepreneurs that are closer to consumers.
That means focusing only on what creates value for consumers and discerning what work is done by P and G versus what's done by agencies. For example, data and analytics is helping us bring more media planning in house, which we're already doing in China and in 4 U. S. Categories. We're doing more media deals in house in multiple countries, negotiating directly with media providers.
And like a start up, we're directly buying more search and social media. We're implementing new agency models such as fixed and flow, where we invest a fixed amount for work that requires experienced creative resources like on big campaigns. And then we supplement that with a flow to the work approach through open sourcing creative as needed for fast cycle creative. For example, SK II has a fixed contract with Publicis for their Change Destiny campaign, along with several specialty agencies and producers who created content such as Marriage Market Takeover and expiry date you saw earlier. And we're co locating with agencies, so brand entrepreneurs can amplify their brand assets with consumers in real time through search, social and earned media in command centers like we have in Singapore, Cincinnati and Guangzhou, hand in hand with local creatives on one side and data scientists on another.
What this is enabling our brands to operate like is more like a start up, working in a seamless way without functional silos. For example, SK II operates with a brand entrepreneur at the center, who works with a hacker or a data scientist, a hipster, a creative designer and a hustler or demand creator, using direct to consumer performance marketing tools with their hands on the keyboard. Now this means we need to reskill employees for this hands on the keyboard world. We've trained nearly half of our U. S.
Brand employees with an intensive externally sourced 5 week training course, and we're expanding coverage during the next year. We're creating strategic partnerships and are acquiring new capabilities. For example, we're forming partnerships with 3rd party experts in data driven e mail marketing, who are also providing ongoing coaching and training in performance marketing. We've already hired several performance marketers from the outside, and we're working to bring in more. And we're starting experiential competitions with multiple teams of 3 to 4 people who compete to achieve the most sales in a 12 week period using direct to consumer performance marketing tools.
Teams create an e commerce storefront and a landing page in just a few hours using third party software services extract smart audiences from our data management platform create, buy and publish ads and offers on social media, search and e mail Then they rapidly iterate between multiple alternatives or AB testing and analyze performance in real time to see which ads or offers do the best. Getting our hands on the keyboard is not only saving money, nearly $1,000,000,000 in agency and production spending in the last 5 years, It's leading to better quality, more entrepreneurship and greater creativity. Marketing is being disrupted and we are embracing it to lead disruption. We're reinventing media to achieve broad reach with 1 to 1 precision, reinventing advertising with less, doing more and reinventing agency partnerships to get our hands on the keyboard. Now I'll turn it over to Janus Kupfelis, P&G's Global Product Supply Officer.
Thank you.
Thank you.
Very good afternoon to everybody. On behalf of all of us on product supply, a warm welcome to this particular event. I am really thrilled of joining you again to update you on how we are transforming our company's supply network. As John Moller shared earlier, I too am pleased with our project with our progress on the beginning since the beginning of our productivity effort. Together since year 2012, we have delivered a cumulative cost of goods sold reduction of $10,000,000,000 including nearly $3,000,000,000 in the past 2 years.
On adjusted free cash flow, we delivered fiscal 2017 and fiscal 2018 at 94% and 104%, respectively, averaging ahead of our commitment of greater than 90 percent. Since 2012, we have meaningfully reduced inventory by $1,000,000,000 through optimizing our supply network from our suppliers, plants, distribution centers, all the way to our physical distribution partners and retailers. We have also significantly improved days payables behind a cash acceleration program that has delivered $5,000,000,000 through a great work on supply chain financing. 2 of these $5,000,000,000 have come in the last 2 years alone. With this momentum, ladies and gentlemen, I am confident that we are on track to deliver our productivity commitments through fiscal 2021.
Our mission remains 1, to continue to create and provide P and G with a sustainable competitive advantage. It is time to develop and continue to enable the next S curve in supply chain that delivers our objective of cost reduction, cash, agility and, dare I say, an unparalleled service to our customers. The last time we were together, it was back in 2020, where I shared with you our Product Supply 2020 vision. I also talked to you through the 5 strategic choices of how we are connecting through a creation of an entire synchronized end to end network that brings together our company, customers, physical distribution partners and suppliers all operating in a seamless ecosystem. Today, I wanted to share with you some of these examples of how we bring these strategies to life.
I would like to start with planning, move to manufacturing, talk of quality and then move to the supply network that is being underpinned by our colleagues. It all starts with planning. We view our planning service centers as the conductors of our end to end supply network, and we want to ensure that our suppliers, production sites, distribution centers, customer logistics work as one team across a seamless ecosystem. We have integrated major material suppliers into our planning service centers across the globe. In North America, suppliers that account for about half of our entire material spend are co located with P and G planners.
Now this significantly improves our ability to respond to fast evolving business need, such as natural disasters and an ever increasing retailer expectations. We are also incorporating customers and distributors into our planning cycles, supporting major initiatives such as the 11:11 event in China. I Planning is our flagship program, which is transforming the way we work by encoding market, human and supply chain behavior and strategies into algorithms using advanced capabilities and analytics. That's planning. Next to manufacturing.
Our manufacturing of the future framework builds on our industry leading integrated work system methodology that has been our approach to systematize operational excellence, dare I say, for decades now. The core principle, total employee involvement, 0 losses. Our supply network is quickly becoming touchless as automation solutions have revolutionized how repetitive work gets done. Touchless, ladies and gentlemen, is a culture, is a culture shift where every touch in the supply chain is being viewed as a loss. The video clip that you see showcases our state of the art manufacturing site in West Virginia.
The autonomous guided vehicles, or AGVs, they are called, or the collaborative robots, cobots, you see may have been introduced into many of our flagship manufacturing sites. What are they? They are 3 d enabled elements, which connect to our digital platforms and they work alongside with people where we are piloting online sensors and measurement devices to eliminate any manual sampling. Suppliers are with us on this journey. At our West Virginia site, we have suppliers' AGVs connected into our warehouse, which is also co located at the site.
These are fully integrated into digital platforms for a seamless transition between the supplier warehouse and our manufacturing operations without any human touch. Okay, planning, manufacturing. Now on to quality. We view quality as a true vector for growth. Our consumer trust us, and we take this responsibility very seriously, as you can see in this example of Pampers.
We have invested in predictive algorithms that map consumer behaviors to reveal product vulnerabilities. We have transitioned from manual quality detection to fully automated online analysis and operational dashboards. We can also now predict when certain components or machinery will fail quality testing and may require replacement. Finally, ladies and gentlemen, our supply network. Our new site at Tablets Station in West Virginia is an example of how we are transforming our entire North America and European supply networks.
We are designing scaled, digitally enabled sites that give us the geographical ability to address any omni channel fulfillment and ensure that we have 80% of products in our largest markets, broadly within 24 hours reach of customers and consumers. In North America, this has proven to be a winning strategy in the face of many, many challenges, such as the tightening of transportation markets and natural disasters that we are encountering. We are also partnering with retailers to step change responsiveness across all of our supply networks. In Europe, for example, we have optimized both distribution and manufacturing infrastructure to multi category operations in optimum locations. What is this doing?
It's paving the way into redefining customer order lead times and full assortment requirements across the region. Based on early successes in both North America and Europe, we are executing similar programs in Latin America, India and with plans to expand into China very shortly. Now all this is being underpinned by our women and men in product supply, who are really embracing these new capabilities. We are leveraging all available data in real time with actionable results. We are automating material ordering, receipt, consumption and return.
We are exchanging information real time with our external partners to operate the supply chain as 1, enabling end to end synchronized network.
And we are
integrating citizenship and sustainability in all that we do. Our product supply leadership model fosters a culture that develops a unique blend of business savviness, end to end supply network mastery and importantly, digital competency. Our people act as business owners who take personal responsibility for their own learning and their own development. Ladies and gentlemen, I'm afraid we don't have enough time to talk about all areas of product supply where we are transforming our work. I want you to know that we are working on many, many facets.
For example, we are actively partnering with our research and development colleagues for the development of breakthrough, new to the world platforms in trends and biosciences. We are also reinventing our approach to transportation, where we are striving for optimized management for our transportation partners. In closing, I would like to tell you that product supply lies at the heart of P and G, confirming that P and G is very much in the business of marketing, selling and supply of noticeably superior products. By being laser focused on our strategic choices, together with our own demonstrating track record of strong results, I am more than confident that we will deliver at least €7,000,000,000 in cost of goods savings in the current productivity program and further and contribute more towards our company's goal of greater than 90% of free cash flow productivity. The next generation of digitization and synchronization will contribute additional savings beyond the current 5 year productivity program that we have.
I want you to be reassured that in product supply, we have the technical leadership, the technical mastery to excel in this digitally disruptive era, while remaining a demonstrable competitive advantage for years to come. I would like to invite Mr. George Churapas, our President for Global Home Care, who will share examples of how product supply transformations are impacting his business. George?
Thank you very much, Yanis, and good afternoon, everybody. As Yanis said, the constructive disruption of our supply chain is creating significant value for our Home Care business. In fact, the superiority of product, packages, retail executions and the investments we're making across many vectors, including marketing and consumer value, are fully integrated and actually powered by the disruption and the transformation of the product supply. The product supply transformation, 1st and foremost, has enabled a significant improvement into our noticeably superior product and packaging in an accelerated way. Here are a few examples.
Through our standardized packing, making and converting technologies and platforms, we have been able to roll out within very few months globally both a major stage of our superior concentrated handpiece liquid business and at the same time our superior proprietary unidose on auto dish. As a result of this, we have extended our global value share trends over the last 12 months. In fact, we have added about 50 basis points for our Handys business, extending leadership, and we have managed to achieve a milestone for the first time ever global leadership in the markets where we play on Autodesk by actually adding a full point of share over this period. We have also developed a new making platform for our hard surface cleaner businesses, which we are rolling out as we speak. This platform allows actually our research and development department to create formulations which are both cheaper and superior in cleaning and versatility versus the competitive offerings.
Equally, Home Care is reapplying baby care converting technologies to be able to provide significant innovation for our Schiefer pads business, differentiating those further from our from the competitive offerings. We are doing this while reducing capital, increasing speed of the lines and reducing dramatically also the materials the material losses. The platform, as I said, brings superior innovation in the marketplace in the next few months. We are deploying a new blind to shape packing technology across our businesses that allows us to create a wider range of bottles without the need of major retooling every time we are changing shapes and sizes. That allows us to be able to respond a lot faster and much more affordably against the consumer needs and, importantly, the evolving needs of customers and channels.
It allows us to be able to create demand in store in a much more holistic way by leveraging more convenient case formats, self ready packaging, secondary packaging and also exceptional on- and off the shelf executions. Here you see some of those. Specifically, for the growing needs of e commerce, we have created what we call ship in own container executions. Those executions are, by definition, allowing us to do 3 things. 1 is they are definitely allowing us to ship without interventions across the different supply systems from P and G to the customer to the consumer.
2nd, the consumer gets a superior and more delightful experience. And third, these are evidently a lot more sustainable solutions. In summary, those innovations create cost and cash efficiencies for home care by being able to reduce capital, by being able to reduce investments, increasing line speeds, reducing changeovers, actually reducing the need for staffing and even allowing us to use space more efficiently into our manufacturing facilities. We have already begun to apply those technologies beyond Home Care on the rest of our businesses like Hair Care as well as Personal Care. Home Care has also implemented a new manufacturing capability that allows us to deliver both best levels of process reliability, allows us to improve quality standards and actually allows us to improve customer service.
As a result of this, we are able to serve customers more efficiently. One example is our participation in the supply chain in the responsive network for customers in North America, where our products are able to be shipped within 24 hours to all the customers. We are also delighted that we are participating one of the first units allowing us to expect allowing us to expect and receive higher customer support installed. The work we're doing to support to transform our supply chain is critical to the success of Home Care. Fiscal year 2018 was actually the 12th consecutive year of organic sales growth for home care.
The segment in which we compete, this air and surface, are all growing currently between 3% 5%. These are very healthy level of consumption. And P and G Home Care is actually growing share across all of the time periods. Growth is in fact accelerating. In the last quarter, we have been able to deliver strong middlesingledigit growth sales in sales and also leveraging the topics discussed above as well as innovation, which is truly demonstrating ability to create new consumption for our categories and our brands.
Hopefully, these examples demonstrate how disruption and transformation of the supply chain is creating for home care and for the rest of the company a competitive advantage for now and for years to come. Now I will hand it over to Javier Politt, PNG's Chief Information Officer. Thank you very much.
Thank you, George, and good afternoon, everyone. You heard earlier about how dramatically the world is changing, and nowhere is that more evident than in technology. It is literally transforming the way we compete, and today, all companies are technology companies, and the line between physical products and digital products is clearly blurring. And consumers expect, they even demand real time digital relationships that are frictionless. And we at P&G are meeting that need, leading the application disruptive technologies to the development of connected consumer products.
And we're eager to show this. For the first time, P and G will be present at the Consumer Electronics Show in January. CES for 50 years has been a gathering place where leading innovative companies come and share their future roadmaps on technologies, and they share with business leaders and pioneering thinkers. And our presence is going to demonstrate for the first time that we are going to start sharing our future road map the same way that technology companies do. And I'm excited about what we're going to share at CES, and I'm excited about the opportunity to talk to all of you today how we're leveraging technology to transform the way we serve our consumers.
So when I think about data, data is at the heart of our strategy. Today, we're enabling, we're optimizing, and we're transforming the foundation that already exists to create disruptive capabilities. And we're standing up data hubs in our businesses to capture petabytes of data, millions of gigabytes that are relevant to our business leaders, so we can make better decisions. And we are gleaning unique insights to solve big business problems. And what we're doing is we're embedding those skill sets into the business to be able to accelerate some of the decisions.
And this is happening in every region, spanning business units and brands and across our internal work processes. It has always been and always shall be about the consumer. And the what has not changed, but the how we drive superiority has changed significantly through insights and actions that we take today. And the consumer is still at the center. And our ambition is to understand the consumer and serve the shopper better than anyone else in our industry.
And data and analytics and technology are core to helping us do that. This covers a little bit about how we think about our data strategy, and I want to share a few examples of disruptive work we're doing in our categories and our regions. Superiority starts with products so good that consumers recognize the difference. And we're applying data and analytics to remove friction so consumer does not need to figure out what or how they need to order. They want to be focused on personalized recommendations, auto dosing and replenishment capabilities.
And one great example that Alex and Mark discussed is Olay's Skin Advisor, which applies artificial intelligence and machine learning to help women find a skin regimen specifically designed for their unique needs. And another great example is the Oral B Genius toothbrush. Consumers can download an Oral B application to their smartphone and connect it through Bluetooth technology to get real time feedback on their brushing habits. The oscillating, rotating, pulsating brush heads provide consumers with the best clean, while the app makes sure that we're spending the right amount of time and covering the mouth equally to get a good clean. As it is innovative as it is as innovative as it is effective, more than 80% of people today that are using the brush realize an improved oral health hygiene in less than 6 weeks.
And we're excited about the Oral B work that we're doing, and we're going to be sharing a lot more of that at CES. But it is clear that our data science work continues to enable superior consumer experience personalized through deeper insights, which further informs our future product design. Let me give you a few examples of other work going on in our regions. As Mark mentioned, we're using data science to transform the way P and G does marketing. The data science algorithms use consumer and shopper data to optimize our audience selection.
Data and algorithms allow us to be surgical with the audience we target, making us more efficient and effective. And to make sure that we are serving the right product message to those most likely to buy, resulting in 2 to 3 times our normal conversion rates, driving top line sales, media savings and bottom line growth. And with dramatic improvements in efficiency and effectiveness through the optimization of our reach and frequency across linear TV and addressable channels. An approach we have successfully leveraged in United States, Europe, China and Asian Pac regions. Shifting to superior retail execution, we launched a program called Neighborhood Analytics in the United States, Europe, Latin America and Asia Pac.
This program gives us the ability to use data and analytics to better ensure the way we are precisely serving at the right stores down to the neighborhood level with the right shelf sets in placement. Using a proprietary algorithm, we work with our retail partners, we combine store and sales performance data with anonymous demographic and lifestyle data. Slide that you see behind me basically shows the work that we did in the U. K. We overlaid data about category development with sales and demographic strength data.
It basically gave us an opportunity map, so you knew what stores to target down even to the store and shelf level. By knowing precisely where and how consumers are shopping, we can better optimize our distribution, our merchandising, shelf sets, target sampling and marketing. The result is better consumer experience and category growth in our stores. In China, we created a platform called GoldenEye, a program where we leverage crowdsourcing and artificial intelligent methods to better analyze our stores. Previously, we've been using partners to mainly do this in about 200 stores.
With Gold and I, we brought those capabilities in house and now capturing and analyzing more than 1,000,000 images a month from 40,000 stores in real time using image recognition technologies. So we're driving faster insights, suggesting priority interventions in our stores that will help our retailers as well as P and G. And we're activating and personalizing recommendations to our account executives in regards to this work directly to the smartphones. And none of this work that I shared with you today would be possible without our team. Some of them are P and G IT veterans, other external hires like myself that brought in with specific skill sets, and many are experts in the business units.
And coupled together, we bring business and technological expertise. And we have been purposeful about establishing these capabilities in house. And related to data science and other technologies, we continue to push this capability. These are people that have hands on keyboards and are really focusing on the consumer. Together, they're relentlessly solving some of our biggest business challenges.
And beyond the work that I've shared already, they're focusing on broader things such as our global network modernization. We're focusing on the cloud migration and making certain that we have the latest cybersecurity platforms and technologies to safeguard our systems and our operations. These examples I shared and all the work that we've across IT is relentless focus on delivering value in form of top line growth, bottom line growth and cash. And this is helping us to deliver superior consumer and customer value. And in closing, technology is changing at an exponential speed, leading us to have a 360 degree view of our consumer, helping us to interact with her or him in a more contextual and relevant manner.
And our focus is very, very clear Through technology, with a purposeful IT strategy that is woven into the very fabric of our business, we are constructively disrupting our business and solving business challenges and transforming the way we serve and delight our consumers and with much more to come. So thank you. And now I'll turn it over to David.
All right. We're on the home stretch. The constructive disruption we're leading in all areas of the value chain is critical to the future success in this dynamic world. We must be and are willing to change anything, and I've said it many times, and everything needed to win, including our organization design. The only things that will not change in this company are our purpose, our values and our principles and our commitment to winning and delivering results.
And John outlined some positive changes we've already made, and they're contributing to the stronger results. We are operating through a stronger and more focused portfolio of 10 product categories. We've streamlined central organization and moved resources closer to the consumers and the customers we serve. We supplemented our internal talent with skilled, experienced external hiring and improved category dedication and mastery. We strengthened compensation incentive programs.
We've also made changes to how we operate in markets. Since our last major reorganization in 1999, product categories have had responsibility for innovation, manufacturing and marketing and full profit and loss responsibility, but had little influence over direct selling, which was owned by the SMOs. Over the last several years in our largest market such as the U. S. And China, the categories have taken partial ownership of sales staffing, giving them more end to end responsibility.
In smaller countries, where it doesn't make economic sense to have fully staffed organization for each product category, we began implementing what we call a freedom within a framework approach. The intent was for these markets to execute within predefined strategies to deliver the plans set by the categories. As long as they were on track to deliver these plans, they had freedom to make executional changes without the need to engage category leadership. And we've learned a lot over the last 2 years while operating with this new approach, and it's helping us to improve results. However, we can and will go further.
What's clear is the current structure that does have three-dimensional matrix of GBUs, SMOs and corporate function, now 20 years old, still creates some complexity that impacts our ability to meet the demands of consumers and customers in a rapidly changing environment. Today, we're announcing a new structure designed to dematrix the company and provide a greater clarity on responsibilities and reporting lines and to strengthen leadership accountability and enable P and G people to accelerate growth and value creation. Starting year effective July 1, 2019, P and G will operate through one axis of industry based sector business units led by the sector business unit CEOs who will report to me. Fabric and Home Care, led by Shailesh Jhajarikar, baby and fem care Feminine Care led by pharma Francisco, Family Care and New Ventures led by Mary Lynn Ferguson McHugh, beauty care led by Alex Keith, grooming led by Gary Coombe, healthcare led by Steve Bishop. Within these SBUs or sector business units, we will manage the 10 product categories.
Each of the SBU CEOs will have the latitude to decide how they staff to win in their categories. The SBUs will have direct sales, profit, cash and value creation responsibilities for the largest markets, which we're calling focused markets or focused markets. That includes the U. S, Canada, China, Japan, U. K, Germany, France, Spain, Italy, Russia and some smaller adjacent countries accounting for about 80% of company sales and 90% of after tax profits.
These SBUs will have responsibility for all facets of the business for the focused markets, consumer understanding, product and package innovation, brand communication, selling and retail execution, and supply chain. In fact, we'll change reporting lines for between 45,000 people in sales and supply planning, officially moving them to report directly into the SBUs. In each focused market, we will have markets operations that provide scaled market services and to represent the company externally. Importantly, the SBUs will determine the optimal level of services needed to efficiently support their businesses. The SBUs will also retain responsibility for global strategy, innovation and supply to ensure winning results worldwide.
And we are consolidating profit responsibility for the remaining markets, which we're calling enterprise markets, into a separate unit with sales, profit and value creation responsibility. The SBUs will provide innovation plans and operating frameworks to drive growth and value creation in these enterprise markets. The intent is to give these markets execution freedom with just enough framework. John Moller will have responsibility for these enterprise markets and will further expand his responsibilities to include the operations side of the company reporting to me as Vice Chair, Chief Operating Officer and Chief Financial Officer, including focused market operations, global business services, which are viable to the scaled services and functions that support the operations of the company. We are significantly reducing the level of corporate resources, completing the move that I've talked about previously of moving about 60% of our corporate roles to business units and markets.
We will retain a core set of corporate resources needed to sustain the ongoing health, viability and sustainability of the corporation, including back office services, governance and stewardship in some areas that require very high technical mastery. In particular, we will retain corporate R and D that invents upstream platform technologies, you heard about some today, to benefit multiple businesses and to get us into entirely new businesses. We are further solidifying these changes with a new approach toward talent management. Talent development, staffing, promotion, performance appraisals and pay will shift from being managed by the functions to being managed by the business units. This enables business units to develop and apply the knowledge, skills and mastery needed to succeed in their business against local and multinational competitors.
It also eliminates the complicated approach where multiple people are involved to make a staffing move. We see important benefits from this approach. We see more opportunities for better value creation in both focused markets and enterprise markets with this new design. The sector business unit CEOs will have more focus on innovation, commercialization and value creation opportunities in the most important markets. More than 80% of total value creation will come from these focused markets.
Modestly faster growth in these big profitable markets can and will create significant value. The enterprise markets often demand a significant amount of time and attention from business unit leaders due to the unique retail dynamics and market specific volatility like currency shocks and policy driven disruptions. Having dedicated enterprise market leaders who are closer to the market and giving them more freedom to operate will enable them to deal with the challenges and more quickly take advantage of opportunities for growth and value creation. We will have a much simpler management structure and reporting lines. The sector business unit CEOs will report to me along with governance functions, legal, HR, finance and diversity, and innovation functions, R and D and brand.
John will continue to report to me with responsibility for operations, including enterprise market and focused market operation presidents, along with global business services and function resources that support the operation side of the business. Now we understand that some of you may be skeptical as this to the significance of these changes. We believe this is the most important organizational change we've made in the last 20 years. The design eliminates the three way matrix and moves to one axis, sector business units. Sector business units will now have full end to end responsibility in the large markets.
Evidence that this approach can work, coupled with our focus on superiority, is in the US, where we're furthest along and showing improved results. All resources that have business unit specific roles will be in the business, including those that are moving from corporate functions, which will be reduced by 60% when completed. In the enterprise markets, we have more freedom to capitalize on opportunities and the profit and loss responsibility that goes with it. To summarize, we'll have a more engaged, accountable and agile organization operating at a lower cost, focused on winning with consumers through superiority, fueled by productivity and operating at the speed of the market. Now before we wrap up and open it up for questions, I do want to take a few minutes to talk how we will continue to actively build strong citizenship into how we deliver our business results.
In this area, our aspiration is very clear. We want to be a force for good and a force for growth. We know that the more we integrate and build citizenship into how we do business, the bigger the impact we can have on the people we serve, the communities we live and work in, and the broader world that surrounds us. In turn, that helps us grow and build our business. We continue lead in each of the four areas of citizenship where we've determined we can have the greatest impact: communities, diversity and inclusion, gender and quality, and environmental sustainability, all executed with a strong focus on ethics and corporate responsibility.
In the area of community impact, our Children's Safe Drinking Water program delivered more than 1,000,000,000 liters of clean drinking water last year and has provided 14,000,000,000 liters of water to those who need it most since this program began in 2004. Through our diversity inclusion focus, we've increased our internal representation of women now at 46% of all P and G Managers globally, and we increased our US representation and workplace satisfaction of African ancestry, Hispanic, and Asian Pacific American employees. Externally, Gen Z, Millennials, Gen X, and even boomers today want to see and understand what brands and companies do, what they believe in, the people behind them, their values, and their points of view on relevant issues like equality and the environment. Our leadership brands can impact these areas with their wide reach, so we're using our brands' voices for good And in a way that's good for growth. We've shared some of it today.
We've used videos like The Talk, Love Over Bias, and The Words Matter to spark important conversations that motivate positive change among racial, ethnic, sexual orientation and identity, disability, and gender lines, potentially the most positive example of constructive disruption. These ads have had outstanding and received outstanding third party recognition. Each of these ads won awards at the 2018 Cannes Lions International Festival of Creativity. In fact, The Talk won a Cannes Lions Grand Prix Award, a top honor, and also won an Emmy Award for outstanding commercial 2018. Specifically, on gender equality, the Always Like A Girl campaign is launching its 5th chapter and has changed attitudes on gender bias, with 76% of people who've watched the ad now considering the phrase like a girl a positive expression versus only 19% before watching.
And importantly, the brand has been growing share, sales, and users since the start of the campaign. Some of P and G's best performing brands have the most gender equal campaigns, including SK 2 Change Destiny, Olay Live Fearlessly, as well as Tide, Don, Swift, and Ariel, which show men sharing the houseworkload like in this ad from Ariel France. On environmental sustainability, we innovate and deliver product and package superiority in ways that are good for the planet and good for business. Our brands solve everyday problems for people, but they use water and energy to manufacture, transport and consume and can generate unwanted waste after use. So we ask, what if our brands could have a positive impact on the environment by promoting responsible consumption, reducing, renewing and recycling water, energy and waste just by consuming our brands.
It would be good for consumers, good for the planet and it would drive growth. For example, what if using laundry detergent could help save energy? Ariel designed formulas to deliver clean clothes and cold wash conditions, lowering energy usage because 80% of a washing machine's energy consumption comes from heating the water. Switching to cold water cleaning for a year can save enough money to charge your mobile phone for a lifetime. And Ariel's cold water cleaning products are growing double digits, one of the key drivers to Ariel growing sales 5% worldwide.
What if we found a way to turn beach plastic into shampoo bottles? We've done that with Head and Shoulders and Herbal Essences. Our objective is to convert our European bottles to 25% post consumer recycled plastic from beaches and other sources, reducing tons of new plastic every year? And what if products made with more plant based ingredients actually delivered superior performance? We have a growing list of examples now, Tide Pure Clean, Gain Botanicals, Herbal Essence Spy Renew, Whisper Pure Cotton, Pampers Pure Protection and Native Deodorants.
This is where I think our scale can drive big sustainability outcomes. Think about it in terms of P and G's business. We serve about 5,000,000,000 consumers and have operations in more than 70 countries. With our global reach, our understanding of the consumers we serve, and our innovation and supply chain capabilities, we have a unique ability to make a positive difference for our consumers, our society and our world. We can help protect our world's natural resources, and we can do so while delighting consumers and growing our business.
This is what's behind our new sustainability goals, which we call Ambition 2,030. Ambition 2,030 aims to enable and inspire positive impact on the environment and society while creating value for the company and consumers. Our ambition 2,030 goals span our brands, our supply chain, society, and our employees. By 2,030, 20 leadership brands will enable and inspire responsible consumption through packaging that is 100% recyclable or reusable, ingredient transparency on 100% of our brands and launching more sustainable innovations. Our sites will reduce water efficiency by 35% and source at least 5,000,000,000 liters of water from circular sources.
Manufacturing sites will cut greenhouse gas emissions in half and purchase enough renewable energy to power 100 percent of our plants. We will continue to create transformative partnerships that enable people, the planet and our business to thrive, including using more recycled plastics, protecting and enhancing forests, expanding recycling solutions for absorbent hygiene products, and protecting water in priority basins around the world. We will engage, equip, and reward employees for building sustainability thinking and practices into their everyday work. We will reward progress and integrate recognition into performance appraisals, and we're being recognized for this leadership in sustainability, including the Dow Jones Sustainability Index, the FTSE For Good Index, the Arbor Day Foundation, the Forest Stewardship Council and recently the EPA with their Green Power Leadership Award. Now as I hope you can see, we've built citizenship into the business versus making it a separate effort.
And it's not only doing good, it's building trust and equity with consumers and driving growth and value creation for shareholders, a force for good and a force for growth. The work P and G is doing to be a constructive disruptor across all pillars of citizenship is the best demonstration of our commitment to living out our purpose, values and principles that are foundation the foundation upon which this company was built and have been our guiding force for more than 180 years. Now, my hope is this discussion throughout today has helped you understand our view of the world that we're operating in, the changes we've already made to deliver improved results, and the work we're doing to constructively disrupt ourselves and our industry to position P and G for success in the future. I'm going to end where I began. We are defining winning as consistent, sustainable, balanced growth and value creation.
Our long term growth algorithm is aimed at delivering organic sales growth modestly ahead of the underlying growth of the markets where we compete. Our markets are growing currently 2.5% to 3%. We want to do a bit better than that consistently. We're targeting long term core earnings per share growth of mid to high single digits, which requires annual margin expansion of 30 to 70 basis points each year, depending on the top line results. And while we'd obviously prefer to deliver the high end of the range every year, we feel this range reflects the volatility of market growth rates in the macroeconomic environment.
This range reflects our intention to maintain strong investment in the business to support top line growth, including in periods where macro factors like foreign exchange or commodity costs are working against us, like this year. We expect to turn these earnings into strong levels of cash generation, delivering free cash flow productivity of 90% or better every year. Consistent, sustainable, balanced growth and value creation. Thank you very much for your attention. And now, we'd be happy to answer your questions.
John will come up and join me. Our Vice Chair, Chief Operating Officer, and Chief Financial Officer will come up here.
Maybe.
Nick Modi from RBC. John, congratulations on the new appointment. David, just thinking about this, you called it the largest reorganization of the company since in the last 20 years. How do you think about this transition? You have pricing, you have a lot of volatility going on around the world in some of your key markets.
Seems like a lot of stuff to do in a, I guess, over a 12 month time frame. So maybe help us think about how you transition into this new structure.
That's great. First, I like the fact that you asked me why we're moving so fast versus so slow. So this is already a great start to the Q and A. Many of these changes that we're making are continuations of the direction we're moving. I've talked before back in CAGNY 20 16 about more end to end and more freedom within framework.
So we're going further in directions we have been going in the organization's embraced and is moving that way. There are still additional quest additional moves we're doing to further accelerate it, but it's to address the outside world. We didn't ask, what do we think we can do? We asked, what is required to win? And what I've seen throughout the last couple of years is the organization rises to meet that challenge.
And so in both of the areas, it's accelerating things that we're doing. And then the other change, big change that we mentioned is the talent management. It's in to support the changes we've made because at times, even though we've done many things to reduce the interaction that may be duplicative, We still had, in some cases, multiple people that had to be involved, in some cases, multiple people that had to say yes, but one can say no. We're being very clear, making a choice so that the businesses we operate through these 6 sector businesses, we set up the company to support that, the operations to support that, the talent management to support that and the market services to support that, but also recognize that there are differences across the markets. Because a lot of that exists and we've been moving in that direction, I believe we can do that and do that very well.
Our priority is to deliver our commitments and to do this so that we're set up to deliver next year and the year beyond. And we've learned a great deal the last few years as we've moved in this direction, and we've been working and we continue to work with the leadership team, and we'll work deeper in the organization to make sure we execute this while delivering this year and next. John, you're going to have to pick lots of hands.
Thank you. Olivia Tong from Bank of America Merrill Lynch. So obviously, lots have changed, but the targets are still the same. So is the is it just that much harder? Is the cost of doing business that much higher?
Can you just give a little bit more color on how we end up at the same targets? And then I was also struck at 2 things. Number 1, leaving Mexico and Latin America out of the focus market. So if you could give a little bit more color on that? And then in your brand and product discussions, we didn't talk about diapers.
So given that, that has been a big focus category, if you could give a little bit more color on that, that would be great as well. Thank you.
Okay. Many questions here. And maybe we're going to do the multiple questions here. We'll get one and then we'll make sure we get the compound questions. 1, why did we change our targets?
First step is to deliver our targets. And to me, what we're working hard to do, and you saw progress in the Q1, is we want to get back to growing share in a constructive way and deliver strong bottom line and cash flow. And you all have been very open about the inconsistency we've had over a number of years. So step 1 is to make progress and continue to make progress every quarter.
One of
the reasons we share, and frankly, I feel good about these multiple year charts, what you're seeing is the focus on getting each brand in each market better is helping. But we also recognize there are many forces out there, including foreign exchange and commodities, and what we're doing is work to do the best we can. And I think the Q1 was a good demonstration of strong progress, but there are a lot of things. We're now taking pricing in many markets. We'll have to see how the market responds to that, and certainly, we'll take appropriate actions.
But our aspiration is to get back to winning and to delivering consistent growth above the market growth rate and to getting back to deliver in the mid to high single digits. As we said in the prepared remarks, we want to be at the high end of that. But again, if you look over time, that hasn't happened a lot in the last few years for a lot of reasons. So job 1 is to deliver those targets. And I think that's the appropriate way to approach it.
The second question, was around Mexico and Brazil and why did we make those focus markets. Depending on which category you look at, there's a number of countries that are more important than others. But what we looked at is for the all of Latin America, we looked at what is the best way to operationalize the change into some degree to address the comment that Nick made, which is what level of change do we think is appropriate and how can we best operate in a way when you turn it into an action. And we thought keeping it together because while Mexico and Brazil are very big and important, if you look at the trade structure, it still has many distributors. If you look at the volatility of the market, be it currency or other dynamics, it still has characteristics more similar to enterprise markets.
Now, it doesn't mean if it's enterprise that it won't get appropriate focus if there's value creating opportunities. If you recall, when I said what the sector business units are responsible for is the global strategy, global innovation and supply chain. They're working to maximize value contribution. And certainly, when you look at some of the bigger markets that may be in the enterprise markets, there'll be appropriate connection to make sure they support. The change, which I think is important, is we've learned a lot of freedom with their framework, where we're making very good progress in the pilots we've run.
But what we want to do is give more freedom. And so we've opened up the P and L for the enterprise markets so that they have much more agility and less transactions. So again, I think this can work very well. It's a build on what we've done. We've got very good success in the pilots that we've run the last couple of years with a modest amount of flexibility.
So we're given the enterprise markets more, and we will address bigger markets in enterprise. But recall, 90% of our after tax profits in the focused markets, and value creation is the top priority here. Diapers. Diapers, okay. First, we did talk diapers, Pampers Pure.
So we did do that. And beyond Pampers Pure, we're also working in each the challenges. We've talked to them before, whether it is in China with our mainline product or whether it is in Europe where we had some product quality issues that have been addressed. Each region, each country, the same formula that we used in the other categories were taken. In baby care, it is taking longer, and we've had to make some significant equipment changes.
And because of that, the time frame is a little different than others. But I think the progress made in Pampers Pure is a good indication of the speed that we can move at. And to me, there's many positive indications, but we're not yet where we want to be. As John mentioned in the opening comments, whether it's 8 of 10 categories holding or growing share or 9 of 10 that are growing sales, we didn't say all of them. And at any given time, there will be some that have a competitive issue or have a challenge in our execution.
We're going to address it. And what we're doing is investing to make sure our product is right, our package is right, our go to market capability. And there are many positive sides, pants doing very well, Premium taped, making very good progress. We still got some work to do to make sure we address the middle of the market or the mainline side. And right now, Fahm and her team are all on this right now in the key markets.
Somebody, wherever the mic is, please stay in. Somebody.
Hey, thanks guys. So a lot of good progress. I want to see how you guys could talk about mitigating 3 risks here. One is, much of what we heard was about SKU increases. So you've gone through this period where you cut a bunch of SKUs, cut a bunch of portfolio.
How do you mitigate the risk that you repeat the mistakes of old, which is just tumor SKU proliferation? That's 1. 2 is Sorry, you can write down. I'll repeat
at the end if
you want.
2 is, in many areas, whether it be Gillette and otherwise, you talked about expanding the price tiering, both up, but certainly downwards as well. And so what's the risk there from a margin perspective or price mix perspective? And I know John is going to talk about we have been having positive pricing for a while, but it's been massively below the inflation FX and that gap is getting worse.
So how
do we think about the risk of price tiering impacting downwards on that?
Let's get 2 and then you get the 3rd, 4th and 5th here. First, on SKUs, each category has got to decide what they need to grow value. And what I don't want, and frankly, one of the reasons we're running through one lens, which is the sector business unit, is they need to decide what's required to win and create value. I do agree. If you go back and look at the data, we did go too many SKUs.
We've taken a lot out. At the same time, they have to be responsive to the needs in the market. And in some markets, there are fast growing segments that we think aren't fads that are real, some of the natural moves, and we're addressing those. Now we want to address those. And even if you look at Pampers Pure, it's not with 50 SKUs.
It's with a focused portfolio that addresses the both the performance issue and with the free of or full of dynamic that is needed. In grooming, and this takes a little bit of the first and the second question, We've had a full ladder, although from double edged up to premium systems. What's different about that, and to me this is an appropriate choice the sector made, is we need to innovate on all where we primarily only innovated at the top, and we've lost a lot on the lower part of the portfolio. In the end, the total business wasn't growing, and we didn't address some emerging segments that may have needed a different entry price point package or consumer user experience. And again, now Gary talked about, here's what we're doing to address that.
What I want is each one of the sector business units to define what it takes to win and create value. If it's a little more SKUs because that's right because of differentiation or serving a group of consumers segments that are growing, That's okay. What we don't want is absence of meaningful superiority, brands and products that are meaningfully different. And instead of that, have a bunch of line extensions that just give you more shelf space that last maybe a year, often 6 months. But we'll see if in a year, Pampers Pure is still on the shelf.
We've seen what happens when we came out with the beads. Those grow and continue to grow because they're meaningfully better than the best competition. So to me, the bar that you ought to challenge us on, and frankly, we're challenging ourselves, is the product meaningfully better. And to me, that's what underpins this whole superiority strategy. It's not proliferating the kind of SKUs, is if there's a meaningful segment, serve and you can create value, serve it, but serve it with something that's enough better that it will last.
If that means there's some more SKUs and it's sustainable, that's fine. We're not having an artificial goal that you can't increase more than 3% the SKUs because of what happened. We're learning from the past, but we are not encumbered by the past. We're looking for what it takes to win in the future.
I would just build on a little bit of what David's, talking about. I do think that superiority, in addition to all the obvious benefits, is the governor. And it's not just product superiority that David was talking about. Go to market superiority. I mean, when you over skew that shelf, you do not have a superior shopping experience.
So clear focus on both of those things, I think, will help on exactly the issue that you raise, appropriately so. On pricing, I think there are many reasons to be optimistic and positive, and then there are some watch outs, and we'll have to see where that nets out. Reasons to be positive. A lot of the innovations that we talked about that our colleagues talked about that are growing markets and growing very rapidly, whether that's beads, whether that's pods, whether that's adult incontinence that Jen talked about, those are premium priced items. So that's one reason to for optimism.
If we look at some of the markets that we operate in, we've talked about China as an example premiumizing very quickly, another reason to be positive. If we look at so far the competitive dialogue and experience on their own need to price, that's a positive. Now what are the negatives? The negatives are, and I've been very clear about pricing, introduces volatility, and it has an impact on markets, and we're going to have to see where that nets out. I don't have a crystal ball that allows me to see that.
Private label in some markets and the retail transformation that I talked about in our opening remarks, which drives sometimes a disproportionate focus on private label and have an impact on category pricing. Net, as we stand here today, I'm I continue to be positive as you predicted I would be, but it's there's puts and calls.
Thanks for those. The so just my last one is, again, one of the risks. Much of what we heard from a constructive disruption perspective that I think is the right way to think about it is about disaggregation of your scale. So descaling, right, whether it be the brand entrepreneurs or getting the outside consultants that Fauma talked about for pure manufacturing or increasing employee ownership or even the SBU, the sector business units now. How should we think about that?
What does that mean in terms of your advantage of being big? What does that mean in terms of your ability to fight against smaller players who are inherently already small and descaled?
Sure. First, I didn't say we were going to be small. In fact, if you look at the choices we've made is we have scaled market services in the SBUs and the focus markets who will look at what they need, but we will have a market leader that can work with customers and you're still P and G. So if you show up to Tesco as P and G and we have a customer team leader that can show up Walmart, Target, Kroger, as P and G, we're able to still carry P and G scale. If you looked at the supply system that Janis talked about, we have the scale of P and G, and we're able to leverage, whether it's new plants or the automation that we're able to generate because we can monetize it over the 6 sectors, which are playing in 10 categories.
So we're working very hard on trying to get much more agile, but still keeping, to me, the critical part of our scale advantage. But what I didn't want, we do not want, is scale is not the objective. This objective is being agile enough to win, but there are tremendous opportunities not to descale the company by going and saying you don't have a market leader, so the 6 sectors will independently go to Tesco or go to whatever. We still have a market leader because we've chosen that, that provides an advantage. The choice though is the sector business leaders and senior leadership will get together and say, what are the services you need?
And I take a lot of confidence and encouragement from what we've seen in the U. S. We did not have the results we wanted. They've been working against this end to end in a very smart way. There is a market leader that's done a beautiful job working with the external audience, be they customer CEOs or other key stakeholders to leverage the scale of P&G, create an environment where the categories could go in.
And she calls it the superhighway. We want you to be able to get there with an advantage versus anybody else. But what we need when you get to selling at the buyer's desk, category mastery, expertise, superior products and propositions. To me, that's a wonderful combination of the scale of P and G in many ways in the back office, our Global Business Services, that scale of P and G that small companies don't have. So I see many advantages, and we're going to try to get that balance right.
I do believe, and many have highlighted, we had a period of time where we were not fast enough, period. We're addressing that.
I think as well, in some cases, agree completely with David, that scale for scale segment is not something that we're interested in. Some of the disruptions we're talking about are enabled by scale. Mark's ability to work with our digital and social media providers and literally change that landscape in a meaningfully important way would not have happened without the buying power and purchasing power of P&G, which we actually had to use and to get that change affected. I know working closely with Javier, our ability to attract top notch innovation from the digital ecosystem that wants to be part of our success would be very different if we were a smaller company. And that doesn't mean that size is always good and there's some again, scale should not be the objective in itself.
But I wouldn't similarly, I would not look at it as a universal negative. It's a huge positive in many of the things we're trying to accomplish.
Next, somewhere. Microphone, it's okay.
Kevin Grundy, Jefferies. So David, two questions, both on the U. S. Market, if I may. First is category improvement and the second one would be on Fabric Care.
So category has accelerated up to about 2.5%, 3%, U. S. Being your largest market, obviously, at about 50% of profit. Talk about the largest factors driving that category improvement and maybe your visibility on how sustainable those factors are given the importance to the algorithm. And then the second piece, your biggest business in North America, U.
S. Laundry, where Henkel's had some success with Persil, largely coming at tides expense. Can you talk about your commitment to price discipline? It's a category where we've seen episodic price wars over the years. And if I'm not mistaken, this is a category where you have not discussed taking price yet at this point.
Maybe you want to comment on that. And then how you intend to restore market share with Tide specifically in liquid? Thank you.
Okay. I'm going to make a John, can
we get a mic We got
a mic for Shailesh. For help us. Let me first address broader US, but then I'm going to ask Shailesh. We've got the the sector president right here. On the broad U.
S, to me, there has been tremendous improvement for several reasons. And frankly, I've got many of the people right in front of me that have led that. And it's been a combination of adopting this end to end where we have the businesses owned all the way to the buyer, making sure you've got a winning proposition. And we've created and taken advantage of the fact that we have the ability to meet with very senior leaders and our customers. Importantly, we declared that the US was a top priority.
And therefore, each of the organizations made sure they had superior products to win in the U. S. And made sure on each of the elements, and we weren't. And in many cases, because of the expansion, and we've talked about it before in many parts of the world, if you go back a few years, we were under supporting our US business. And so we said top priority was you must grow in the US.
It is our home. It's over 40% of our sales, even more than that of profit. What you've seen over the last couple of years is consistent improvement in the US, as each business said what is required to win on the superiority and then implement that. That with the choice to dedicate more salespeople. We've added, Carolyn, how many, 100 and 200 salespeople in the US because we said that's the priority.
Put whatever you need to win because it's got a high payout. We have very good margins in the US, so we added a couple 100 salespeople. And the other thing we made and we've talked about in the past, we changed the way we move folks to ensure we had better category mastery. We have kept what is working, which are customer teams that are able to work with key customers and create the environment for our categories then to have access to key decision leaders and then taking advantage of the scale advantage. What you've seen is meaningful progress each 6 months for the last couple of years, culminating with a very strong quarter.
If you look at our share, growing share in the last one and 3 months, so and 12 now, which is good. You're seeing consistent. So because it's driven by products that win, packages, go to market, the communication campaigns that win, as well as the other one I'd say that has been very important, in addition to consumer value, we've worked very hard with our customers to understand our role in growing the category and improving their profitability with our business. And that message has been very clear with our customers as well. And we can do that when we work together and say, how do you create joint value?
And so each of our key customers and categories has joint value creation plans, which tells me it is sustainable. It's driven by the right combination of superiority and it's mutually helpful to both us and our customers. 2nd one on fabric here, let me turn it to Shailesh.
Let me break it into 3 parts. I don't know whether that will fully answer the question. There's one question about Persil. I'm not going to qualitatively judge it, but it has been for the last 18 to 24 months somewhere between a 2.5 to 2.9 market share, and it has been pretty much in that range and continues to be in that range across time periods. So you can make the conclusion you want on that one.
Our tight share is actually at a probably 40 year high right now. One of the things on share data, keep in mind, is a lot of the share we talk about is an all outlet share, which includes some of the channels which are not covered in TRAC, which are very fast growing and now meaningfully big. So that may be some of the delta. So tide is actually at a all time high on household penetration, all time high on share, and I'm talking a few decades now. There's a third element around pricing.
On type one more thing, when you look at the title Toll brand, remember, the unit dose is growing very fast as well. So there is some form shifting that happens within that. On pricing, I would look at it 2 ways. One is fundamentally, we believe a lot of our pricing, we are already, as I was sharing earlier, at very high premiums. Our liquids is 100% premium to the market.
Porches 25 percent to liquids. So driving the mix is a huge part of our pricing equation in U. S. Laundry. As we get more and more of the business moving to the premium forms, the price mix moves very significantly.
The second aspect of it is promotional in nature, okay? And in the last 12 months, we've had a lot of change in how as new tools like digital coupons have evolved, the promotional calculations and calculus has changed. We've adjusted a lot of that and I see that getting significantly better moving forward. The last but probably the most important is generally we have seen when the category total category market size is growing, volume sold on deal tends to come down. And we have a pretty robust plan both in terms of dosing as well as pricing to ensure the category is healthy because that normally results in a better volume solvency.
So I hope that covers that.
Here we go.
Thanks. Andresi Shera from JPMorgan. So I wanted to go back to the price differentials for against private label. If you feel like now you got especially on the interventions you've made for Gillette and also for Luvs, if you feel like there's any other categories that you need to intervene more in order to become more competitive? I've seen, obviously, in outlets, we don't I mean, we don't have all outlets, but just the scanner data has shown that the gap has been diminishing.
But I would like to see to hear more if there is any other additional investments you need to make or otherwise you'd see more of your cost save flowing to the bottom line? Thank you.
Yes. Generally, each of the individuals that leads the category is going to have to make call, and we won't talk ahead of time about anything we might do. Generally, I'd say we've made the interventions where we thought there was a big issue. What changes over time, we're going to have to deal with. But in terms of, like, Gillette, where we got significantly out of line and there were 2 issues in Gillette.
There was a pricing issue, but we did not have a price point covered as well. So there was a combination of challenges that we had with Gillette innovation, presence in a very popular price point, as well as some value work we needed to do, which is why we had a very big intervention, and it made a big difference. But do I see many of those? No, I don't see many of those, but I'll also say each one of the categories has to be agile to deal with what happens. We have seen cases where others may drop price because of whatever their choice may be, and we'll have to deal with that.
And that may create a different dynamic, but it's certainly what you've observed is certainly fair. It's closed down. And in areas where we may have been more vulnerable, Luvs is another one where the pricing on baby care has moved a good bit, up and down. And it depends on many retailers choose to get very aggressive at times because they want that consumer. And at times, other retailers do as well.
So, we'll have to decide what's appropriate when it happens.
The other general dynamic, which isn't specific, and I don't want to draw too strong of a correlation, But as we've talked about market sizes globally, also in the U. S, have started to improve modestly. And typically, as markets are more constructive and growing, the need for or the interest level on the part of our retail partners to drive private label as their source of growth obviously is less significant, right? So we'll see how that evolves, but
Others, yes, wherever, please.
Okay, thanks. Bonnie Herzog at Wells Fargo. So I have two questions on the new structure you just announced. First, I'm curious how much consideration went into the current categories you're in and if they are in fact the right categories? And I'm asking that because you are needing to spend more to drive growth, even the same level of growth and especially if you want to accelerate that growth.
So was that a consideration? And then secondly, I'd be curious to hear from you, what were the risks that you considered in making this change or some of the concerns as you're implementing it? And do you think that you're giving anything up? So I'd like to hear from your perspective the cons.
Okay. First one, let's get which is, do we have the right core categories? And how much consideration was given to that? Every year, with the Board, we spend a significant chunk of time to look at the total portfolio and say, do we believe this portfolio is about right? And I do believe the 10 core categories we're in are very good categories.
And we are looking at some additional areas. And we talked about some of the innovations, and we have a group that is looking to do that. We have a Ventures group that is looking at new jobs to be done. Within those 10 categories, we have looked and said, are there some spaces we can play and make some changes, some organic and some inorganic? And you're aware certainly of the Merck change in the health care area, which we see as very helpful and could be a positive mix.
And some of the choices we've made on smaller acquisitions in the beauty care area. So do I think the 10 core categories are attractive? Yes. Do I think there's some things we can do over time to improve our general mix, either by segments we play in or our footprint? Yes.
And each of the business leaders is responsible to figure out how to maximize value. And then once a year with the board or whenever it's appropriate, we would go back and look at the total and say, is there any broader choice? But as I mentioned, when we closed the Coty deal back in 2016, we believe then the big changes were done. Then it would be looking at bolt on or other ones that we thought were or bigger, whatever that we thought was appropriate. But the biggest opportunity we see by a meaningful margin is getting superior on each one of our brands right now opening up a big enough advantage and playing in segments and sometimes there's new forms in segments that can open up significant growth.
And you've just seen some examples of it in some of the presentations today. I mean, the growth is amazing on thing on many of these, whether it was Pure, whether it was the China example in fem care, these grow categories. And when they grow categories and we drive the growth in the category, we tend to disproportionately benefit in share and in profitability. And the other thing we get, which is great out of that is the retailers tend to reward us when we do that with support. The second one was on
Risks of making the organization change.
Risk of making the organization change. To me, in my mind, there was a bigger risk not to continue to change from what we've learned for many, many years. And because we did pilots, we don't do a lot of things without thinking about them or testing them. We had already run end to end for a number of years. It was in a couple of years now in the US.
And we made a step, and then we made another step. And frankly, some in the organization were saying, Let's just go. If we're going to do that, let's just go. Change the reporting lines and just go. But keep what was really working, the customer teams, the market scaled resources, but we had moved some.
First, you have oversight, then you have the bonus, and then we move the direct reporting lines. And then we said in markets that have similar conditions, big and generally biased toward more developed trade, we can do the same thing to different degrees and appropriately adapted. And then on the enterprise markets, again, we had those 2 pilots and some other examples that said this made sense. What we have made the choice, and it was some degree, tied in the answer I gave on Latin America, is we're not going to get overboard on making everything absolute. We're going to say be very pragmatic because we do want to deliver and manage the risk.
We're not looking for a dip, and then we'll come back. We did a big organization change, the last really big one in 1999. And there was a couple years of significant people moving around, lots of job changes, and that's not the way we're approaching this. We named the people that are leading the big categories, and we're organized in a way we're taking advantage of things that are moving in the right direction. So again, we want to do this in a manageable way.
We fully intend to do this in a way that allows us to deliver, and certainly, I can't predict the future on the external environment, but certainly, I feel good about the actions we're taking on bringing us our strategy to life.
So thank you very much. In this format, that's all the time we have for questions. Thanks to those of you who have been listening to the webcast.