寶潔 (PG) 2009 Q4 法說會逐字稿

Good morning and welcome to Procter & Gamble's fiscal year-end 2009 conference call.

Today's discussion will include a number of forward-looking statements.

If you will refer to P&G's most recent 10-K, 10-Q and 8-K reports, you'll 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.

Free cash flow productivity is the ratio of free cash flow to net earnings, excluding the gain on the sale of Folgers business.

Core EPS refers to earnings per share excluding significant adjustments, tax reserves and the net impact from the sale of the Folgers business.

P&G has posted on its website, www.PG.com, a full reconciliation of non-GAAP and other financial measures.

Now I'll turn the call over to P&G's Chief Financial Officer, Jon Moeller.

Thanks, and good morning, everyone.

Welcome to Procter & Gamble's fiscal 2009 year-end earnings call.

AG Lafley, our Chairman; Bob McDonald, our Chief Executive Officer; and Teri List, our Treasurer, join me this morning.

I'll begin with a summary of results, after which Teri will briefly cover business highlights by segment.

AG and Bob will both comment on the business before we provide guidance.

We will, of course, take questions after our prepared remarks.

Following the call, Teri, [Mark Irsig], John Chevalier and I will be available to provide additional perspective, as needed.

Early in the fiscal year we just completed, we made and then remained committed to a few key choices.

These choices were designed to weather the economic crisis and build the strength of the Company for the long-term with the objective of coming out of the recession an even stronger Company than when we went in.

These choices, which we've shared previously, were to focus on cost and cash discipline, to protect the long-term structural economics of our business and invest for future growth.

They have served us well.

Against the backdrop of the worst economic environment in 50 years, we grew organic sales 2%.

We grew earnings per share 17% on all-in basis, earning $4.26, $0.01 above the high end of our guidance range and $0.03 ahead of consensus.

Core earnings per share grew 8% and were up strong double digits on a constant-currency basis.

Despite unprecedented cost increases and 50 basis points of Folgers restructuring, we held operating margin even with year-ago, maintaining the structural economic attractiveness of our business.

We generated close to $12 billion in free cash flow.

(technical difficulty) free cash flow productivity was 102%, well ahead of our 90% target.

We increased our dividend 10%, marking the 119th consecutive year we have paid a dividend and the 53rd consecutive year of dividend growth.

P&G's average dividend yield is higher than it has been in 20 years.

We repurchased over $6 billion in stock and retired an additional $2.5 billion as part of the reverse Morris Trust split merge with the Folgers and Smucker.

Most importantly, we continued to make investments in our future, strategic investments in capacity, incremental restructuring investments, industry-leading -- by a wide margin -- investments in research and development and investments to support our brands, spending more on advertising again last year than any company in the world.

Turning to the fourth quarter, macroeconomic conditions were worse than in the prior three quarters.

Global economic growth was negative.

Unemployment continued to rise in the US and across the world.

Market growth rates decelerated further and were negative in discretionary categories in Eastern Europe, the Middle East and China.

Foreign exchange continued to significantly impact sales and profits versus year ago.

These foreign exchange trends increased the cost of dollar-based commodities in local currencies, which we priced to recover in February and March.

The volume impact of these pricing moves impacted April and June.

All of these trends were reflected in our going-in guidance estimates, and results came in largely as expected.

Diluted earnings per share were $0.80, $0.01 above the high end of our guidance range and above consensus.

Core earnings per share was up 6% and up strong double digits again on a constant-currency basis.

Organic volume was down 4%, 1 point better than last quarter.

Volume was impacted by the pricing taken in developing markets, by market size contraction in discretionary categories and some share loss in developed markets, where price gaps widened versus competition.

Organic sales were down 1%, 1 point below our guidance range.

4 points of volume decline and 2 points of negative mix were partially offset by 5 points of pricing.

The combined price mix benefit was less than the prior quarter due to the annualizing of some price increases and targeted moves made in the fourth quarter to improve value.

Foreign exchange lowered sales 9%, leaving all-in sales down 11%.

Encouragingly, gross margin was up 90 basis points, reflecting price increases, moderating commodity costs and continued cost savings.

Operating margins were up 120 basis points on an all-in basis and over 200 basis points excluding Folgers restructuring costs as overhead productivity improvements and lower media rates more than offset volume deleveraging.

Cash results were very strong.

We generated $3.9 billion of free cash flow and free cash flow productivity was 159%.

With our structural economics in good shape, we are increasing investments in fiscal '10 to profitably grow market share.

Some of the head winds we have been facing will continue through the next quarter but then begin to annualize and even reverse.

The benefits of our investment program will also build sequentially as it's fully rolled out, so this year should be marked by sequential improvement.

With that, let me turn the call over to Teri.

Starting with the Beauty segment, organic sales were down 3%.

Organic volume was down 4% and net price mix added about 2% to sales growth.

Organic volume results were particularly soft in the central and eastern Europe, Middle East and Africa region, following several rounds of pricing to recover higher input costs and the transaction impacts from foreign exchange rate changes.

We also saw continued market contraction in the more discretionary elements of the beauty portfolio this quarter as professional hair care organic volume was off mid-single digits and prestige fragrances was down to low singles.

Importantly, both businesses have held or have modestly grown value share for the year.

In the retail hair care business, global value share is up nearly 0.5 points to about 24%.

In the US, shampoo and conditioner all outlet value share for the past three months was 30%, in line with the prior year.

Personal cleansing global value share was up modestly for the quarter at 7.5%, but organic volume was down sharply, due mainly to less promotional activity in North America and China following price increases taken last fall.

Global Skin Care value share is up nearly 0.5 points to 12%.

In the US, Olay Pro-X prorate continues to grow, approaching a 6% all-outlet value share on a past three months basis.

In total, Olay's share of US facial moisturizers is at more than a point to 46%.

Skin Care shipments were down versus prior year, primarily in developing markets, following price increases.

In Grooming, market contractions and inventory reductions continued to affect shipments, resulting in a 4% decline in organic sales.

Braun continued to bear the brunt of these impacts with shipments down more than 20%, given the more discretionary nature of home and personal grooming appliance purchases.

In blades and razors, the Fusion brand delivered a strong quarter with low teens increase in global shipments.

The strong Fusion volume results were more than offset by shipment declines on legacy razor systems, including Mach3.

Blades and Razors global value share was down about 0.5 points for the quarter due to the declines of legacy systems.

Importantly, global share of Fusion was up more than 2 points.

In Health Care, organic sales were down 2% and organic volume declined 5%.

In Personal Health Care, Vicks shipments were down sharply in developing markets following price increases and comparing against a strong base period that includes significant promotional events.

Vicks shipments were up modestly in developed markets, and US all-outlet value share was in line with prior year at nearly 11%.

In Oral Care, volume was down due to declines on Oral B caused by market contraction in power toothbrushes and trade inventory reductions following price increases.

Global shipments for the Crest brand were in line with prior-year levels, and global value share was up 0.5 points to 12.5%.

Feminine Care volume declined due mainly to the impact of trade inventory changes related to price increases in the CEEMEA and North America regions.

In CEEMEA, significant price increases more than offset a double-digit decline in unit volumes.

On a global basis Fem Care value share is down about 0.5 points but remained above 36%.

In the US, Fem Care all-outlet value share was up modestly for the quarter at about 50%.

We continue to innovate on both the super-premium and mid-tiers in Fem Care.

Always Infinity is above 6% value share in the US.

Naturella, which is positioned at mid-tier price points primarily in developing markets, grew double digits this fiscal gear despite significant price increases in the second half.

For the Snacks and Pet Care segment, organic sales were down 7%, driven by over a 20% volume decline on snacks.

The decline in snacks volume was driven by lower merchandising versus last year due to the Pringles can re-stage, which included pricing and a strong base period that includes several new initiatives.

Pet Care delivered solid organic sales growth behind higher pricing that more than offset a mid-single digit volume decline while Iams US value share was roughly in line with prior-year levels.

Recent innovations, such as Iams Proactive Health, Iams Premium Protection and Eukanuba Naturally Wild initiatives are all at or ahead of Company expectations.

In the Fabric and Home Care segment, organic sales increased 1% as a 4% decline in organic volume was more than offset by a 5% net benefit from pricing and mix.

Fabric Care shipments were down primarily due to market contraction in developing markets in Western Europe and share softness in the US.

Lower market shares were primarily driven by increased price gaps versus competitive brands, which we are addressing as appropriate.

Home Care shipments were in line with prior years, and solid growth on the Febreze, Cascade and Fairy brands was offset by a decline in Swiffer.

In the US, Febreze share of the Instant Action Air Care market was up more than 3 points to nearly 25%, driven by a strong combination of innovation, trade support and marketing programs.

Swiffer US value share improved more than 1 point behind product upgrades and a new marketing campaign to renew consumer interest in the category and to increase trial Swiffer starter kits.

Battery shipments were down double digits due to market size contraction and share challenges in both developed and developing markets, due mainly to heavy competitive promotional activities.

Baby Care and Family Care delivered solid organic sales growth of 4%.

Volume was in line with prior US pricing, adding 4 points to the sales growth.

Global Baby Care shipments were in line with prior-year levels as strong growth in Western Europe behind Pampers Simply Dry [to the] tier three initiative in Germany was offset by declines in developing markets due to market contraction.

We are expanding Simply Dry to key European countries in the September quarter.

Pampers diapers value share in Western Europe was up about 0.5 points to a 54%, and in Germany the diaper value share was up nearly 5 points to 62%.

In the US, P&G's all-outlet value share of diapers was up 0.5 points to 35%, as growth on Luvs more than offset a modest share decline on Pampers.

Family Care shipments were in line with prior-year levels despite increased competitive activity that caused some market share softness in the quarter.

US all-outlet value share for Charmin was down by about 1 point, and Bounty was down about 0.5 points on the quarter.

Both brands remain clear market share leaders with Charmin at 27% of the US bath tissue market and Bounty at over 45% of the paper towel market.

That concludes the business segment review, and I'll hand the call over to AG for his comments on the year.

Thank you, Teri.

When we started this decade in 2000, P&G faced some of the most demanding challenges in our Company's long history.

We focused then on the few critical strategies and choices necessary to get P&G back on track to long-term sustainable growth.

As Jon mentioned, we faced even greater challenges in fiscal 2009 as we encountered one of the most difficult economic environments in decades that placed tremendous pressure on our business.

We incurred roughly $2 billion in net incremental commodity and energy costs this year on top of over $1 billion in incremental costs last year.

Foreign exchange reduced P&G's fiscal 2009 sales by about 4 percentage points, or approximately $4 billion.

The foreign exchange impact on profit was over $1 billion.

Consumer spending declined, and growth in the broad majority of categories in which we compete slowed from 3% to 4% over the last several years to 1% to 2% for the full fiscal year and to essentially flat during the June quarter.

As Jon also mentioned, we made a couple of critical choices to deal with this macroeconomic environment and to balance near-term results with long-term growth.

We chose to focus on cash and cost management, to protect the long-term structural economics of the big four categories we lead and to invest to build the strength of the Company over the mid- and long-term.

We increased prices to recover commodity costs and foreign exchange transaction impacts.

Despite $4 billion in price increases, we basically held global value shares across the majority of our categories, which is a reflection of our brand strength with consumers and retail customers.

We knew that increasing pricing would lead to short-term share volatility and even some share loss.

We were willing to accept these short-term consequences to maintain investment-grade structural economics.

We made the cash utilization choices necessary to maintain our strong credit rating, and we rigorously reduced costs and increased productivity.

More than any other factor, this discipline on cash and cost ensures that P&G will have the agility and the resources to invest in growth even in the most demanding economic environments.

We have been focusing our investments on brand-building and innovation.

We targeted investment on our core brands -- the 23 $1 billion brands and 20 $0.5 billion brands that accounted for 85% of sales and more than 90% of profits.

We are supporting this portfolio with strong consumer communications programs that emphasize the powerful performance-based value P&G products provide.

We are also continuing to drive innovation that improves consumer value across all price tiers.

We spent over $2 billion on R&D this year, nearly twice the average of our major competitors.

Our Connect and Development program multiplies these dollars even further by allowing P&G scientists and researchers to access and leverage the best external ideas from entrepreneurs, universities, foundations, institutes and other companies.

These innovation investments generate results, as reported in the IRI New Product Pacesetter Report, which ranks the most successful US new product introductions as measured by annual sales.

This past year, P&G had five of the top 10 new product launches in the US and 10 of the top 25.

Over the past 14 years, P&G has had 114 top 25 Pacesetters, more than our six largest competitors combined.

We continued to make strategic investments in capacity, particularly in manufacturing capacity to support longer-term business growth.

Last year we spent more than 4% of sales on capital, funding investments in 10 new manufacturing facilities around the world.

The choices we made this year are reflected in our results.

We delivered strong free cash flow and delivered organic sales and earnings per share results that balance short-term return with the necessary investment in the longer-term.

In this difficult macroeconomic environment we must continue to deal with what is in front of us by being agile and financially strong.

Doing so will allow us to adjust to multiple scenarios in the near and midterm.

We believe P&G is well-positioned to do this because we have designed P&G to lead with clear strategies, the core strengths required to win in our industry, rigorous cash and cost discipline and the most diverse and experienced leadership team in our Company's history.

As John, Bob and I have previously described, we've designed a plan for next fiscal year that acknowledges existing economic reality while further accelerating investment in innovation, in our brands and in improved value to profitably drive share growth.

With that, let me turn it over to Bob.

Thanks, AG.

In addition to the choices Jon and AG described, we have been renewing our strategies for future growth and identifying the few critical interventions that can significantly strengthen our business.

We have been doing this with our purpose in mind.

Our single unifying growth strategy is tightly linked to our purpose.

We will grow by touching and improving the lives of more consumers in more parts of the world more completely.

In order to accomplish this, we will first continue to grow our core brands and categories; second, build business with underserved and unserved consumers; and, third, continue to grow, develop and acquire faster-growth, higher-margin businesses.

We will create abundant growth opportunities in each of these areas.

We will continue to focus sharply on our core businesses and brands because this is the primary way we touch and improve lives, and there is plenty of room to keep growing our core brands and categories.

First, in Global Household Care, it's a $200 billion market, and our global share is about 20%.

Second, Beauty and Grooming is a $300 billion market, and P&G is leading, but with only a 13% share.

Third, Consumer Health Care is a $240 billion market, and P&G just has a 5% share.

We will focus on profitably growing market share across each of these businesses in the coming year.

Our second where-to-play strategy is to win with underserved and unserved consumers, and we'll do this in three ways.

We will increase our presence in emerging markets.

The opportunities here are boundless.

86% of the world's population is in emerging markets.

Our emerging market sales are about $25 billion today.

This is more than five times the average emerging market sales of our major competitors.

However, emerging markets represent nearly 40% of sales for some of our largest competitors, while they represent only 30% for us.

We are confident we can grow the percentage of our business coming from emerging markets.

We will dramatically increase the percentage of total Company sales from these markets by focusing on the affordability and accessibility of our products and by building consumers' awareness of the performance, quality and value of our brands.

Our strategy for emerging market growth targets expansion in product categories that will accelerate per capita spending on our products in each market.

The second choice for making the win with underserved and unserved consumers is to strengthen P&G's presence in channels where we are not as strong today as we want to be.

We are pursuing opportunities in several areas.

The drug, pharmacy and perfumery channels represent a significant opportunity across many parts of our business and a strategic focus for Beauty and Grooming.

High-frequency stores are also a huge opportunity.

Today high-frequency stores would be our single largest customer if they were a single retailer.

We see abundant room for continued expansion in this channel.

Our consumers' boss focus means we must be available to consumers when and where and they seek to research or purchase P&G products.

Increasingly, that's online.

We do about $0.5 billion in e-business today, and we believe we can increase that substantially over the next few years.

We see e-commerce as part of a broader effort to establish online connections with consumers that build our brands and our business with retail partners.

A third action we are taking to serve more consumers is to create broader and deeper product portfolios.

To do this, we will continue to expand our categories vertically into the premium end of our markets, as we have done successfully with Olay Pro X, Always Infinity, Tide Total Care, Ariel XL Gel, Clairol Perfect 10, Gillette Fusion, Venus Embrace, Crest White Strips Advanced Seal, Crest Pro-Health Enamel Shield, Pampers Extra Protection, Dawn Hand Renewal, Secret Clinical Strength and Cascade ActionPacs.

By bringing better performing, specially targeted products to market, we will increase consumer value and drive category sales for retailers.

We will simultaneously expand our portfolio deeper into the value price segment.

The successful launches of Mach3 Disposables, Pampers Simply Dry in Germany and the United Kingdom, Naturella in Saudi Arabia and Kazakhstan and [Achay] laundry detergent and Salvo dishwashing detergent into Brazil are just some recent examples.

We will also expand our core brands horizontally into adjacent product segments -- Align, Bounce Dryer Bar, Tide Stain Release, the Febreze Home Collection and Dolce & Gabbana makeup are some good examples of this.

As we expand our portfolio vertically and horizontally, we will touch more consumers' lives and offer more opportunities to improve each consumer life.

Our last growth strategy is to continue to develop faster growing, structurally attractive businesses.

This is something we have been doing.

At the start of the decade we took the decision to shift our business portfolio toward more beauty and personal care businesses.

Over the past decade the percentage of sales in Beauty and Grooming increased from 18% to 33%.

Beauty, Personal Care and Health Care have accounted for nearly two-thirds of sales and profit growth in the past eight years.

One of the ways we've done this is by making smaller talk-in acquisitions such as Frederic Fekkai, Nioxin, the Art of Shaving, Zirh, to help round out our portfolio.

These three strategies -- growing our core brands and categories, building business with underserved and unserved consumers and continuing to grow and develop high-margin businesses, are the right growth strategies for the foreseeable future because we can continue to do what we know best in spaces where we have room to grow.

We can leverage our capital by sticking with strategies that are proven, such as growing from our core.

At the same time, we will seize opportunities by focusing on areas that present the greatest potential to win and grow.

We are focused on an approach to growth that balances continuity and change, preserving and strengthening what's working where we can and leading change where we must.

We will leverage our core strengths in consumer understanding, innovation, brand building and go-to-market capability in pursuit of these growth strategies.

P&G is the industry leader in consumer research and understanding.

P&G interacts with more than 4 million consumers each year in nearly 60 countries around the world.

We conduct over 15,000 research studies per year.

We spend over $350 million a year on consumer research.

This results in insight-driven knowledge that tells us where to innovate.

As AG described, P&G is the innovation leader in our industry.

Virtually all of the organic sales growth we've achieved in the past nine years has come from innovation.

As AG also described, P&G is the brand-building leader of our industry.

We have built the strongest portfolio of brands in the industry.

We have established industry-leading go-to-market capabilities.

P&G is consistently ranked by leading retailers as the preferred supplier and as the industry leader in our wide range of capabilities, including company strategy, the brands most important to retailers, business fundamentals and innovative marketing programs.

We are also elevating simplification, scale and execution to how-to-win strategies.

These are the key improvement areas where believe we believe we can create the greatest value and competitive advantage.

Execution is, of course, the only strategy our customers and consumers ever see, so we must do it with excellence, always.

Simplification is a critical focus and a disproportionate opportunity.

Since I joined P&G in 1980, we have grown from a $10 billion company to an $80 billion company.

We continually strive to keep our systems simple and workable, but inevitably size brings greater complexity.

Driving out this complexity requires conscious and deliberate effort.

Our simplification efforts have one goal, and that's to make it easier for each P&G employee and business partner to improve the lives of more of the world's consumers.

We must remove the costs of complexity so our brands are more affordable.

We must communicate simply and collaborate seamlessly inside and outside of our Company.

We're reducing senior management positions and layers and improving decision-making by simplifying our organization structure.

We're also making other important [interventions] to simplify our business processes.

We want to become a $100 billion Company with the speed and agility of a $10 billion Company.

We consider scale to be a tremendous asset.

We have scale advantages as a total Company at our brand and category levels with retail customers and in geographic regions and markets.

Internally, we also have technology and knowledge scale advantages because of the size and diversity of our product technology portfolio and our organization.

We reap substantial benefits from these advantages today, but we know we can create more scale and leverage it more comprehensively across our business.

For example, we are building broader and deeper category, country and retail channel portfolios.

We're also coordinating cross-category initiatives and plans to win in multiple markets around the world.

There are other opportunities.

We are designing and delivering faster, bigger, fewer and better product initiatives so we can generate bigger in-market wins and greater returns on our innovation and brand-building investments.

We are leveraging scale efficiencies to deliver best-in-class cost structures throughout our business.

We are using our R&D and supply chain scale to create alternative materials that minimize exposure to volatile commodity markets.

We are creating the technology infrastructure to rapidly transfer best-in-class knowledge across our global organization.

And there are many, many more examples.

I am confident this focus will yield dramatic benefits for our Company.

Our last how-to-win strategy is continuing to strengthen the breadth, depth and quality of leadership at all levels of the Company.

We are becoming an even more collaborative organization inside and outside our Company.

We are getting flatter, faster and simpler.

We are making the investments to be networked globally and digitized from end to end, and we are building the capability to operate on a demand-driven, real-time, future-focused basis every day.

Becoming this kind of organization requires new leadership skills and behaviors, and we are building these.

In today's economic environment many companies are cutting back on investments in their people.

P&G is increasing its investment.

We know without a doubt that P&G people are our most important asset, and we will continue to invest in their growth, their capability and their productivity.

AG and I both believe the decade ahead has the potential to be one of the strongest decades of growth in the Company's history.

We're serving about 4 billion people in the world today.

That's 1 billion more people than we were reaching at the beginning of the decade and at least 1 billion less than the number I'm committed to serving in the decade ahead.

We know that P&G products touch and improve people's lives in meaningful ways.

People tell us and show us when we visit them in their homes, when we shop with them in stores, when we listen to their calls and read their e-mails.

When we spend time with the people who trust and use our brands, we come away inspired every single time.

The opportunities are there, and I believe we have the right strategies, capabilities and plans to improve the lives of more consumers and create significant value for our shareholders.

Before I turn the call back over to Jon, let me address the fiscal year immediately in front of us.

We are increasing investment to drive portfolio profitable share growth.

We're investing behind our core brands, increasing support versus year-ago levels.

We are addressing uncompetitive pricing spreads market by market, SKU by SKU.

We are increasing the number of low-tier offerings, including the expansion of Pampers Simply Dry and Naturella, to more markets.

We are bringing significant and in some cases revolutionary innovation to market.

We will leverage recent innovations like Olay Pro X and Always infinity.

And we will enter additional category and white space country opportunities.

As AG said, we are willing to accept near-term share loss as we rebuild the structural economics and long-term attractiveness of our categories.

This was not something we would accept on a sustained basis and isn't something we will accept this year.

Now back to Jon.

Thanks, Bob.

As Bob and AG have both mentioned and as we have discussed previously, we've structured next fiscal year plans to reflect current economic reality and support investments to profitably drive share growth.

Our fiscal year organic sales guidance is unchanged at 1% to 3%.

This reflects current market reality and assumes share growth.

Foreign exchange is expected to impact all-in sales 0 to minus 1%.

This is a modest improvement versus the minus 2% to minus 3% impact we communicated towards the end of May.

Our guidance on earnings per share is also unchanged at $3.65 to $3.80 per share.

We are using recent foreign exchange help to bolster investment plans.

The first quarter will remain challenging.

Sales and profits will be impacted by a base period which included significant volume pull-forward ahead of commodity-based pricing taken in the fall of 2008 and gains on the sales of ThermaCare and the Noxzema brands.

Foreign exchange will also represent a strong year-on-year headwind in the first quarter.

We expect first-quarter organic sales growth of between 0 and minus 3%.

Foreign exchange will reduce all-in sales by about 7%.

Earnings per share are expected to be between $0.95 and $1 per share.

The year will improve sequentially as we get past the July-September base period as our investment plans are fully fielded, as savings accrue from additional restructuring spending and, finally, as foreign exchange annualizes and then, at current spot rates, reverses in the back half.

We'll continue to target 90% free cash flow productivity.

We'll resume share repurchase later in the fiscal year, once we see our plans taking hold.

While we will target a meaningful level of repurchase, the lower earnings level in 2009 and 2010 and our focus on business investment as a primary use of cash may result in 2010 share repurchase below the $8 billion threshold that was established prior to the global crisis.

The earnings per share impact of any likely share repurchase level is fully reflected in our earnings per share guidance range.

AG, Bob, Teri and I would now like to open up the call for questions.

(Operator instructions) Nik Modi, UBS.

Bob, I just wanted to congratulate you again for your new designation.

Thanks, Nik.

As I've said to everyone who's said that, I think congratulations are premature.

I've been congratulating AG, who I think has been one of the best CEOs in P&G's history.

We've reached more consumers, touched and improved their lives.

Congratulations to me will be appropriate only after we get to that next billion consumers and touch and improve their lives.

But thank you very much, Nik.

So, just to talk about the incremental investment spending as you start fiscal '10, in July -- and maybe it's a little early -- but can you share any early perspective in terms of how those spending efforts are bearing fruit in terms of how you think about narrowing price gaps in certain categories, certain regions and you look at incremental distribution?

Any thoughts for us as the new year starts?

As you indicated, it is early, and our plans will unfold as the year progresses, and some of them are very significant, and we really don't want to be disclosing them prematurely.

But there's a lot we can talk about.

The investment is really focused in several areas.

First, as Bob mentioned, we will be expanding the number of low-tier product offerings that are available to consumers in many markets.

We've talked about Pampers Simply Dry previously, which built 5 share points for Pampers in Germany; it's a mid-tier diaper.

We are currently expanding that to the UK, France, Spain, Austria, Switzerland.

We'll be bringing the Naturella mid-tier feminine protection brand, as Teri mentioned, to additional countries as well -- China, Saudi Arabia, some additional Western European countries.

And we'll be sharpening price points selectively in several markets and several product categories.

At the same time, we'll be increasing trial and footprint of our value-enhancing performance-based premium-tier offerings of products like Crest Pro-Health, which we'll expand across the Crest footprint this next fiscal year; Tide Total Care, Always Pro X, which was just introduced, really leveraging all of those innovations to drive more trial and to increase the footprint across which those products are offered.

We will be increasing marketing support on our core brand portfolio, and we'll be expanding the portfolio horizontally as we enter new -- we'll bring new products into adjacent segments.

So one that's on the market that we can talk about now is Tide Stain Release, the same essential product that's being offered across Europe.

It's called Ariel Professional, and it gets P&G, for the first time, into the stain treatment/laundry pretreatment business, which is very exciting for us, and early support for that is very strong.

And beyond just the product initiatives, Nik, we're also going to be investing over $500 million to $600 million after-tax in the next year in our efforts to improve the organization.

We talked about simplification, the use of technology.

We have other restructuring spendings that we are going to be taking in order to create this flatter, faster, more agile organization in order to grow and touch more lives.

Really, I wish I could talk to you today about more of what's coming because there really are some exciting things, and I think this year is shaping up to be a pretty exciting year from an investment standpoint.

Nik, just to finish this up, one of the obvious issues in the April-June quarter was we were very light on innovation and new product initiatives.

And you're just going to see a pickup in the pace.

And I think you know, we invest behind innovation.

Lauren Lieberman, Barclays.

I had a question on mix, actually, because it has been, I'd say over the last year or so, interesting to me that mix -- actually, plus -- yes, we can go back two, three years -- that mix wasn't more positive, given where a lot of your growth came from, and then it didn't turn more negative sooner, given the shift in the macro and how people are spending money.

This quarter that changed.

Mix became more negative, and I'm wondering also if, looking into the next two or three quarters, is your expectation is that mix stays around this kind of minus 2 type thing?

And then, what is it that changed, or is it more about what you are emphasizing in your merchandising activity?

Actually, price mix was plus 3 in the quarter, I think.

I'm sorry; I mean just mix.

Yes, mix was minus 2; right.

I think on the -- let me do the price mix, and then I'll do the mix.

Okay?

On the price mix side, what you are seeing is value adjustments, all right?

We led the pricing up in virtually every category.

In most of these categories, we have the brand leader.

And as the price went up and as it settled out at retail and as we saw what customers and competitors were going to do, we had been making adjustments.

And those adjustments began in the April-June quarter, are continuing in July.

And hopefully, we'll have them done by the end of this quarter.

But that's obviously impacting the price mix.

On the mix number alone, I mean, part of that is emerging markets, right?

And part of it is this still out of the portfolio.

As we vertically fill in more of the economy and value segments, there are three or four price-value tiers in each of our categories or industries.

And as we fill out the portfolio, as Bob and Jon were talking, we are going to have some negative mix in those categories where the fill-out is in the economy and value segments.

But overall, it's going to attract more consumers, we believe.

And overall, it should lead to the profitable share growth of that Bob and Jon have been talking about.

John Faucher, JP Morgan.

You talked a lot about the innovation behind the incremental spending.

Can you give us an idea in terms of how much of that incremental spending is going behind new products and innovation?

Is it a nice balance between the existing portfolio and the innovation?

Or, should we expect just a huge push behind the innovation?

And then, finally, housekeeping question, which is the Q1 guidance talks about continuing operations.

Does that mean -- of $0.95 to $1.

Does that mean there's no charges in that number and the gains aren't in that number?

If you could just clear that up?

Thanks.

In terms of the question on the balance of investment next year, it's really balanced across three items -- one, commercializing and expanding innovation; two, increasing market support on the core existing brands and products; and, three, frankly, is increasing competitiveness in some categories where we're not at the value equation we need to be.

So you will see activity pretty evenly spread across those three sets of activities.

Your question on the first quarter -- there's nothing untoward in that number.

It's a clean number.

So continuing operations is the same as the all-in number for the first quarter.

Bill Schmitz, Deutsche Bank.

First of all, the shackles in the balance sheet in terms of maintaining investment grade credit -- I know that kind of inhabited some of the stuff you could do this year.

Are we done with that?

And then, the commodity outlook for fiscal '10?

And then what happens -- I know you want to change lives, but what if people can't afford to change their lives?

It kind of seems like that's kind of happening now.

So if that sort of [privatization] even trades into some of these categories, doesn't happen, is there a plan B?

I'll try to answer your first two, and I'll have Bob address the third part of your question.

You, actually, I think, you effectively snuck in three questions here.

But they're all good ones.

First, the only thing that was constrained by the shackles that you described related to our credit rating was a share repurchase itself.

And the only constraint there was it kept us from going above the minimum amount that we've committed to, to a higher number.

But, for instance, we spent more on capital, which is cash and straight out the door, last year than we spent in any year in our history.

And there are no unfunded projects in that regard.

So I would just encourage you not to view that as an issue because we certainly don't.

The only thing that constrains is the level of share repurchase.

Commodity costs will clearly be a benefit starting next quarter.

We'll see, whereas this year we had about a $2 billion increase in commodity costs year on year, next year we are looking at about $1 billion of health, again based on current spots in obviously what continues to be a very volatile market.

And that is health behind that will be investing behind the three sets of activities that we just talked about previously.

Bob, do you want to --

Yes.

Relative to the improving lives, Bill, we think we can do that, and we can do that profitably.

We have value tier offerings in most of our core categories now.

We talked about Pampers Simply Dry, for example, and the expansion of that.

We talked about Mach3 Disposables, gain in Luvs in North America, are all good examples.

One of the things we've learned is that, in order to improve the lives of people that tend to be toward the bottom of the economic pyramid, you have to innovate for the best consumer experience for those people.

It's not a matter of trickling down higher-tier technology.

A great example of that is Downy Single Rinse, which we began developing in the Philippines some years ago.

This was an opportunity for Filipino consumers who rinse their clothes five times with clear water in order to get rid of the soap, to use a product that added fragrance, some degree of softness, but also, importantly, sequestered the suds that were in the water and allowed them to go from five rinses to one.

And basically, the product pays for itself because of the water that they save.

So it's great for the consumer, it's great for the environment, and frankly, it's virtually free for the consumer versus their previous practice.

We designed that knowing the Filipino consumer experience.

And that's what you have to do if you're going to innovate for people at the bottom of the economic pyramid.

Joe Altobello, Oppenheimer.

In terms of the organic sales miss in the quarter, you touched on this a little bit.

But I just wanted to drill down a little bit on some of the categories of brands that most surprised you in the quarter.

And secondly, a modeling question -- the tax rate you are assuming for your guidance for fiscal '10?

First of all, in terms of the miss in the quarter, that was really due to primarily widening price gaps, which we've talked about addressing as part of our investment plan.

And it would be, frankly, inappropriate for us to comment on the category of brand specifics there.

But we've taken several moves recently that have been announced, one in our family care and tissue/towel business.

We've announced moves on parts of the portfolio for laundry as well as to address price gaps.

So those are the ones that have been announced.

In terms of the tax rate, going forward we've talked about a long-term tax rate of 27% to 28%.

And I would view that as being inappropriate rate to model for next year.

Bill Pecoriello, Consumer Edge Research.

With the organic sales lagging the category by the 1 point in the quarter, your 2010 plans are clearly calling for market share gains, I guess growing about 1% or 2% ahead of the category growth.

So what are you going to be watching to gain confidence at the magnitude of that investment that you have for 2010 that you've detailed for us, that it's going to be the appropriate level to accomplish the goals?

Is it simply going to be watching those value share trends?

That's a great question, Bill.

We have this goal of building market share profitably, broken down by building block, by key customer, by key geography, by key category.

And we will be tracking it on a day-to-day basis.

We basically are trying to create an organization that operates globally in real time, and we will be tracking and reacting to it, focused on the goal of building market share profitably.

And we have the tools to do that.

Wendy Nicholson, Citi Investment Research.

I know we're just at the very beginning here of fiscal 2010, but I kind of wanted to look forward to fiscal 2011.

Consensus estimates are looking for, I think, a 12% increase in earnings growth.

And I guess my concern, thinking out that far -- obviously, there's a lot, macro, that can change with FX and commodities.

But some of the investments and some of the changes you are making to the organization, things like R&D spending and whatever, and particularly the investments emerging markets strike me as maybe multi-year investments that aren't necessarily going to be funded in the first half of 2010 and pay off in the back half and, boom, we're off to the races in 2011.

So can you talk a little bit more about your long-term earnings growth rate and whether you think 12% in fiscal '11 is a realistic target?

Well, I'd say a couple things, Wendy.

First, as you know, we've provided no guidance beyond 2010, and really won't be in a position to do that until we get a better feel for the directionality in market growth.

And that's really what I would encourage you to focus on as you think about what the ultimate earnings level is likely to be, going out.

It's really going to depend on what happens to the broader economy.

That's going to be a much bigger driver than any single investment that we are making.

I see our investment plans as continuing to sustain themselves, but I don't see them, in themselves, continuing to be a drag year on year beyond this year.

Wendy, we've been in the business for 171 years, it will be 172 in October, and we really do look at the business over the long-term, and we try to balance the investments we want to make with the results we want to deliver, always focused on the long-term.

And just like we've invested during this economic crisis globally and that we've talked about this fiscal year being a year of heightening that investment, we are going to continue to invest in the business and in the people of the organization, in order to achieve growth over the long-term.

So we really are focused on the long-term.

Just a couple of things to think about -- you know, if you step back and look at our results this last year and even in the fourth quarter, there has been a fair amount of contraction in the beauty industry.

But in virtually every segment we build share -- hair, skin, fragrance, which had a miserable year -- cosmetics, even personal cleansing, okay, we build share.

That's going to come back.

As economies come back, that consumption is going to come back.

And I think some of the consumer behavior changes which involve channel shifting and involve consumers trying our kinds of brands and products, who hadn't tried them before -- they are going to stay with them because they like shopping in the channel and they actually like the performance of Olay and Pantene and Perfect 10, etc.

So that should be momentum that we continue.

On your other point, I just want to make sure that you all understand this.

We don't just turn on the investment for emerging markets.

We've been increasing it every year.

And under Bob's and the team's leadership, they are going to accelerate, okay, again because it's so much of the growth, okay, and we are driven by babies born, households forming and incomes rising.

But this investment in accessibility in distribution and infrastructure and affordability has been going on for well over a decade.

What we're doing is just accelerating it.

So I don't think you are going to have a long wait to see some of those returns.

They're going to begin to improve.

And the other piece -- perspective I'd give you -- we have talked about, this year, both in the quarter and in the fiscal year, that excluding foreign exchange we are delivering earnings per share that are actually double-digit.

And as we release guidance for next year, we indicated that -- again, on a constant currency basis -- earnings per share growth would be high-single digits.

So in a normalized environment, we are still generating very attractive earnings growth.

Connie Maneaty, BMO Capital.

Bob, you said, I think, that the decade ahead might be one, or you are hoping or planning that it would be one of the strongest in the Company's history.

At least that's what I wrote down.

If it's not, let me know.

But can you quantify anything about that, either sales growth or margins or EPS, how do you see it evolving over time?

No.

Consistent with Jon's last comment, we haven't provided guidance out that far.

But I think AG, John and I and the leadership of the Company, the Vice Chairman, we all see the next decade ahead as one with as much if not more potential as the past decade.

When I think of the potential that we have, we are in markets, as I said, that are well over $200 billion in sales, and we have anywhere from a 5% share in health to maybe a 20% share in household.

So the growth potential is immense.

There are countries in the world where we are not yet in.

There are categories that we are not in.

So this idea of filling out our portfolio of country, category and then vertically within the category amongst price tiers is really what we have been focused on.

The vice chairs, AG, Jon and I, have been working on this new strategy which we call continuity with change for well over a year now.

As we've said before, Procter & Gamble takes succession planning very seriously.

We've been working on this new strategy for over a year now, and I'll be talking more about it at the back to school conference.

But this is the plan.

This is what we see ahead, and we are all excited about it.

Chris Ferrara, Banc of America-Merrill Lynch.

I just wanted to bring it back to competitive pricing again.

I know it's beating a dead horse here, but you guys have made a bunch of comments in the conference call and in response to other questions.

It kind of feels like maybe things are stepped up.

I know previously you had described pricing actions as still kind of surgical.

And now you are saying that places were sales may be fell short or because of competitive pricing.

Jon, I think you said some of these things are big.

And it just feels like the tone has changed and that maybe pricing is a bigger piece than what you thought or a change in price gaps is a bigger piece than you thought.

Is that right?

Am I reading that wrong?

I don't think it's changed.

I think value is more important.

Let me try to frame this a couple of ways, Chris.

First of all, we are talking about less than 10%, maybe even less than 5% of the total portfolio, where we are adjusting prices.

And as Bob said, it's by category, by brand, by SKU, by channel.

So it's still extremely surgical.

And we are just in the normal cycle of things.

We had to price for commodities, then we had to price for currency.

All right?

And commodities in the first half, currency and developing markets in the second half.

We know it takes six to nine months for pricing to settle out through the channels and through retail with all of the customer moves and all of the competitor moves, and then you start dialing in the refinements.

The second point that I think is incredibly important to understand is, it's definitely more about consumer value, but consumer value isn't just about price.

Consumer value is about brand and benefits and performance and price.

And in virtually all of our industries, there are three or four value-price tiers -- that's what we call the vertical portfolio -- and there are three or four benefit segments.

So in a four-by-four matrix, you've got 16 different consumer segments.

They are all buying what they think is the best value.

So the woman buying Olay Pro X thinks she's buying the best value for her, and the woman buying the most basic complete moisturizer that we sell at $5 to $10 think she's buying the best value for her.

The reason why Bob and the team think there's so much potential here is, while we thought we had extended our portfolios -- and we had, versus where we stood before going into this recession -- as we really got into it over the last year, we see a lot of opportunities to fill out these portfolios vertically and horizontally.

And that's a value issue more than it's just a pure price issue.

Occasionally, you run into these silly discounting things.

Frankly, I think one other thing I would add, I think most of that's behind us.

We had a couple of customers that I think would admit that they went too far, chasing the trade-down.

And if you look at what some of the big customers have done, they are now trying to dial it back in.

Ironically, one of the segments where we actually lost a little bit of share this last year was the super premium segment.

Okay?

We held our own in most of the other segments.

So, it's about value.

I think value has gotten more important, and we need to deliver value across the value price tiers and across all of the benefit segments.

And if we do that, there's a lot of opportunity here.

Ali Dibadj, Bernstein.

I feel like there's a little bit of an inconsistency in what I'm hearing, and maybe it's just me.

So I'd love some clarification on it.

On the one hand, things are fine ex-currency; I heard that from Jon.

Things about the economy -- except for the economy being bad, things are okay.

Pricing is going to be a little surgical, on the one hand.

On the other hand, hearing, look, we're losing share.

We are going to be more aggressive -- actually, I never really heard the word aggressive.

But we're losing share, we have to do things differently.

And I guess my question is, are your plans today different than they were six months ago?

If they are different, how different?

What triggered that, and when?

And if they are not different, how can we really have confidence that you're actually going to see some improvement in share, which seems to be what you are going to measure?

Let me say one thing about the past, and then I think Bob should describe how the plans are different because they are meaningfully different.

Ali, if you think about the last year, the reality is we took a little bit more of the commodities headwind because of our big Fabric Care business.

We took a little bit more of the currency and recession hit because of our big developing market business, especially in CEEMEA.

We took a little bit more hit than many of our competitors because we are sitting in a few more discretionary categories.

Okay?

We talked about fragrance, but we also have salon.

One is certainly discretionary, and arguably, some of the devices that fuel battery consumption are discretionary, and that's why we saw the falloff in the batteries market.

And frankly, we took a little bit more of the trade inventory hit because it's a lot easier when you are pulling something off to pull off the leading brand, pull one item, pull one cartridge off the peg on Blades and Razors.

Okay?

So that's just the reality of the world that we had to deal with.

We're also the leaders in two-thirds to three-quarters of these industries or categories, so we had to lead the pricing up.

So we exposed ourselves a little bit there.

But the truth of the matter is, while we performed well head-to-head in some of our categories, we frankly aren't performing that well in some of our others.

And we didn't do very well in Snacks.

We're not doing very well in Batteries.

Blades and Razors isn't all that hot.

We did well in Fusion, but we didn't do well in female or in disposable.

We did well in Global Oral Care.

We didn't do as well as we'd been doing in North America Oral Care.

So we have some issues, like we always do.

Pet Care came back.

Beauty, relatively, we did pretty well.

So that's sort of the reality, and what the team did was step back, and under Bob's leadership I think what they've done is they've identified new sources of growth, and then they are really going to invest in the innovation program that they've put together.

And I'll turn it over to Bob now.

Well, that's right.

As we work this new strategy that we've talked about, and the vice chairs, AG and I and others, we really focused on a unifying growth strategy of this idea of grow by touching and improving the lives of more consumers in more parts of the world more completely.

That's tied to our purpose of touching and improving lives, and that's motivating the P&G people and motivating all of us.

It's the reason we joined the Company.

What we've discovered as we looked at this is there are a lot of opportunities out there for growth that we really weren't pursuing as aggressively as we could or that, evolutionarily, it was time to get after these opportunities.

That includes things like the portfolio, getting the product portfolio, category portfolio, country portfolio, right in every country and doing that as quickly as possible.

That's enabled by technological change.

Jon talked about the expansion of Crest Pro-Health.

Channels, things like I talked about, e-commerce, high-frequency stores, drug, perfumery, pharmacy -- these are all immense opportunities.

All you have to do, Ali, and you've done this, is walk into a drugstore just near where you are right now, and you will see Proctor & Gamble is pretty much not present in beauty and grooming in that drugstore.

This is a huge opportunity.

If we added up all of these opportunities, they would obviously -- the net present value of them would overwhelm any of our goals going forward.

So we obviously have to figure out how to stage the investment in order to deliver them in the right way.

And that's why we're focused on profitable share growth this year.

Bill Chappell, SunTrust.

Can you tell us, have you seen anything either inter-quarter, as we've moved into July, that gives you comfort that we've bottomed out on the economy?

And just as a follow-up, is there any way to quantify, Bob, what you're expecting from the simplification program in terms of cost savings over the next year?

Well, from an economic standpoint, we are obviously -- that's not our business.

And we're being prudently conservative as we think about our plans going forward.

Our planning basis is the same market growth rates that we saw in the last quarter, which was essentially flat.

So we really haven't -- we're really not going to be in the business of calling the bottom, so to speak.

What I will tell you, though, is that the rates of decline have clearly decelerated.

So, it's not as bad sequentially as we've seen in the past, and it appears to have flattened out quite a bit.

Obviously, one of the things that we're going to be watching -- and we've talked about this as a group before -- most closely because it has the biggest correlation to a purchase of our products -- is the unemployment rate.

And as you know, that hasn't turned, either, yet.

So our guidance, though, next year doesn't assume that turns.

And I think that's the right planning stance to take as we go forward.

Relative to the simplification, we have all the efforts broken out in the building block.

We don't plan to disclose those building blocks, but rest assured it's a really pervasive activity.

It includes things like looking at our SKUs and making sure we reduce the number of SKUs, looking at our product initiatives, cutting the number of product initiatives and then increasing the size of those that remain, things like looking in our organization structure.

We're flattening the hierarchy.

We're doing things to allow it to be more agile.

We are investing in technology to go to more globally standard systems, which will obviously free up people.

We are looking at all the work processes within the Company.

Jon is leading an effort looking at our business planning cycle, for example.

And so everything is -- we are looking to make changes that would allow us to be more agile and able to seize opportunities more quickly in the future.

We know that, as I said in my remarks, that as any company grows in size the normal organizational tendency is they become slow, bureaucratic, hierarchical and complacent, doing the things that made you successful in the past.

And if you look over the 171-year history of the Procter & Gamble Company, it's a company that has led change.

And when we've led the change, we've gotten a disproportionate share of the advantage of that change.

You know, we were the first company to avert wholesalers in the United States and go directly to retailers.

We were the first company that had a profit sharing program for its employees.

And I could go on and on and on.

We were the first company to ship retailers directly in Japan.

We're going to continue to lead change because we know, if we preserve our purpose, values and principles, those will never change.

But if we lead change in other areas, we will continue to grow.

And that's what we want to do.

Andrew Sawyer, Goldman Sachs.

Just first on a housekeeping question, I was wondering if you could just tell us what the breakout on organic sales growth in the quarter was for the developing and emerging markets versus developed.

And then, on the topic of mix, my question is really that, I guess in the past your algorithm has been driven by trading people up in developed markets, and then that's offset a bit by growth in emerging markets and you wind up pretty close to mix-neutral.

And I guess now is a continued push behind the emerging market growth side, but on the developed market side you are broadening to a more multi-tier strategy.

And I guess my question is really, is that broadening to multi-tier and lower-end strategy or getting more exposure to the lower end a permanent change, or is this something that's more tactical with what's going on economically?

Let me just handle the question on the quarter, and then I'll turn it over to Bob.

Organic growth rate wasn't significantly different between developed and developing.

Developing was a little bit higher simply because of the recent price increases to recover the currency impacts, but not, Andrew, dramatically different.

Andrew, our goal, as I said, is to try to improve the lives of every consumer in the world, and that's why getting the right product portfolio in every country is right.

Now, as we talk about developing and developed, it's somewhat misleading, because if you talk about a developing market like China, you've got more millionaires in China buying premium products than you do in the United States.

So in China, we've got to have higher-priced products that meet the needs of those consumers looking for that kind of value.

One example of that is Pantene Clinicare, which we've expanded throughout China.

It's a premium Pantene offering.

It's in more exclusive distribution channels, and it's the best hair care technology we know how to put together.

And we have Chinese consumers buying that and liking that form of Pantene a lot.

So just because we talk about developing markets, don't just think that those are only people at the lower end of the economic pyramid.

The reverse is also true.

In the United States, a developed market where you would think that people are operating more at the high end, we've got a lot of Hispanic-American consumers shopping in bodegas that we are trying to get similar great value offerings to where they shop.

So really, the key is having a full portfolio in every single country.

And really, if we do that well, I'll give you the example we've talked about already today on the call, which is Pampers Simply Dry in Germany.

While that is a value tier offering that we introduced into the market, it facilitated pricing on the premium tier behind innovation because it then became the competitor with private-label and store brands as opposed to our more premium offerings.

So it's a fairly complex algorithm.

But if we get it right, this is not mix destructive.

And of course, we work on the innovations on all tiers separately, as I said before.

It's not a trickle-down phenomenon.

We are looking at the consumer experience in each tier and innovating for those tiers and then trying to expand the differences between the product offerings in a given category.

Alice Longley, Buckingham Research.

You highlighted that market growth is going to be -- is critical to your growth.

Could you tell us what your market growth was in the fourth quarter and how you are expecting it to be or what you are expecting it to be in the first quarter, by region?

I won't give you the by-region breakdown, but I think Mark and John could do that after the call.

But in general, and it's really not that different by region, the markets were, as AG said, essentially flat in the fourth quarter.

As I said earlier in response to a previous question, we're assuming that level of growth going forward from a market standpoint.

So that's essentially our assumption for the first quarter.

Victoria Collin, Atlantic Equities.

I wonder if you could talk a little bit about volumes in the Grooming segment.

We've seen a sequential improvement in Q4, but can you talk about any steps that you are taking to offset the declines in the Blades and Razors segment, and sort of in relation to the [gross] of Fusion versus your other brands?

Well, the big issue in grooming and in Blades and Razors is our competitiveness in every segment and our competitiveness in developing worlds and developed worlds.

So we've done quite well in the high-end male system -- segment and we've done quite well in the high-end female system segment.

Where we have opportunities are in what I would call point of entry for developing markets, and we have opportunities in the disposables.

We've just introduced Mach3 Disposable.

It's early, but it's off to a good start.

So we're hopeful there.

And as Jon said, we can't comment on the innovation program going forward, but we're going to have to compete there.

The other big opportunity in developing markets is category development.

I think we've shown in the past that in India, the average male basically uses one blade a year.

In India, right now, 50% of the shaves are done in barbershops.

So if we can either change the barber to using a Gillette product -- right now, they break a double-edged blade in half and they use it multiple times.

So it's not necessarily very safe.

Also, as you've probably have noticed, Vicky, a lot of people to see around aren't shaving as much as they used to.

We've discovered that if we create the right advertising and create the marketing, we can actually affect how quickly people change their blades.

And you may have seen some of our advertising on television.

I know it's certainly been on in the US and the UK, where we talk about the benefits of changing your blade more frequently.

And just one last thing, this is Jon.

As you look at the segment volume results, realize that most of that decline year-on-year is the Braun business, which we have talked about as being more discretionary.

It's not a base Blades and Razors volume issue.

Linda Bolton-Weiser, Caris.

Can I just ask you a question about your strategy to expand horizontally the key brands?

It seems that, with retailers wanting to cut back on SKUs and brands on the shelf, that it may be a challenge to do that.

And you've had some misses.

I mean, Mr.

Clean Wipes, I think, didn't succeed in the disinfecting wipes category, for example.

So is that strategy going to be more emphasized in the domestic market, or in international markets?

Well, the horizontal -- Linda, the horizontal -- the strategy to expand our categories horizontally is a global strategy.

And really, it's not inconsistent with the idea that you mentioned, which we call efficient assortment.

In fact, we have retailers all over the world right now and major retailers in the United States working hard to create more efficient assortments in their store.

Generally, that benefits our business because we have leading brands, the number-one, number-two brands.

They benefit from a move by the retailer to go to a more efficient assortment.

We typically get more shelf space.

And that even includes line extensions of a given brand, for example, on Tide that could result in more total care space on a total Tide brand.

So efficient assortment we actually are very much in favor of.

If, in the end, we lose distribution, we don't celebrate that but we think that's a good thing that we have to go back and work because our challenge is to make sure we create an item which improves the life of a consumer and is good for the retailer.

So if we lose on an efficient assortment new set, we'll go back and work on it and work to improve the brand.

And, often, our efforts to horizontally expand our portfolio lead to the creation of new categories or lead to the creation of new segments for existing retailers.

For instance, Olay Pro X attracts a different shopper than, potentially, a base Olay.

And those are market growth activities that retailers are strongly supportive of.

For those of you who haven't heard us talk that before, we know that Olay Pro X drew people from department stores who bought $300 moisturizers in department stores into retail outlets.

Some of our customers ran it at the checkout and had major market share growth, 7, 8 points of growth during the weeks they ran it at checkout.

And if you can buy a better performing product for $35 versus $300 in a different channel that you don't want to shop at.

We had one consumer convert this morning.

The woman who made me up before I went on CNBC told me that she could no longer afford her $160 skin care product, and she was now going to buy Olay Pro X.

Thanks, everybody.

Thank you.

And thank you for your participation in today's conference.

This concludes the presentation, and you may now disconnect.

Good day.