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Operator
Good day, everyone, and welcome to Procter & Gamble's fiscal year-end conference call.
This call is being recorded.
Today's discussion will include a number of forward-looking statements.
If you will refer to P&G's most recent 10-K and 8-K reports, you will see a discussion of factors that could cause the Company's actual results to differ materially from these projections.
As required by Regulation G, P&G needs to make you aware that, during the call, the Company will make a number of references to non-GAAP and other financial measures.
Management believes these measures provide investors valuable information on the underlying growth trends of the business.
Organic refers to reported results, excluding the impacts of acquisitions and divestitures and foreign exchange, where applicable.
Free cash flow represents operating cash flow less capital expenditures.
P&G has posted on its Web site, www.PG.com, a full reconciliation of non-GAAP and other financial measures.
Now, I'd like to turn the call over to P&G's Chief Financial Officer, Clayt Daley.
Please go ahead.
Clayt Daley - CFO
Thanks and good morning, everyone.
A.
G.
Lafley, our CEO, and Jon Moeller, our Treasurer, join me this morning.
As is typically the case, we have a lot of information to cover on the year-end call.
I will begin with a summary of our fourth-quarter results.
Jon will cover business highlights by operating segment.
I will then provide a brief update on commodities, pricing, markets and Folgers, and I will also provide guidance for next fiscal year -- or for the current fiscal year and the September quarter, and A.G.
will then close out the call.
Now, onto the results -- P&G's business has performed well, allowing us to complete both the quarter and the year with sales, earnings per share and free cash flow at -- all at or above our long-term targets.
The June quarter is the 24th consecutive quarter in which P&G delivered topline growth at or above the Company's target.
We also delivered another quarter of high quality earnings and record cash flow despite unprecedented increases in commodity and energy costs.
Our ability to consistently deliver our top and bottom line commitments is a direct result of the breadth and depth of our unique portfolio, the strength of our innovation, and our disciplined cost-management and productivity efforts.
For the June quarter, diluted net earnings per share increased 37% to $0.92 per share.
This includes net tax benefits of $0.12 per share due to a number of significant adjustments to tax reserves in the US and other large countries.
Excluding these tax adjustments, P&G's underlying business delivered $0.80 per share, $0.02 above the high end of our going-in expectations.
Total sales increased 10% to $21.3 billion.
Organic sales were up 5%; organic volume was up 4%.
Pricing added 3% sales as previously-announced price increases took effect.
Foreign-exchange contributed 6 points to sales growth.
Disproportionate growth in developing regions, large sizes and midtier brands resulted in a negative 2% mixed impact.
Quality of earnings was strong.
Operating profit increased 13% for the quarter to $3.8 billion, and nonoperating profit was below year ago.
Operating margin grew 50 basis points.
Gross margin decreased 160 basis points.
Higher commodity and energy costs impacted the quarter by over 300 basis points.
Faster growth in Baby Care, family care and developing markets, reduced gross margin by about 50 basis points.
We also increased restructuring activities in the fourth quarter in anticipation of the Folgers deal.
These projects brought fiscal 2008 restructuring costs to slightly more than the top end of the range of $400 million.
This resulted in a negative 30 basis point impact on gross margin in the fourth quarter.
So without the change in business mix and increased restructuring, gross margin would have been down about 80 basis points.
SG&A expenses were down by 210 basis points.
This was driven by tight cost control and overhead productivity improvements.
Importantly, while SG&A has been down every quarter, advertising spending remained constant as a percent of sales for the year at 10.4%, even as we continue to improve efficiency.
Turning to cash, operating cash flow in the quarter was $4.1 billion, up $0.5 billion from the same period a year ago.
Free cash flow was $2.9 billion, up $300 million versus a year ago.
Free cash flow was 96% of earnings, ahead of our 90% productivity target.
P&G generated $12.8 billion free cash flow during the year, an increase of over 20% or $2.3 billion.
Capital spending was 3.6% of sales, below the Company's target of 4%.
Working capital was up about two days versus a year ago, driven by higher inventory balances.
Year-end inventory values were impacted by the run-up in commodity costs.
During the June quarter, P&G increased dividends by 14%, the 52nd consecutive year dividends have increased.
For the full year, P&G paid $4.7 billion in dividends to shareholders.
In July 2007, we announced a three-year, $24 billion to $30 billion share repurchase program.
As part of that program, we repurchased $2 billion worth of stock in the June quarter, bringing the fiscal year total to $10 billion, at the high end of our $8 billion to $10 billion target range for the year.
Combining dividends and share repurchase, P&G distributed nearly $15 billion to shareholders in fiscal 2008, or over 120% of earnings.
Based on the current market capitalization, P&G is providing shareholders a cash yield of over 7%.
To summarize, P&G continues to drive top and bottom-line growth despite a challenging cost and competitive environment.
We have been pricing to recover commodity and energy cost increases, and we are driving productivity and operational efficiencies to expand operating margins.
We are generating significant cash and are aggressively returning that cash to our shareholders while maintaining our AA credit rating.
Now, I will turn it over to Jon for a discussion of the business-unit results by segment.
Jon Moeller - VP, Treasurer
Thanks, Clayt.
Starting with the Beauty segment, all-in sales grew 11% and organic sales were up 4% in a very competitive market.
Olay skincare volume grew mid-single digits with over 40% growth in Central and Eastern Europe, the Middle East and Africa, and midteens growth in Western Europe.
These strong results are driven by market share gains and continued distribution expansion.
In the US, Olay facial moisturizer's leading all-outlet value share is in line with prior year at more than 44%.
Retail hair care volume grew 3% despite a base period that included pipeline shipments for the Pantene base brand restage in North America.
Excluding North America Pantene, global retail hair care volume grew 6%, behind double-digit growth of Head & Shoulders and high single-digit growth of Rejoice.
Head & Shoulders volume was up double digits in North America and Western Europe and tripled versus a year ago in Japan behind the Head & Shoulders brand relaunch.
Head & Shoulders is now the number one shampoo in the world.
We expanded our retail hair care portfolio in June with the launch of the Gillette hair care brand in North America.
We also strengthened our Prestige hair portfolio during the quarter with the acquisition of the Frederic Fekkai business.
Professional hair care and retail haircolor volume were both down slightly.
Professional hair care shipments were down versus the prior year due to soft results in North America and Northeast Asia.
In retail haircolor, strong volume growth on the Nice 'N Easy brand was more than offset by declines on several smaller brands.
Nice 'N Easy US all-outlet value share is up more than 3 points to over 20%, driven by share gains from the Perfect 10 line that launched in January.
Nice 'N Easy has now grown sales double digits for four consecutive years and has doubled its market share over this time period.
The cosmetics business had a very strong quarter with high single-digit volume growth behind the continued success of Cover Girl Lash Blast mascara.
Lash Blast is on track to be the largest global cosmetics industry initiative ever.
Cover Girl's market-leading all-outlet value share in the US is up nearly 1 point to 19%.
In the grooming segment, all-in sales were up 12% for the quarter and organic sales grew 4%.
This compares to a base period that included Blades & Razors organic sales growth of 13%, driven by the expansion of Fusion in European markets.
Blades & Razors delivered solid sales and volume growth behind mid-single-digit market growth and continued market-share gains.
Global Gillette Blades & Razors' share increased versus prior year to 71%.
Volume in developing markets grew double digits with over 20% growth in developing Asian markets and double-digit growth in Latin America behind continued distribution and market-share increases.
In the US, Fusion and Venus continued to grow value share, but these gains were offset by declines on legacy male systems.
Fusion added 4 value share points versus a year ago and is now over 36% of the US male systems market.
Venus added nearly 7 points behind the Embrace initiative and is now over 58% of the US female systems markets.
Shave prep shipments increased mid-single digits on double-digit growth in developing markets.
In the US, Gillette shave prep all-outlet value share increased nearly 6 points to 36% behind the growth of the Fusion line.
Braun shipments were down modestly, due primarily to the exit of the Tassimo coffee appliance business.
Healthcare all-in sales grew 7% and organic volume increased 3%.
This was the first full quarter reflecting the loss of market exclusivity for Prilosec OTC, which negatively affected volume growth.
Excluding Prilosec OTC, healthcare organic volume increased 4% for the quarter.
Family care volume grew high single digits with the Always brand up double digits and Naturella up more than 20%.
In the US, Always all-outlet value share of the pad segment increased more than 1 point to 58%, and share of the panty liner segment grew almost 3 points to nearly 32%.
These results were driven by the continued strength of the Always Clean and Always Fresh initiatives that launched last calendar year.
Expansion of Naturella in Central and Eastern Europe, the Middle East and Africa drove shipment growth of nearly 30% in that region.
Naturella volume in Latin America grew double digits.
Oral care shipments were up for the quarter with growth of both the Crest and Oral-B brands.
Crest dentrifice maintained its all-outlet value share leadership in the US despite intense competitive promotional activity.
P&G's leading all-outlet value share of toothpaste in the US remained at about 38%, and Oral-B toothbrush value share held steady at 43%.
In personal care, shipment of volumes were down high single digits due to the competitive market entry against Prilosec OTC, which resulted in brand volume down more than 20% for the quarter.
Despite intense competitive promotional activity, Prilosec OTC maintains a very strong 34% value share of its segment in the US.
Pharmaceutical volume was up low single digits versus prior year, as high single-digit growth of Actonel was partially offset by lower shipments of other minor brands.
Sales for the snacks, coffee and pet segment increased 8% for the quarter, and organic sales grew 4%.
The snacks business delivered high single-digit volume growth and high-teen sales growth, driven by the Pringles Stix, Extreme Flavors and Minis initiatives.
Pringles' all-outlet value share of the US potato chip market is up modestly versus prior year to more than 14%.
Coffee sales declined in mid-single digits, due mainly to an expected reduction in trade inventory ahead of the Folgers brand restage launching this month and due to temporary pricing disadvantages versus the leading branded competitor.
P&G's all-outlet value share of the US coffee market was in line with prior year at nearly 36%, and Dunkin' Donuts is now approaching 4% value share after less than a year in-market.
Pet care shipments increased mid-single digits for the quarter, behind the Iams ProActive Health initiative for dogs and the Iams Healthy Naturals initiatives for cats.
Sales were up double digits as pricing was taken to recover higher input costs.
Fabric care and Homecare sales grew 13% for the quarter with organic sales up 7%.
Topline growth was broad-based with every region posting solid volume increases.
Fabric care global shipments increased mid-single digits with balanced growth in developed and developing markets.
Tide and Ariel each grew volume mid-singles, and the Gain and Downy franchises each grew high singles or better.
We completed the North American conversion to the concentrated liquid laundry format in the June quarter.
We are on track to meet or beat every element of our success criteria for this initiative, including gaining distribution on new SKUs and delivering target shelf pricing.
Home Care shipments were up high single digits, led by North America with a double-digit volume increase.
Febreze volume grew double digits behind Febreze Candles and new scent innovations on Air Effects.
Febreze's share of the instant action air care market is up 2 points to nearly 21%.
Dawn and Swiffer volumes were also up double digits, due partially to forward buying by retailers ahead of previously announced price increases effective in the September quarter.
Batteries volume grew modestly for the quarter, as solid growth in greater China and Latin America offset modest declines in developed markets that were mainly due to market contraction.
Duracell alkaline value share in the US was down about 1 point to 47%.
In Western Europe, lower volumes were driven by trade inventory reductions in anticipation of the September quarter launch of a new Duracell marketing and promotional campaign.
Baby care and family care delivered an excellent quarter with all-in sales growth of 10%.
Organic sales also grew 10%, and organic volume increased a very strong 9%.
Pampers diapers global volume grew midteens with each region posting shipment increases.
Developed markets grew mid-singles, and developing markets grew high-teens.
China, Russia, Turkey, India, Saudi Arabia, Poland, and the Philippines all delivered double-digit diaper volume growth.
In the US, Luvs diaper volume grew midteens, and Pampers Baby Dry grew high single digits.
In total, P&G all-outlet value share in the US diaper market increased nearly 1 point to 35%.
In Western Europe, Pampers' market-leading diaper share was in line with prior year at a strong 54%.
Family care organic volume grew high single digits behind double-digit growth on Charmin and mid-single-digit growth on Bounty in North America.
Charmin US all-outlet value share increased more than 2 points to over 28%, behind the Ultra Soft and Ultra Strong innovation launched nearly a year ago.
Bounty US value share also increased more than 2 points to nearly 47%, a 43-year high, continuing to leverage the Best Bounty Ever initiative.
That concludes the business segment review.
I will hand the call back to Clayt.
Clayt Daley - CFO
Thanks, Jon.
There are several important topics I want to discuss before getting into guidance -- commodities, pricing, market growth rates and Folgers.
Starting with commodities, the rate of commodity and energy cost increases has clearly accelerated.
For the fiscal year just ended, we incurred approximately $1.5 billion in incremental costs.
There's a great deal of volatility and uncertainty, so this is a moving target, but based on where spot and forward markets are today, we expect to incur about $3 billion in additional commodity and energy costs this fiscal year.
This is higher than we anticipated three months ago, when we expected commodity and energy costs to be up more than $2 billion.
Since that time, crude oil, diesel fuel and natural gas have each made moves of 25% to 35%.
Other important materials, such as surfactants, alcohols and soda ash, have moved up sharply as well.
Given the magnitude of this increase, I want to help frame the margins dynamics for you.
If we take the results from the fiscal year just completed and simply add $3 billion in commodity costs to cost of goods sold and $3 billion of pricing to net sales, holding everything else equal, our gross margin would decline by about 180 basis points and operating margins would drop by about 70 basis points, even though we would fully maintain our profit.
A complete reconciliation of this is posted on our Web site so you can check our math.
Pricing beyond commodity and energy cost increases to maintain operating margin would be very risky, given the pressure that our consumers are under.
So we are going to have to live with some amount of gross margin compression throughout this fiscal year.
It is important to understand this to put our equal June, July, September and fiscal '09 results in the right context.
We have also previously announced that we will incur additional restructuring costs in fiscal 2009 in order to offset the dilution caused by the Folgers transaction.
Now, I will say more about this later but these additional restructuring projects will lower operating margin by roughly 50 basis points.
So assuming we fully price to offset the impact of commodities and we execute our plan to offset Folgers dilution, gross margin would be down 180 basis points and operating margins down about 120 basis points.
That's the starting point for fiscal 2009.
To manage our business against this backdrop, we are pricing to recover commodity costs and challenging every part of our cost structure.
Since the last call, we announced price increases in oral care, family care, baby care, fabric care, health care, beauty care, home care, batteries, and pet nutrition.
On the cost front, each of our businesses is working to strengthen its ongoing cost-savings projects in manufacturing, product formulation and capital spending efficiency.
In SG&A, we are broadening and accelerating the overhead productivity program we discussed at (inaudible).
We will also -- we also continue to improve return on our marketing spending while we increase our marketing investments at roughly the same rate as sales growth.
To summarize, commodity and energy increases will put pressure on margins even as we price to offset those increases, but what really matters is cash and profit, which will grow at our target rates this year.
Turning to our markets, on a global basis, market growth rates remain in the 3% to 4% range on a value basis and 1 to 2 points below this on a volume basis.
Developed markets are slowing modestly but still growing for the most part.
We have not yet seen a slowdown in developing markets, which continue to grow in the high single-digit pace.
We do see some evidence of trade-down.
For instance, in the laundry detergents, Tide grew volume in mid single digits in the fourth quarter, down from its high single digit growth previously while Gain continued to grow volume in high single digits.
This highlights the benefits of our tiered portfolio.
We also continue to see examples of trade-up where innovation warrants it.
A good example is Perfect 10, our premium priced retail hair coloring.
Perfect 10's value share is above 3%, and almost 100% of that is incremental to the Nice 'N Easy brand.
Gillette Clinical Strength deodorant is another good example.
Gillette Clinical Strength is priced two times higher than the base offering but continues to gain distribution and share.
Private-label in the US is up modestly.
Excluding personal healthcare where Prilosec OTC came off patent exclusivity, private-label shares in our categories are up less than 0.5 share point in aggregate.
Most importantly, P&G continues to grow or hold value share in the majority of our categories.
Like commodities, market dynamics are something we will continue to closely monitor, taking a balanced, consistent, measured approach with one eye on sales and the other on volume.
Switching to Folgers, on June 4, we announced the signing of a definitive agreement to merge the Folgers coffee business into the J.M.
Smucker Company in an all-stock reverse Morris trust transaction.
Since that time, we have filed a preliminary S-4 with the SEC and clarified the transaction structure as a split merge where P&G shareholders tender shares in exchange for new Smuckers shares.
The deal structure maximizes the after-tax value of the coffee business for P&G shareholders, and minimizes earnings-per-share dilution versus other structures.
We expect to complete the transaction during the second quarter of fiscal 2009.
The Folgers deal will bring with it a significant one-time gain.
We will not know the exact amount of the gain until the deal is completed, but for now, our guidance assumes that the gain will be approximately $0.50 per share and, again, occurring in the December quarter.
As I mentioned earlier, P&G will incur additional restructuring costs during fiscal 2009 in order to offset about $0.04 of dilution caused by the Folgers transaction.
The costs of these additional restructuring projects will be about $400 million.
Adding this amount to our ongoing base restructuring budget of $400 million brings our fiscal year 2009 restructuring budget to approximately $800 million.
The Folgers gain will be outside of operating earnings and will only impact the December quarter.
The incremental restructuring charges will be in operating earnings and will impact all four quarters.
The September and December quarters will be the most heavily impacted, as we have chosen to accelerate several projects to get as much of the benefit as possible into this fiscal year.
The additional restructuring costs will be about $0.04 per share in Q1 and Q2 and about $0.02 per share in Q3 and Q4, adding to about $0.12 per share for the year.
If actual results are materially different than these estimates, we will update these numbers.
Otherwise, we will not provide further guidance or reconcile the quarterly split of restructuring charges during fiscal 2009.
Before moving on, I need to take a moment to reassure you that P&G's approach and philosophy towards restructuring charges has not changed.
We will continue to manage our business with ongoing versus episodic restructuring and we will continue to report the results, including these costs.
In situations where strategic portfolio decisions result in stranded overheads and earnings dilution, we will take action to offset those impacts.
But in fiscal year 2010, we expect restructuring spending to return to fiscal 2008 levels as a percent of sales.
Now, onto guidance, for fiscal 2009, P&G projects organic sales growth of 4% to 6%, in line with our long-term target range.
[Within] that, price mixed should contribute 2% to 3%.
Foreign exchange is estimated to have a positive impact of 2% to 3%.
Acquisitions and divestitures will reduce net sales by about 1% to 2%.
Therefore, in total, we expect all-in sales growth of 5% to 7% for the year.
Organic volume is likely to grow 2% to 3%.
This is below the 4% to 5% we have been delivering during the first half of the calendar year, which we think is appropriately conservative, given the amount of pricing that we have recently announced and also the fact, as I mentioned earlier, that volume growth in our categories is below sales growth by 1% to 2%.
We expect gross margin to be down only 75 to 125 basis points for the year despite the fact that the combined impact of commodities and pricing will reduce gross margin by about 180 basis points.
We will accomplish this through cost-savings programs and volume leverage.
SG&A will be 75 to 125 basis points lower on the year with productivity savings more than offsetting the approximate 50 basis points of incremental Folgers restructuring charges.
The net result of our aggressive cost-savings and productivity efforts is that, despite roughly 70 basis points of net commodity and pricing impacts and the incremental 50 basis points from restructuring, operating margins on an all-in basis should be about flat for the year.
The tax rate should be between 27% and 28%.
Our updated fiscal 2009 EPS guidance starts with fiscal 2008 GAAP result of $3.64 per share.
Backing out $0.14 per share of tax benefits, this brings us to an adjusted based EPS number of $3.50 a share for fiscal 2008.
From that base, we are projecting EPS growth of about 10% or $3.80 to $3.87 per share.
This includes the $0.04 Folgers dilution and compares to our prior guidance of $3.80 to $3.85.
We took the high end of our guidance range up by $0.02 a share to reflect better results in the fourth quarter.
We have also widened our guidance range slightly, which we think is prudent, given the volatility and uncertainty that exists in the commodity and energy markets today.
To arrive at the GAAP guidance for 2009, you need to add the Folgers one-time gain of $0.50 a share and then subtract $0.12 a share in temporary increases and restructuring charges.
This produces a fiscal 2009 GAAP EPS range of $4.18 to $4.25 a share.
We have included a full reconciliation in the press release materials.
We expect to continue to generate strong cash flow and are confident that we will deliver against our goal of 90% or greater free cash flow productivity, excluding the impact of the Folgers gain, which is a non-cash item but will result in substantial additional share repurchase when the transaction is executed.
While we expect to deliver the fiscal year numbers in line with long-term targets, there is likely to be greater quarter-to-quarter earnings volatility in fiscal 2009.
We've been dealing with higher input costs with pricing, but pricing does not take place instantaneously.
We like to couple pricing with innovation to deliver better consumer value.
We also need to give our retail partners time to adequately plan for pricing.
All of these dynamics are factored into our planning efforts.
The lag between when we announce pricing and when it's effective on our revenue, combined with a rapid escalation that took place in commodity markets during May and June, will create some gross margin compression during the September quarter.
We will catch up as price increases we just announced take effect in September and October, and expect to see sequential gross margin improvement throughout the year.
So turning to the September quarter, organic sales are expected to grow 4% to 6%.
Within this, price mix should contribute 2% to 3%.
Foreign exchange is expected to have a positive impact of 4% to 5%.
Acquisitions and divestitures will reduce sales by about 1%.
So in total, we expect all-in sales growth of 7% to 10% for the quarter.
Organic volume growth will be 2% to 3%.
We expect earnings per share to be in the range of $0.98 to $1 a share, including the $0.04 of additional restructuring costs.
On a GAAP basis, this is up 7% to 9% versus a year ago and 9% to 11%, excluding the $0.02 per share tax benefit in the base period.
Gross margin will be down 250 to 300 basis points, primarily due to commodity and energy cost increases.
Business and geographic mix will also decrease gross margins.
We expect gross margins to improve sequentially during the balance of the year.
We will offset about 50% to 60% of the gross margin reduction with focused productivity efforts, which should result in operating margins being down 100 to 150 basis points for the quarter.
Excluding the $0.04 per share of incremental restructuring costs, operating margins should be down less than 50 basis points and operating income should increase in high single digits.
The Other income should be up versus a year ago, reflecting the timing of minor brand divestitures such as ThermaCare, which was announced in July.
We expect the tax rate for the quarter to be about 28%.
Now, I will turn it over to A.G.
to wrap up the call.
A.G. Lafley - Chairman, CEO
Thank you, Clayt.
Fiscal 2008 was another very good year for P&G.
Total sales grew 9% to $83.5 billion.
We've more than doubled the size of our business over the past six years.
Sales in developing markets exceeded $25 billion and now account for 30% of our total business.
P&G is now the largest consumer products company in the developing world.
Organic sales grew 5%, in the middle of our long-term target range of 4% to 6%.
For seven years running, we've delivered these topline objectives.
Two thirds of our $1 billion brands grew value share globally.
Fusion became our 24th $1 billion brand, and did so faster than any other P&G brand in history, crossing the threshold in just under two years.
Excluding the help from significant adjustments to tax reserves, diluted earnings per share increased 15% to $3.50 per share.
Our cash performance was excellent.
We generated $12.8 billion of free cash flow and returned over 120% of net earnings to shareholders through dividends and share repurchase.
On top of all this, we beat the odds which say "large acquisitions fail" by successfully completing the integration of Gillette.
We exceeded our cost synergy and dilution targets.
Revenue synergies are on target with significant upside over the next three to five years.
Gillette and Oral-B brands are platforms for innovation, and we've just begun the efforts to fully leverage these equities.
Looking forward, I believe P&G is well positioned for continued success.
Our portfolio, our commitment to innovation, and our productivity efforts are the reasons for this.
Our portfolio is stronger than at any time in our history.
With the addition of Fusion, P&G now has 24 $1 billion brands, far more than any other company.
$1 billion brands are platforms for innovation.
They support larger investments in consumer research, in R&D; they build strong equities with consumers.
They become indispensable to retailers, and they earn a leadership share of category profits.
P&G's $1 billion brands give P&G the number one or number two position in 18 different product categories around the world.
This breadth of category leadership position is unmatched in our industry.
This portfolio of brands and categories provides many unique advantages, strong growth potential, and financial stability and reliability.
Let me share just a couple of examples of how the portfolio creates unique advantages for us.
The first example is cost category innovation.
Bleach technology from laundry has been used in health and beauty care products such as crest White Strips and Clairol Perfect 10 hair colorant.
Nonwoven top-sheet technology started in diapers, traveled to feminine care, then moved onto Swiffer and Olay Daily Facials.
Proprietary perfume technology has been used to enhance the performance of Bounce and Febreze, our fine fragrance brands, Camay and more recently Secret and Gillette Clinical Strength deodorants.
Looking forward, we are very excited about the innovation possibilities we have in combining Gillette's expertise in mechanical engineering with our expertise in chemical engineering.
A second example of portfolio advantage is developing market penetration.
The depth and breadth of P&G's portfolio allows us to penetrate markets quicker and deeper than many competitors because it allows us to attract and build a network of best-in-class, dedicated distributors in countries like China, India and Russia.
These distributors have the deepest reach and the best capabilities in their respective markets.
Today, our distributor network in China reaches 2,300 cities and 40% of towns and villages.
This is about 60% of the population and 800 million more people than our next-largest competitor.
In India, our distributor network now covers 4.5 million stores, an increase of 2 million stores in just five years.
In Russia, we are now reaching 80% of the population.
The third example I will offer is an advantage that's created by scale and by the unique combination of categories that comprise our portfolio.
In combining household and health and beauty businesses, each benefits from the unique scale advantages of the other.
Health and beauty benefits from the larger raw material purchasing pools created by high tonnage household businesses like laundry, diapers, and other paper products, so they are able to purchase packing material and basic commodities at lower prices than direct competitors.
Household care enjoys economies of scale created by health and beauty care's larger advertising and marketing budgets.
The cost advantages created by scale provides the investment flexibility needed to build our brands with leadership levels of innovation and marketing support.
These examples are just three of the many ways in which we are advantaged by our diversified portfolio.
Our portfolio, as currently structured, has significant potential for growth not just in health and beauty but also in household care.
Household care, excluding acquisitions, has grown sales at a five-year compounded annual growth rate of about 40% in China and India, 30% in Russia, and 20% in Brazil and Turkey.
Household care also has significant growth upside in the developed world.
In the United States, innovation, compaction and lower prioritization of the category by competition have driven meaningful growth in categories like laundry.
Other categories like bath tissue are growing in excess of 10% on an all-outlet basis because of better consumer understanding and shopper segmentation, and of course leading innovation.
Household care has increased sales in the US, excluding acquisitions, by almost 40% over the past five years, adding approximately $4 billion to our sales.
Our health and beauty business gives us access to a structurally attractive $370 billion global market that is growing, on average, 4% to 6%, has favorable demographics, and which is still fairly fragmented.
P&G's share of this market is still only about 10%, which of course we expect to grow steadily over time.
We generate 30% of our sales in developing markets today, and that number is increasing every year.
We have leadership shares in China, Russia, Poland, Turkey and Saudi Arabia.
In China, P&G is number one in 11 of 12 categories in which we compete.
We are the largest consumer product goods manufacturer by a factor of four, and we have, as I said, the deepest distribution network.
In Russia, our value share is now about 40%, and sales are three times larger than the next-largest CPG manufacturer.
In Poland, value shares are approaching 30%.
In Turkey, the number is closer to 40, and in Saudi, we are approaching 50%, but there is still an awful lot of room for growth.
Despite the size of our developing market business, we are, frankly, still underdeveloped in these countries.
We currently compete in only 9 categories in India, 11 in Brazil, 12 in China, and 18 in Russia.
In Indonesia, the fourth most-populous market in the world, we compete in only six.
This compares to North America where we currently compete in 24 categories.
Sales per person per year is another way to look at market development potential.
Using the US is probably not a fair point of comparison, so let's use Mexico.
In Mexico, P&G generates sales of approximately $20 per person, per year.
In Brazil, that number is less than $10; in China, less than $5 and in India, still less than $1.
In addition to unique advantages and growth potential, our portfolio provides financial stability and reliability.
This allows us to react quickly to competitive challenges in a given area while continuing to deliver the results that shareholders expect from us.
Stability allows us to think longer-term, which is what building enduring brands is really all about.
It allows us to reliably and consistently invest in innovation.
P&G's commitment to innovation has never been stronger.
Innovation is what will differentiate the winners and the losers in our industry and in the current environment.
Innovation drives consumer value and builds brand equity and trust over time.
Both brand value and brand equity scores for P&G brands are strong.
Over 70% of our $1 billion brands have top tertile consumer value scores, and approximately 80% have top tertile equity scores.
P&G's commitment to cost control and productivity has also never been stronger.
Over the last year, are selling, research and administrative costs as a percentage of sales dropped 100 basis points with advertising growing in line with sales.
We are committed to accelerated progress in this area.
Our productivity focus will provide us with the financial flexibility we need to deal with short-term challenges while maintaining our focus on the long-term drivers of value creation.
All of these things -- our category and geographic portfolio, our unwavering commitment to innovation, and our focus on productivity -- give me the confidence that we will continue to deliver the results our shareholders expect from us, despite the challenging and more volatile environment in which we are now operating.
Now, Clayt, Jon and I would be happy to take your questions.
Operator
Thank you.
The question-and-answer session that will be conducted electronically.
(Operator Instructions).
Bill Pecoriello, Morgan Stanley.
Bill Pecoriello - Analyst
Good morning, everybody.
On the price mix guidance for '09, is that assuming that the price will be 4 to 5 and you are holding the mix at negative 2% we saw in the fourth quarter, so no additional trade-down expected?
Then in the volume component, I guess this is what your elasticity or models are showing by category, by market.
There's no category or market that you would single out in terms of where we might see more of the volume impact.
Is it pretty broad based, given the pricing?
Clayt Daley - CFO
I think the volume is pretty broad based, and I think your assessment on the relationship between pricing and mix is actually pretty close.
So, I think that assessment is pretty accurate.
Operator
Nik Modi, UBS.
Nik Modi - Analyst
Just in terms of going back to the volume growth, Clayt, what are you embedding in terms of the emerging market growth for fiscal '09, in terms of volumes?
Clayt Daley - CFO
Well, we think that we still expect to deliver double-digit organic sales growth in emerging markets.
I would say that the volume growth behind that will probably be upper singles.
Therefore, I think it's quite clear based on what's happened to the markets.
I mean, a lot of this is driven by the markets as it impacts volume growth, where volume growth is now below sales growth by a couple of percentage points in North America and in Western Europe.
So, that's what will create the aggregate 2% to 3% volume growth for the Company.
Operator
Wendy Nicholson, Citi.
Wendy Nicholson - Analyst
Yes, if I could just follow up on Nik's question there, I think he was asking volume growth in emerging markets.
My question there is the 2% to 3% outlook is a little on the low end because I would have expected volume growth in markets like China and Russia and India to be healthy healthy double digits.
What we've heard from some other companies is that reported sales growth in those emerging markets is lower than volume growth because of the heavy levels of promotion and that kind of thing.
So in a market like China specifically where it sounds like you've just got so much headroom from a categoric perspective and reaching more of the population, what kind of outlook for volume growth do you think you see in China over the next 12 months?
Clayt Daley - CFO
We are seeing the opposite.
We are seeing sales growth exceed volume growth.
There are significant price increases going on in emerging markets as well.
We have been raising prices in Russia and Eastern Europe, some fairly sizable percentages in China and Latin America as well, and so we are seeing organic sales growth rates well above volume growth rates.
That's why, as I said, we think the volume growth rate in emerging markets is likely to be in the upper singles.
By the way, I think it's important also to note that we think that it's prudent, given the amount of pricing that is going into the marketplace, to not get ahead of ourselves in terms of what volume growth is likely to be in this environment.
A.G. Lafley - Chairman, CEO
Yes, Wendy, this is A.G.
Just a couple of quick facts -- the markets we estimate are growing -- take our two biggest developing markets, [India] and China.
We think they are growing about 7% in aggregate across all of our categories.
As Clayt just said, we actually have a couple of quarters or more now of concrete experience where we've been rolling through pricing across our categories, and we are delivering very consistent double-digit sales growth, but it's been on high single digit volume growth.
As Clayt also said, we have pricing plans that's going to impact -- not impact until the end of this first quarter of the new year and into the second quarter of the new year, so we are trying to estimate the roll-through there.
The other thing that I think is important to understand is one of the biggest engines to growth in developing markets in the past year has been the big cities.
In the big cities, we are selling, frankly, more of our premium line.
So, the kind of product lines that we are selling in the Shanghais and Moscows and Delhis of the world right now are actually growing sales at a rate faster than volume.
Then the third point I think is incredibly important.
We are just one month into a new year here.
We are looking at the largest increases in commodity and energy prices at least any of us who have been with the company 30-plus years now have seen, including the '70s, okay?
So we are going to be taking pricing that is unprecedented, and we just want to make sure that we are prudent.
We want to make sure that we are cautious and we are careful.
If we do better, that would be great!
Operator
Chris Ferrara, Merrill Lynch.
Chris Ferrara - Analyst
I just wanted to ask a little bit about the mix overall, back to that.
So obviously it decelerated.
Can you quantify how much of it is geographic mix versus what mix looks like in developed markets?
I guess could you talk about that, what mix looks like the US and Western Europe?
Clayt Daley - CFO
About 1% in geographic of the total, which is pretty consistent with what we've been seeing for the last couple of quarters.
Chris Ferrara - Analyst
So 1 point down from developing markets?
Clayt Daley - CFO
Yes, it's geographic mix.
A.G. Lafley - Chairman, CEO
I mean, Chris, obviously as that becomes a bigger percentage of our business, it becomes a little bit bigger drag but it's still worth it.
It's where you want to be.
You want to be where babies are born, households form, incomes are rising and economies are growing faster.
We just have a lot of white space.
Jon Moeller - VP, Treasurer
As we've said many times before, of course from an all-in after-tax profit basis, this is not a negative mix story.
Chris Ferrara - Analyst
Thanks.
Operator
Bill Schmitz, Deutsche Bank.
Bill Schmitz - Analyst
Can we just talk a little bit longer term on how you come to juxtapose the sort of short-term pressures in the business and having to really belt-tighten on the SG&A side, and how that impacts both (inaudible) deliver the decade -- like (technical difficulty) you sort of pushed "deliver the decade" and then kind of what's left in the tank after that?
I guess sort of a long way of saying are you guys trimming fat here in the SG&A side or is there some muscle in there as well, just given the unprecedented rise in input costs in the short term?
A.G. Lafley - Chairman, CEO
Okay, I think there's still a long runway for the kind of steady and consistent growth that our targets represent.
Okay, let me hit the key drivers.
The first is the portfolio.
I hope we've made it clear that we're going to continue to evolve the portfolio over time.
I think Clayt and I have tried to be very clear about that.
I think, if you look at our actions over last eight to ten years, you've seen us very methodically move out of categories where we don't like -- where the growth prospects aren't as good, where they aren't quite as structurally attractive and where they don't lend themselves to our brand and innovation-driven business model.
You will continue to see that.
So the portfolio will be a growth driver.
The second piece, Bill, is obviously innovation.
You know, we've worked very hard this last eight to ten years to build a robust innovation engine, and we think we've got one and we've said before we have visibility out at least five years, more on some of our businesses, and we're looking at an innovation pipeline that's robust enough to deliver the growth rates that we are -- that we set for ourselves.
Most of our organic sales growth, every year, is driven by new product innovation.
We could talk about a lot of things there, but the way we innovate, the whole connect-and-develop program -- you know over half of our new products now have at least one outside partner -- the way we cross pollinate technologies and learn from each other and re-apply, I mean there's just a lot there.
The third one in the productivity thing -- you know, I hate to say it but this is my 32nd year and there's still fat to trim, okay?
It's not because we don't work at it; it's not because we don't have 138,000 P&G-ers working their hardest every day around the world.
It's simply because there are always ways to do things more simply, and that's what we're focused on.
We are focused on simplicity and productivity.
I will just tick off a few really quick ones -- GBS/IDS.
You know, we moved to this shared services structure back in the early part of this decade.
It's been a big driver of productivity and we've still got more productivity to grow.
We've got five more years of productivity improvement currently identified.
Look at our CapEx.
Ten years ago, we were running 7.8% of sales.
We now arguably have a portfolio that is should be as capitol-intensive, especially when we added Blades & Razors and batteries, and we just turned in 3.6%.
This is fantastic work by our engineering and product supply and R&D organizations.
Look at our R&D productivity, you know, what we run as a percent of sales.
We peaked at, I don't know, 4.8% of sales, something like that, a decade ago.
We are running 3.2%, 3.3% of sales.
There's a little bit more productivity there.
We still have a lot of productivity opportunity where our organization structures connect.
There is duplication, and there are opportunities to be more efficient where the GBU touches the MDO, etc.
We still have -- the program we laid out at [Cagney] we are going to accelerate and we're going to broaden, and there's at least five-year timeline for that one.
Operator
John Faucher, JP Morgan.
Cecilia Trennis - Analyst
It's actually [Cecilia Trennis] on John's behalf, and we just have one question.
Most of the consumer companies actually are seeing organic revenue growth accelerate as they take more pricing.
What do you need to do differently in order to get your topline accelerated?
Clayt Daley - CFO
Well, I think that what we are saying is that the pricing we are taking is on top of the volume growth.
I think the scenario where our sales growth would be a little bit higher is if we could get toward the upper end of our volume growth range and of course if the price increases are fully reflected and we don't end up in a situation where we have to spend money back into the marketplace.
That's the scenario where organic sales growth could be on the upper end of our ranges.
Operator
Lauren Lieberman, Lehman Brothers.
Lauren Lieberman - Analyst
I still had a follow-up on the mix question because I don't really feel like it got totally answered, and then one on advertising.
On mix, it was -- the geographic mix was 1 point, but what were mix trends in developed markets?
Is that the other negative point of mix or it --?
Clayt Daley - CFO
Yes, yes, that's what we said, that we have seen some mix, some trade down to cheap, to lower-priced brands that are still P&G brands that have created some negative mix.
Lauren Lieberman - Analyst
Great.
A.G. Lafley - Chairman, CEO
Lauren, the other thing is there are really three things going on here, okay.
One is developing markets, which Clayt commented on.
The second is some trade-down, and the third one is our mix of categories, right?
When we do more baby and we do more family care, that impacts our mix.
Then, as John pointed out, when you look at it all from a profit standpoint, okay, on an earnings basis, we do fine because there are no -- there are really no negative mix effects when you get to the after-tax profit line.
So it's a little bit complex, but that's the way it's working.
As we continue to grow in developing markets, we are going to see this topline net sales mix impact.
Frankly, when you are in an economic period like this in Western Europe and the US, the staples businesses hold up better, right?
They are more stable.
People keep buying the staples every week and using them every day, so that means we see a little bit of negative topline mix coming from the household businesses.
Lauren Lieberman - Analyst
Okay, great.
Then the advertising piece, just you guys commented on advertising for the full year.
I wanted to know what advertising grew in the quarter and then as you think about next year, because it's a change in CMO, if advertising is becoming a target for more productivity.
Clayt Daley - CFO
No.
The answer is -- well, first of all, we don't disclose quarterly advertising spending as a percent of sales, so suffice it to say we spent 10.4% last year, which was the same as the year before.
Our plans for the coming year would be to sustain it at about that level.
Cutting advertising is not part of our plans to cut costs.
A.G. Lafley - Chairman, CEO
Yes, I mean our thrust is almost every year, we are right about at 10%, usually up a few ticks.
What's changing is the mix, which I think you understand -- obviously less TV -- although in developing markets, TV is still powerful.
The third thing that's going on is we keep driving the market mix modeling and the marketing ROI so when we spend that 10%-plus, we get more bang for it; we get 11% or 12% worth of bang for it.
In terms of the change from Jim to Mark, I guess I would say two things.
One, we are going to run the same brand-building and the marketing focused program with both guys that have been working together on reinventing brand building over the last year, and some of the productivity things that Jim started in marketing Mark will continue.
Clayt Daley - CFO
But the productivity things relate to people, not to advertising spending.
The advertising spending is fundamentally the decision of the business units.
Thanks.
Operator
Ali Dibadj, Sanford Bernstein.
Ali Dibadj - Analyst
So, maybe I'm the only one confused about this, but I love your clarification, particularly on the "restructuring" on Folgers.
A couple of questions there -- one is, so are you saying that $400 million that you're spending on the restructuring of Folgers would not have been spent otherwise without Folgers?
The reason I ask that -- that's the question.
The reason I ask that is it just seems a little disproportional to me that you're restructuring internally at $400 million for $80 some-odd billion of the business, sales of the business, and then for an extra (technical difficulty) --
Clayt Daley - CFO
Hello?
Sorry, we lost you.
Operator
One moment, please.
Ali Dibadj - Analyst
Can you hear me now?
Clayt Daley - CFO
Yes.
Ali Dibadj - Analyst
I feel like that commercial!
So did you get the question at all?
Clayt Daley - CFO
Let me see if I can be responsive to it.
You know, as we've said, we think the ongoing restructuring program will grow over time with the business, okay?
So, if Folgers hadn't happened, there's a chance that the restructuring program in fiscal '08/'09 would have been a little bit over $400 million, it might have been $400 million to $500 million versus $300 million to $400 million, $400 million to $450 million.
I don't know, but it might have grown a little bit, but it certainly would not have gone up to $800 million.
The increase to $800 million is directly tied to the Folgers transaction and our desire to rapidly deal with the stranded overhead costs and rapidly deal with the earnings dilution.
If you look at the $0.04 earnings dilution, which on an after-tax basis is about call it $135 million, on a pretax basis that would be close to $200 million.
I don't think the incremental restructuring, relative to the amount of dilution we are trying to mitigate, is off by a lot.
Operator
Jason Gere, Wachovia.
Jason Gere - Analyst
I was wondering if you can just give a little more clarity about the sales maybe by channel in the developed markets, and then talking about the role of incremental in-store communication to drive the innovation that you are bringing to the marketplace.
A.G. Lafley - Chairman, CEO
I think, Jason, are you most interested in the US?
Clayt Daley - CFO
Well, he said in emerging markets, didn't he?
A.G. Lafley - Chairman, CEO
I think developed, right, Jason?
You asked a question about our channel progress in developed markets (multiple speakers)?
Jason Gere - Analyst
Correct.
A.G. Lafley - Chairman, CEO
Okay.
Well, I mean, obviously, if you look at the monthly retailer reports and if you look at consumer shopping behavior over the last several weeks and months, what's going on is she is reducing trips, right?
She is consolidating her shopping.
That has advantaged the club channel, okay, where we have -- we are in a higher than fair share position.
For some shoppers, it has been good for discounters and I think obviously Wal-Mart has done reasonably well in this environment, and that's not surprising; they are well-positioned.
Then the other channel that I think has done pretty okay is the dollar channel in the US.
If you turn to Western Europe, it's still a story of discounters, okay?
The growth channel is the discounters, although what's changed versus a few years ago is the soft discounters are now growing faster than the hard discounters, which is good for branded manufacturers like P&G.
So the [Liedels] of the world are actually growing faster than Aldi and we are well represented in [Liedel].
We've spent a lot of time and effort building out our distribution with [Liedel] over the last few years.
So that's been the trend.
But I think you have to be careful not to look just at channels.
I mean, there are winners within each channel and in the grocery channel.
Some of the grocery players are actually doing quite well.
The second question was about -- remind me of your second question?
Operator
Just one moment.
Jason Gere - Analyst
(technical difficulty) thinking about more from the alternative channels from that perspective.
A.G. Lafley - Chairman, CEO
I'm sorry, alternative retail channels or (multiple speakers)?
Jason Gere - Analyst
Yes, looking at club, looking at mass dollar, from that perspective, more obviously to mass than to club, if there's any incremental in-store communication needed (multiple speakers) to drive the innovation.
A.G. Lafley - Chairman, CEO
Okay.
I guess I would say, I guess I would say three things.
One is we need to be strong in innovating where shoppers are shopping.
So, we follow the shopper, right.
The consumer is the boss; we follow the consumer with demand creation and with our innovation, and we follow the shopper.
The second thing is, clearly, there's been a shift -- and you've seen it from us and I'm sure you've seen it from other players in our industry -- to more in-store communication, more in-store marketing.
Then thirdly, I would say we are all experimenting, we are all experimenting continuously with what we need to do to generate more trial because I think I've said this on prior calls.
We still have a huge opportunity.
We have a $1 billion to $2 billion net sales opportunity.
We had a question earlier.
How could we accelerate our growth?
We could close our trial opportunity just on our current brands and with our current innovation that is in the market.
So we are experimenting continuously with in-store and out-of-store techniques to build trial faster.
Clayt Daley - CFO
Thanks.
Operator
Joe Altobello, Oppenheimer.
Joe Altobello - Analyst
In terms of the developing market growth, I'm just curious.
Why haven't we seen these emerging markets start to slow, given that a disproportionate amount of their incomes are typically spent on food and fuel, and that's where you're seeing a lot of the cost inflation?
Is the discretionary income growth in these countries overwhelming that inflation impact?
Looking ahead to '09, I know China is one country but typically what you see is, post-Olympics, the GDP growth of the host country tends to slow considerably.
Are you taking that into consideration in terms of your '09 guidance?
Clayt Daley - CFO
Well, I think the consumers who literally have had to shift their income to deal with higher food prices, the consumers who are that far down the economic spectrum are not heavy consumers of our products.
So I think, even in emerging markets, if consumers are making choices on what to buy because of higher food prices, at least so far, they are not choosing to reduce consumption in the staples category.
Those markets are continuing to grow at the rates they've been growing.
I think we've said before, we don't know how to predict this one.
Will these market growth rates continue forever?
No.
I mean, there will be a point at some point where we will start to see some slow-down strictly because of the law of large numbers, as these markets just get significantly larger bases behind them.
But at least for the moment, we have not seen slowdown and it would be difficult for us to predict it.
A.G. Lafley - Chairman, CEO
Joe, I think what's been going on is that there are, broadly speaking, three income levels that we are doing business with across developing markets.
I spoke about the highest income group; they tend to be in the biggest cities, generally two wage earners and incomes rising fairly fast.
I think what's been going on is sort of that developing market top-tier growth has been more than offsetting the developing market lowest-tier pressure that's come from food inflation.
We just have to watch that.
The other thing I think is important to understand is no two developing countries are alike, so what we do in China is different in important ways versus what we're doing in Brazil or Russia, Ukraine for example.
The third thing, I think Clayt makes the right point here.
We had a lot of questions about the volume guidance for next year, but we are just trying to be cautious all the way around because yes, there is uncertainty.
You know, the Chinese GDP is not a consumer-driven GDP, right.
So our consumer markets I think are growing about 7%.
The ones we are in, in China, their GDP has been growing at a rate faster than that.
But we are cautious, and we are watchful and we try to stay -- we are in the market every day and we just try to stay very close to consumers.
We try to stay very close to our distributors and retailers, and we try to be agile and flexible and adaptable.
Clayt Daley - CFO
Thanks.
Operator
Connie Maneaty, BMO Capital.
Connie Maneaty - Analyst
I have a longer-term question on restructuring.
I understand that the plan is to do restructuring on an ongoing rather than episodic basis, and the consolidation of distribution centers is part of that ongoing process.
But my question is are there circumstances under which an episodic charge might be more appropriate to move the organization to where it needs to be for a five to ten-year period, especially given the higher platform for commodity costs and the opportunity still to simplify?
Clayt Daley - CFO
I think that's a fair point.
If we had projects that were not funded, in other words if we had opportunities that the businesses had come to us and we were saying no, we are not funding projects because we are trying to keep an arbitrary restructuring budget, then I think it's an absolutely fair point as to why would you say no to good projects because of an arbitrary funding limit?
That has not been the case.
We have been funding all of the restructuring projects that have been coming to us from the various business units.
Therefore, there hasn't been, if you will, a capital constraint or a restructuring budget constraint imposed on the organization where we would be forgoing an opportunity.
A.G. Lafley - Chairman, CEO
Yes, if we had to recapitalize to move to a new technology platform -- you may recall we spent over $1 billion to re-platform baby care about ten years ago, eight to ten years ago.
We did a major re-platforming of Femcare.
If we had to do something like that, we would step up to it, but I think, if you don't have that, this is a much better way to run the railroad.
Clayt Daley - CFO
Right.
A.G. Lafley - Chairman, CEO
-- a lot more discipline, a lot more operating discipline with the way we've been running this the last eight years.
Clayt Daley - CFO
Thank you.
Operator
Filippe Goossens, Credit Suisse.
Filippe Goossens - Analyst
Good morning, A.G.
and Clayt.
A.G., I would like to go back to my question from the last earnings call related to Pantene in general and Brazil in particular.
Last year, our sources said -- what our own research indicated that you are going to make a big push in hair care, particularly with Pantene in that country, which has already resulted in the hiring of Gisele B1/4ndchen as your spokesperson.
Now, if you look at what's happening year-to-date, our sources tell us that the push in Brazil with Pantene has not been as strong as they had expected.
So the question there is has anything changed with regard to your game plan?
Then as it relates to the US, obviously disappointing reformulation of Pantene.
Now, in order to go back to your 3% to 5% organic volume growth for the beauty GBU, it is critical, in our opinion at least, that Pantene gets turned around as well.
What are your current plans there, A.G.?
Many thanks.
A.G. Lafley - Chairman, CEO
Thank you, Filippe.
First of all, I hope you understand that I really can't comment on our future plans because we are just not going to make an announcement to the market and our competitors (multiple speakers) probably paying attention to what we are doing.
But listen, on the main point that you make, I couldn't agree with you more.
I hope I've been very clear and very straightforward about this.
As well as our hair care business has done and a lot of our brands, as Jon reported earlier, are doing quite well, we did stumble in some markets.
You mentioned one of them, the US, on the last round of Pantene innovation.
We have new innovation going into the US market right now.
You will see innovation from us on Pantene across the US and in other markets around the world.
Regarding Brazil, we are in a testing period.
I believe our share is up; it's still relatively modest, mid-to high single digits, but we are learning.
It's a big hair care market, okay?
So eventually, we are going to have to have a position there, and we are in the learning phase.
I think I will leave it at that.
Clayt Daley - CFO
Thanks.
Operator
Bill Chappell, SunTrust Robinson Humphrey.
Bill Chappell - Analyst
Just a follow-up on the Folgers restructuring -- I guess should we read into the fact that no additional charges in 2010 expected mean kind of we are through with the rationalization of the portfolio, or at least of the major brands?
Also, with the share count, can you give -- I think you said there's a big share repurchase related to this deal.
Could you say what you expect the average share To be at the year-end fiscal '09?
Clayt Daley - CFO
The answer to your first question is this does not signal that there's an end to the evolution of the portfolio; we are not saying that we are going to do more than Folgers, but we are not sitting here saying that we are going to do nothing further.
All we can plan at this point is what we know.
We obviously know the impact of Folgers, and we know that we are planning to step up restructuring this year to offset it, and then next year right now we are planning to take that restructuring back down to about the prior level as a percent of sales.
So I would expect, in fiscal 2010, the restructuring program could be above $400 million but not a huge amount above.
Relative to the share count, you know, what's going to happen when the Folgers transaction occurs is we are going to exchange P&G shares for newly issued shares of Smuckers.
So what basically will happen is, at that time the deal is closed, there will be a substantial reduction in P&G share count that occurs with that transaction, and that's what we were talking about earlier.
(inaudible)
Clayt Daley - CFO
Yes, of course that's in addition to the ongoing, so if you think about share repurchase in fiscal 2009, we are going to do the $8 billion to $10 billion we had previously committed to, and then the share repurchase associated with the coffee/Smuckers deal will be on top of that.
But of course, that reduction in share count is factored into the dilution number for Folgers as well.
Operator
Alice Longley, Buckingham Research.
Alice Longley - Analyst
Just doing the math on the volume guidance, it sounds, for fiscal '09, that volume may be up something like 8% in developing markets, and may be down 1% in Western Europe and up 1% in the US.
Does that sound reasonable?
Clayt Daley - CFO
We can't call it that close.
Alice Longley - Analyst
Basically very little volume growth in the US and Western Europe?
Clayt Daley - CFO
Well, I think that it's modest; I would say it will be modest.
I don't think it's going to go negative.
Operator
Unfortunately, that's all the time we have for questions today.
Gentlemen, I will go ahead and turn the conference back to you for any additional or closing remarks.
Clayt Daley - CFO
Thanks for joining us again today.
As always, Jon Moeller, Mark (inaudible) John Chevalier and I will be around for the rest of the day.
I would be happy to take any questions and follow-up that you have, and thanks again for joining us.
Operator
With that, we will conclude today's conference.
Thank you, everyone, for your participation.