寶潔 (PG) 2014 Q4 法說會逐字稿

Procter & Gamble's quarter end 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 8K 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 divestiture's 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.

Any measure described as core refers to the equivalent GAAP measure adjusted for certain items.

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

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

Good morning.

I am joined this morning by A.G. Lafley and John Chevalier.

We will start our discussion with a review of fiscal year and fourth quarter results.

A.G. will then discuss our foregoing strategy and plans to strengthen our results and I'll close with guidance for FY15.

One housekeeping item before we begin.

All the numbers we'll be discussing today assume discontinued operations treatment for the pet care business reflecting our planned exit.

Impacts of the move from operating results to discontinued operations were provided previously in an 8-K filing and are available online.

Now on to results.

We grew organic sales 3% in the fiscal year we just completed, in line with median performance in our industry.

We essentially held market share.

Core earnings per share increased 5%.

Organic sales and earnings per share results were both within our target ranges.

In fact, they were both within the pre-Venezuela devaluation ranges that we established going into the fiscal year.

Despite more than a 25% reduction in market growth rates from 4 points a year ago to 2.5 to 3 points currently and significant negative foreign exchange developments versus our going in plan.

Our productivity program which we will talk more about later was a significant enabler in delivering this outcome.

On a constant currency basis core earnings per share grew double digits despite market growth headwinds.

All-in sales grew 1%.

All-in earning earnings per share grew 4%.

We generated $10.1 billion of free cash flow with 86% free cash flow productivity.

We increased the dividend 7%, the 58th consecutive year that the dividend has been increased.

We returned $12.9 billion in cash to shareholders, $6.9 billion in dividends, and $6 billion in share repurchase.

About 110% of net earnings all-in.

We made significant progress on productivity, operating discipline, and execution.

We delivered $1.6 billion of cost of goods savings, well ahead of our target run rate of $1.2 billion and ahead of our going in estimate of $1.4 billion.

We improved manufacturing productivity by over 7%, reducing overall enrollment while adding new capacity and new sites.

We opened the first new multi category distribution center in the US with five additional centers slated to come online by early next calendar year.

We continued to accelerate overhead reduction.

In February 2012 we announced the targeted 10% reduction of non manufacturing enrollment by June of 2016.

As of July 1, 2014, we reduced roles by 16%.

More than 50% ahead of the original objective two years earlier.

We've made good progress driving marketing effectiveness and efficiency through an optimized media mix with more digital mobile search and social presence and improved message clarity, and greater savings in non media spending.

While acknowledging the progress I just described across cost of goods sold overhead and marketing, you may be asking yourselves, where have all the savings gone?

In the year we just completed, most went to offset FX.

We have large leading positions in some of the markets where currencies have softened the most, Japan, Venezuela, and the Ukraine.

And where price controls are in place.

Excluding foreign exchange, core earnings per share were up double digits.

Partly as a result of devaluation we are seeing significant wage inflation in developing markets, as much as 30% per annum which we also need to offset.

We're continuing to make targeted investments in innovation, trial generation, and in selling coverage to drive growth.

In addition to productivity we made good progress this year in continuing to focus the portfolio.

Just yesterday we closed the America's pet care sales to Mars.

Mars has also chosen to exercise their option to purchase the Asia business which accounts for 10% of sales.

We are working the European pet transaction with a different set of buyers.

We exited the concierge health services business, MDVIP.

We exited the bleach business.

And we divested several additional smaller brands, Latin America Pert as an example.

Moving from the fiscal year to the fourth-quarter, organic sales grew 2% in a very challenging macro environment with decelerating levels of market growth in both developed and developing regions and intense competitive spending in several categories.

Organic volume was in line with prior year levels, pricing added two points to sales growth.

All-in sales were down one point including the two point headwind from foreign exchange and a modest negative impact from minor brand divestitures.

Core earnings per share were $0.95, a 20% increase versus the prior year.

Foreign exchange was a $0.04 headwind on the quarter.

Excluding foreign exchange, core earnings per share grew 25%.

This includes a five point benefit from tax and a four point benefit from minor brand divestitures.

Core operating margin improved 170 basis points driven by productivity savings.

Core gross margin was down 50 basis points.

Cost savings of approximately 270 basis points were offset by product category and geographic mix, foreign exchange and higher commodity costs.

Core SG&A cost as a percentage of sales improved by 220 basis points driven by overhead savings of 110 basis points, marketing efficiencies of 30 basis points, and other SG&A reductions.

As we previewed in the last call nonoperating gains from minor brand and business divestitures added approximately $0.03 to core earnings per share in the quarter.

The effective tax rate on core earnings was 19% bringing the fiscal year rate to 21% consistent with the outlook we provided in the last call.

June quarter all-in GAAP earnings per share were $0.89 which include approximately $0.04 per share of non-core restructuring charges and $0.02 of charges from legal reserve adjustments.

In summary we've just completed a challenging and tough but on target year.

We met our objectives, delivered double-digit constant currency earnings growth come, meaningfully advanced our productivity and portfolio focus agendas and built on our strong track record of cash return to shareholders.

There is more work to do to deliver sustainable sales growth and reliable profit, cash and value creation.

I'll turn it over to A.G. to talk about strategies and plans to accomplish this.

Thanks Jon.

So that we are crystal clear, as Jon reported, we delivered our business and financial commitments in 2013/2014.

But we could have and should have done better.

If just a couple of businesses that missed their going in operating plans had delivered, we would've achieved our internal leadership team goals of 4% sales growth, built modest market share, delivered 7% core EPS instead of 5% and 5% core operating profit growth instead of 2%.

Despite all the market realities Jon described, country volatility, market slowdowns, currency hurts, customer and competitor challenges.

The point here is delivering a better year was solely in our influence and control.

So while operating discipline and executional capability is getting better, a lot better around here, it must continue to improve to reach the levels of performance this Company and our organization is capable of.

We are increasing our focus on shoppers and consumers.

They are the boss.

Everything begins with consumer understanding, winning the zero first and second moments of truth, and everything ends with winning the consumer value equation, consumer preference, purchase, and loyalty.

We are focused on creating and building consumer preferred brands and products that generate leading industry growth and value creation.

This is how we will generate top-tier total shareholder return.

We need to continue to strengthen our brand positions, our product portfolio and pipeline, and our selling effectiveness in the countries' channels and customers in a way that maximizes shopper trial and regular purchase, drives brand and category growth, and delivers more reliable value creation for customers, partners, for P&G, and of course, for shareowners.

Today we are announcing an important strategic step forward that will significantly streamline and simplify the Company's business and brand portfolio.

We will become a much more focused, much more streamlined Company of 70 to 80 brands organized into about a dozen business units and the 4 focused industry sectors.

We'll compete in categories that are structurally attractive and that play to P&G strengths.

Within these categories we will focus on leading brands, marketed in the right countries, channels and customers where the size of the prize and the probability of winning are highest.

With product lines and SKUs that really matter to shoppers and customers.

Why this significant strategic word of play change in brand portfolio?

These core 70 to 80 brands are consumer preferred and customer supported.

These brands are for the most part leaders in their industry category or segment, 23 with sales of $1 billion to $10 billion, another 14 with sales of $0.5 billion to $1 billion and the remainder, 30 to 40 with strong brand equities and sales of $100 million to $500 million.

These brands are all well-positioned with consumers and customers and well positioned competitively.

These brands have strong equities and differentiated products and a track record of growth and value creation driven by product innovation and brand preference.

These brands are core strategic and have very real potential to grow and deliver meaningful value creation.

Over the last three years, the 70 to 80 brand portfolio has accounted for 90% of Company sales and over 95% of profit.

It has grown 1 point or 100 basis point faster than the total Company and has earned more than 1 additional point of before tax margins.

This new streamlined P&G should continue to grow faster and more sustainably and reliably create more value.

Importantly, this will be a much simpler, much less complex Company of leading brands that's easier to manage and operate.

This simplicity will significantly focus investment and resource allocation and enable execution.

We will harvest, partner, discontinue, or divest the balance 90 to 100 brands.

In aggregate, sales of these brands has been declining 3% per year over the past three years, profits have been declining 16%.

These brands make up less than half the average Company margin.

The strategic narrowing and refocusing of the brand portfolio will have a number of significant benefits, mutually reinforcing.

70 to 80 brands will bring clarity, focus and prioritization and simplicity to a smaller, more integrated, better coordinated organization.

The brand business units will be responsible for brand and product programs, end-to-end, down to the local country level.

Selling and market operations will be responsible for customer and channel strategies -- I will continue.

Selling and market operations will be responsible for customer and channel strategies, for distribution, shelving, merchandising, and pricing execution, for winning at the first moment of truth at the retail customer and distributor level.

This focus on fewer core strategic brands will enable a significant rationalization of product lines within brands and an even more -- this focus on fewer core strategic brands will enable a significant rationalization of product lines within brands and an even more significant pruning of unproductive SKUs.

As we rationalize business and brand portfolios, product lines, and SKUs, P&G brands and products will be easier to shop and more productive and profitable for our customers, our partners, and for the Company.

This focus on fewer strategic brands will enable R&D to focus product and technology development on more consumer relevant and impactful brand and product ideas.

We've already started reallocating R&D resources and budgets, cutting out low value activity, and doubling down on our most promising product innovations.

This focus on fewer core strategic brands will importantly inform our supply chain transformation.

We will now match manufacturing capacity to the brand portfolio and product lines.

We'll build distribution and mixing centers for only the brands and products we choose to sell.

This should enable industry leading responsiveness and service to customers at lower cost throughout the value chain.

With this refocus on consumer and shopper preferred leading brands, we will be able to focus selling operations by retail account wholesaler and distributor; strategies, tactics and in-store executions that really make a difference.

The same simple simplification and prioritization enables all our functions to provide the business units and sales operations better value added help and support.

In summary, we're going to create a faster growing more profitable company that is far simpler to manage and operate.

This will enable P&G people to be more agile and responsive, more flexible and faster, less will be much more.

As a result of the Company's strategic focus on its leading brands, we will both accelerate and over deliver the original $10 billion productivity plan.

While we're not going to publish or report specific endpoint savings numbers today, we will clearly over deliver the original goals and we will update you on progress along the way.

In cost of goods sold we're driving further and faster than when we established the original savings objectives.

The annual manufacturing productivity improvements we're making and have made measured by the number of cases of product produced per person per year are well beyond initial targets.

Better process reliability and adherence to quality standards is resulting in less raw material and finished product scrapping, increasing localization of supply chain is diving transportation and warehousing cost savings.

Earlier this year we initiated what is probably the biggest supply chain redesign in our Company's history.

We're moving from primarily single category production sites to fewer multi category manufacturing plants.

We are taking this opportunity to simplify, standardize and upgrade manufacturing platforms for faster innovation, qualification and expansion and improved product quality.

We moved to standard manufacturing platforms a little over 10 years ago in baby care.

We're developing standardized manufacturing platforms for a number of businesses, fabric care, grooming, oral, and personal power to name a handful.

We are transforming our distribution center network.

Moving from shipping products to customers from many ship points as if they were coming from different companies to consolidating customer shipping into fewer distribution centers.

These centers are located strategically closer to customers and key population centers in North America enabling 80% of P&G's business to be within one day or less of the store shelves and the shopper.

This will allow both P&G and our retail partners to optimize inventory levels while still improving service and on shelf availability, efficient customer and consumer response.

And more importantly, reducing in-store out of stocks.

All of our new distribution centers will be up and running by early 2015.

To manage and operate this simpler brand portfolio, we've made several important organization design changes, moved to four industry-based sectors, streamlined and de-duplication of business units and selling operations, recombination of core brand building functions into one, reduction of hierarchy with all the sales operations and business unit leaders working together and working directly with Jon and with me.

Each of these changes reduces complexity, each creates clearer accountability for performance and results.

We're just beginning to benefit from these opportunities to improve performance and reduce overhead costs that the organization changes create.

We believe we have more opportunity to improve marketing effectiveness and efficiency in both media and non media areas while increasing overall marketing effectiveness and improving top line growth.

When we get brand and product innovation right, source and sell brands and products effectively and efficiently, we grow and we drive meaningful value creation.

We generate higher sales and profit per unit which enables us to capture greater share of the value, profit, and cash where we choose to compete.

It is this share of value, the share of profit and cash that is generated that we really want to focus on and, if we can, disproportionately capture.

Today we have about a 60 share of US laundry market sales but earn approximately 85% of the profit and cash generated in the entire category, and nearly 70 share of grooming business worldwide.

And about a 90 share of value or profit.

This disproportionate capture of category value is a direct result and reflection of our business strategy and our business models.

There's been some discussion in this context about whether premium priced brands and products are still drivers of growth and value creation.

And I want to comment on this a briefly this morning.

We are shopper and consumer led.

Their wants and needs come first.

We meet those needs with differentiated brands and better performing products, priced to deliver real and perceived consumer value.

In all four industry sectors, and in most of our businesses, there is as much and often more sales growth and value creation, profit and cash, in the premium and super premium segments.

We've had some success in these segments.

In the grooming market, premium products generate about 43% of category sales.

Gillette has an 88 share of the segment.

Four years ago we introduced Fusion ProGlide priced at the higher end of the premium segment.

Fusion grew global value share for 31 consecutive quarters, reaching $1 billion in sales faster than any other P&G brand or any other Gillette shaving system in history.

Fusion has been very successful in developing markets which account for 25% of the brand's and product line's total business.

In countries where Fusion has been in the market for several years, it has earned value shares that rival those of the best developed markets.

In South Korea we have a 45 share and in Russia a 33% share, for example.

Last month we launched the newest product in the Fusion line-up, FlexBall is the first razor designed to respond to the contours of a man's face maintaining maximum contact and delivering a closer more complete and more comfortable shave.

End markets -- sorry -- premarket men preferred FlexBall two to one versus the then best selling razor in the world, our own Fusion ProGlide.

FlexBall is off to a very good start and appears to be revitalizing consumer interest in the category.

While it's only been available a couple of months, we've seen a 30% spike in male razor category value in the US and acceleration in cartridge sales and shares.

Crest 3D White premium oral care regimen was also launched in the US and grew market share for 17 consecutive quarters.

Expanded worldwide and has become $1 billion business.

3D White has been an important driver of toothpaste market share growth in Brazil and Mexico, adding about 1.5 points of share in Brazil and 1 point in Mexico.

We recently launched 3D White in Spain, France and Australia, early results are encouraging with growth in both category and our market share.

In Western Europe the oral care category grew 3.5% in value this last quarter in a region where many other categories are declining 1% to 2%.

3D White is a big driver of that category growth.

Following up on the 3D White launch we introduced Crest 3D White Luxe toothpaste and white strips.

The toothpaste removes up to 90% of surface stains on teeth in just 5 days and protects against future states with a proprietary technology.

The white strips with FlexFit stretch and mold to your teeth for a custom fit.

Tide, Gain, and Ariel unit does laundry detergents have been an innovation breakthrough, resetting the bar for delightful usage experience, product performance and convenience in the laundry detergent category.

Tide Pods have priced at a 20% premium to base liquid Tide and have grown to over 7% of the laundry category.

In March we launched Gain Flings, their version of Pods, priced at a 60% per use premium to Gain liquid detergent.

Flings have already grown to nearly 3% value share.

Combined Tide Pods and Gain Flings now hold a more than 10% value share of the US laundry category and over 80% of the unit-dose segment.

We now offer this innovative product in over 50 countries.

In several other markets including Japan and China we recently launched a single chamber unit dose product setting the stage for future upgrades as the unit dose segment develops.

In Japan, Ariel and Bold unit dose detergents are off to a strong start, achieving a 9% value share in just 3 months.

Managing a brand and product portfolio is obviously a balance.

In some categories where affordable pricing is a more important part of the consumer value equation, we broaden our brand, product line, package size and price offerings to serve more consumer needs.

Bounty and Bounty Basic, Charmin and Charmin Basic, Pampers and Loves, Tide, Gain, and now Tide Simply Clean & Fresh.

While we would continue to compete with product innovation and brand differentiation, we will not allow ourselves to be uncompetitive on a consumer value bases in segments where we choose to play.

There are times we must and will make appropriate pricing adjustments to remain competitive.

We're doing this now as you know on a targeted basis in US fabric care and family care where competitors have been price discounting and promoting heavily since last calendar year.

In the end, we follow the shopper and the consumer.

We meet their needs with consumer preferred P&G brands and better performing products, priced at a modest premium that delivers superior consumer value.

We are currently entering the female adult incontinence category.

This is an attractive $7 billion global category growing at an annual rate of 7%.

We're entering the category with consumer preferred superior performing products that deliver significant benefit advantages from Always, a brand women trust and prepare.

We began shipments of Always Discreet in the UK last month and will start shipments in the North America and France over the next few weeks.

We'll be sending you more details about this exciting new product line from Always next week.

In September, we are launching Crest Sensi-Stop strips.

This is a revolutionary new product technology that provides tooth sensitivity relief like never before.

One strip applied for just 10 minutes delivers immediate relief and up to one month of protection from sensitivity pain for many consumers.

We're setting the brand and product innovation agenda in our industry.

When we do this well, we build consumer preference for our brands, extend the level of product competitive advantage, build brand and product consumer preference cumulatively over time and capture a larger share of category value, profit, and cash.

A final area that will benefit from brand portfolio simplification is the consistency and quality of our brand building and selling execution.

This execution is the only strategy our consumers and customers ever really see.

We're bringing renewed focus to brands.

When we get brands right, we deeply understand consumers and we create desirable ideas, iconic equities, and become the prototype in the category.

We consistently express the brand promise with ideas that attract consumers to the products' superior benefits to create trial, purchase, lasting preference, and loyalty.

This brand focus allows us to improve execution and build on those strategic brands to win ultimately with consumers.

We're also focusing selling resources to improve coverage, expertise and execution in key retail channels, wholesalers and distributors.

This should lead to improved distribution, shelving, merchandising and pricing execution, to win consistently at the first moment of truth.

We are and will continue to increase coverage, sector and category dedication of our sales force, and merchandisers in the store.

I'm excited by the opportunity to further elevate brand and selling execution and feel very strongly these efforts will be enabled by the portfolio focus we have embarked on.

I'm working directly with sector and SMO leaders on these opportunities to profitably accelerate top line growth while Jon and the team continue leading the work on portfolio simplification and productivity.

This portfolio transformation may take a little more time than any of us would like because streamlining the brand and product portfolio will be governed by our ability to create value on every exit.

When we get there, to our in effect P&G new-co with a streamlined 70 or 80 brand portfolio, this will enable faster and more sustainable growth and more reliable value creation through the end of the decade and beyond.

We will be a simpler, faster growing, more profitable company that is far easier to manage and operate.

We will be a company of brands that consumers prefer and customers support.

Well positioned competitively.

A company of brands simpler to source, sell, and service.

This streamlined company of leadership household and personal care brands will deliver more reliable value creation for consumers and customers, partners and suppliers and will deliver reliably and sustainably total shareholder return in the top third of our industry peer group.

I look forward to updating you on our progress when we meet for our analyst meeting here in Cincinnati in November.

Now I'll turn the call back to Jon to provide the details on our outlook for this year.

We continue to expect global markets in our categories to grow in value terms 2% to 3%.

Against this backdrop we are currently forecasting FY15 organic sales growth of low to mid-singles.

With this level of growth, we'll maintain or modestly grow level market share on a local currency basis.

We think this is a pragmatic and realistic starting point for our FY15 financial commitments.

Pricing should again be a positive contributor to organic sales growth, though likely not to the same degree we've seen over the past several years.

Foreign exchange is expected to be a one point sales growth headwind.

With this level of sales growth we're forecasting mid-single-digit core earnings per share growth.

We will benefit again from significant productivity savings, but like last year, these will be partially offset by FX headwinds which won't annualize at current spot rates until the back half of the year.

We have a few value corrections to make.

We're also going to invest in consumer trial of preferred brands and major new product innovations that are in market and that are coming to market.

We'll continue to make investments in innovation and go-to-market coverage in the fastest-growing sales channels.

Non-operating income and tax should be roughly in line with prior year levels.

We are targeting to deliver 90% or better free cash flow productivity.

Our plans assume capital spending in the range of 4% to 5% of sales and share repurchase in the range of $5 billion to $7 billion.

At this level share repurchase should net of option exercises contribute about one percentage point of earnings per share growth.

On an all-in GAAP basis we expect earnings per share to also grow mid-single digits including around $0.20 per share of non-core restructuring investments.

In addition to the assumptions included in our guidance we want to continue to be very transparent about key items that are not included.

The guidance we're providing today is based on last week's FX spot rates.

Further currency weakness, including Venezuela, is not anticipated within our guidance range.

We continue to monitor unrest in several markets in the Middle East and Eastern Europe and we continue to closely monitor markets like Venezuela and Argentina where pricing controls and import restrictions present risk.

This guidance does not assume any major portfolio moves.

We'll update guidance as these occur.

Finally, our guidance assumes no further degradation of market growth rates.

There are a few things you should keep in mind as you construct your quarterly models.

Our toughest top line comps are in the first two quarters.

The top and bottom line impacts from consumer value corrections will disproportionately affect the first quarter and the first half.

FX impacts will not fully annualize until the back half and productivity savings will build as the year progresses.

In summary we are pleased to have delivered an on target year on both the top and bottom lines but realize there's more work to do.

We're realistic about where we stand in the journey and are excited about the path ahead.

That concludes our prepared remarks.

As a reminder, business segment information is provided in our press release and will be available on slides which we've posted on our website www.pg.com following the call.

A.G. and I would be happy now to take your questions.

(Operator Instructions)

Bill Schmitz, Deutsche bank.

Can you give us a timeline for the sales of those 90 businesses that have been deemed non-core?

Well as A.G. said in his remarks, the timing on this is going to be governed by our ability to create value which we're committed to do as we exit these businesses, much as we've done -- exactly as we done with the prior category and brand exits.

And rough order of magnitude, this is -- I would guess, Bill, though I'm not providing specific guidance, probably call it 12 to 24 months.

But again, we're not going to be governed by timeline, we're going to be governed by value creation.

John Faucher.

Sort of continuing with this, one of the things you guys are working on is driving sort of more cost-efficient structures and I guess how do you fragment some of these brand groups or is this -- I guess can you talk a little bit about how this is making the structure less complicated as you go to this many brand groups?

And then, secondly, as you look at some of the productivity efforts, can you talk a little bit about the focus on stranded overhead?

And do feel like your recent productivity will allow you to eliminate some of the potential dilution from selling off some of these businesses?

Thanks.

So John, first of all, as we look at the portfolio and the way that A.G. described, we are really looking at it through a strategic lens and we're wanting to play in categories with brands, leadership brands that play to our strengths.

We've talked before about the core capabilities that we believe we have as a company.

And very simply, brands that leverage those capabilities have proven over time to sustainably create value.

And those that don't fully leverage those capabilities on average we've struggled with.

And so part of this simplification if you will is just matching up our businesses with what we're good at.

And not having to struggle with some things that we're not as good at, so that in itself is a big simplification.

You can imagine going from a company of call it 160 brands to a company of 70 or 80 brands is in itself incredibly simplifying.

The number of innovation platforms that we need to focus on, the number of manufacturing platforms that we need to focus on, the number of products that we need to sell to each and every customer and distributor, so there's tremendous simplification that comes with this.

To your specific question of stranded overheads, it is our objective and expectation that we will use the productivity savings that are available both through simplification that comes from portfolio focus, but also the productivity savings that come through the organization structure changes that A.G. talked about to in effect offset the stranded overhead impact.

There will be some dilution as these businesses go out just as there have been with businesses that we've been divesting.

But it will be on that order of magnitude and it will result primarily from the loss of operating earnings of those businesses.

We will take care of the stranded overhead.

John, just a couple of additional points.

I mean, this is a classic strategic choice.

We want to be in the businesses we should be in, not the businesses we are in.

Secondly, it is driven by shoppers and consumers and the market primarily.

We are focusing on their brand and business portfolio in the four industries that consumers actually buy and prefer.

Right?

That customers really support and can support.

Where we have very strong brand equities.

Where our net promoter scores are higher.

Where our brand positioning as well didn't differentiated and where the product performance delivers.

So it's very straightforward.

And the objective is growth.

The objective is balanced, profitable sales growth and much more reliable value creation.

Much more reliable generation of cash primarily, but cash and profit.

In terms of the organization side, it's going to get a lot simpler.

It's already begun to get simpler.

A lot of this is already underway.

But we just have real clarity about what a regional selling operation does and what a business unit does and they're now connected with far fewer handoffs and we will continue to improve that design to further reduce the handoffs.

And we are just going to be much more agile and much more adaptable.

Much quicker inside -- much simpler inside so we can deal with all of the change and the pace outside.

That's really the objective here.

We had a -- look, we had our last global leadership council meeting last week.

Okay?

I don't know that the number Jon -- what are there 30 to 40 people?

Okay.

We now have a lead team of about 10 of us and basically the region leaders, the sector B leaders, Jon and myself, 10 to 12 of us.

We meet more often.

We work on the business.

We get things done on a weekly, biweekly, and monthly basis.

So we're just going to be more about adaptable, we're going to be more agile.

We're going to be more responsive.

We're going to be able to make decisions a lot faster and turn the decisions into action in the market that really matters.

Lauren Lieberman, Barclays Capital.

Just two quick things.

First was just around any kind of tax implications or risks from selling businesses at a very low cost basis.

And then the second was, how do you think you'll be able to kind of ensure you don't lose shelf space or facings as you divest or discontinue brands?

Thanks.

On the tax question Lauren, there will be some low business assets of that will be part of the portfolio that's going to be disposed.

We've done a pretty good job historically about managing that through tax efficient structures.

Those do take time.

Which is what we're talking about when we say that value creation will guide the pacing of the exits.

So what we'll try to manage that as effectively as we can.

A.G., do you want to talk about --

Yes.

I mean, Lauren, obviously we have anticipated the concern that you raise and a whole bunch of other concerns that we have to manage through the transition and through all the details of the execution.

But I guess I'd just mention three quick examples.

One, in the US, we started out with a laundry brand portfolio of 15 brands.

Okay?

Today we have brand portfolio of five and over the decades, our share has increased and as we pointed out in my prepared remarks, our share is approaching 60% again.

And our -- more importantly our share of the value created in that segment is at probably the highest level based on our calculations ever.

So I think there's a lot of evidence in a number of our business categories that the shopper and the consumer really don't want more assortment and more choice.

They want efficient consumer response.

If you just look at what's going on in the omnichannel and pure play E-tailer environment with online shopping, we're doing a pretty doggone good subscription business.

We're doing a good shopping list and automatic replenishment business because in a lot of our categories, frankly, they're low involvement and consumers want to keep their life simple and convenient.

And having the leading brand, better performing products, and a good value everyday helps them keep life simple and convenient.

Two last very quick points.

If you look at this company decade by decade at the end of the decade, all of our growth and value creation is driven by three things.

One, we are able to grow and continue to create value from our core established brands and businesses going into the decade.

Two, we're able to create transform or acquire and build at least one major new business.

And three, we are able to move successfully into new space.

Okay?

Whether that's developing markets or new channels or whatever.

And I suspect in 2021 when we look back at this decade, we're going to see the same pattern.

We have done a lot of analysis that shows more does not drive growth and more certainly does not drive value creation.

Absolute last point and you will know this one as well or better than I. When the team sort of got us into the beauty and personal care business between 2000 and 2007, we tripled the sales from whatever it was -- under 7 to 20 plus.

We quadrupled the profit and we did it on a half a dozen brand businesses.

Pantene and Head & Shoulders, Olay and SK-II, and a trio of fragrance brands accounted for virtually all of that growth and value creation in an industry that's notorious for activity and complexity.

So I just believe very deeply that we're picking our spots in these industries that play to our strengths and our assets and we're going for it.

Wendy Nicholson, Citi Research.

I have two questions.

First, maybe for you A.G. You said at the beginning that there were several businesses that missed plan during the course of the year.

And I'm curious whether that is -- or was predominantly innovation that fell sort of expectations or mis-priced products or what the problems were?

And I think you said you feel more confident about your execution ability going forward but maybe specifically why is that?

Is it different people in charge or do you have a better sense of adaptability if things are going wrong?

So that's question number one.

And the number two, Jon, your comments really surprised me.

You said that for next year you only plan to maintain or modestly grow market share which strikes me as a very -- I don't know -- weak stance to enter the year.

I mean I would think with all the innovation and all of your planned spending, you would have more confidence or more enthusiasm about your market share trends.

Thanks.

Let me take the second part of that question and then I'll turn it over to A.G. Look how we're trying to establish very realistic external guidance.

That frankly is reflective of the macro environment that we're in and is reflective of what we've proven ourselves capable of delivering thus far.

We delivered 3% organic sales growth this year.

We are forecasting low to mid-singles next year.

We've delivered 5% core earnings per share growth this year.

We are forecasting mid-singles for next year.

We share completely your desire to do better than that.

And as we prove that capability, if and as we prove that capability, guidance will reflect that.

Wendy, on your first question, first to be very clear about what I said, if just a couple -- two -- businesses had delivered their operating plans, we would've achieved our internal goals of 4, 7, 5 operating and generated of course even more cash.

Just two, okay?

The issues were different.

In one business, frankly, they let their pricing get out of line.

And the thing that was frustrating about it is it was out of line and for whatever reason, I don't feel like the team came to grips with that reality fast enough.

Okay?

It's being faxed.

It's happened before in this category.

We know how to fix it.

It will get fixed.

And ironically it was a business that had like a 10 or 12 year run of very strong balanced growth and value creation.

In the other case, we got our nose ahead of the tips of our skis on an investment in a new line of brands and products and we just need to get back to the discipline, okay, of testing and qualifying major investments that we're going to make.

Hey, there's a lot of risk in the product innovation side.

There's a lot of risk when you're making investments in the marketplace, but we try also and we have a track record of and when we're performing to our capability, we do a reasonably good job of testing things before we expand them and we just got the investment way ahead of the actual results in the marketplace.

Those are the two.

The thing I feel good about -- I should say, is -- and my team knows this.

Is I actually feel very good that more of our businesses are executing better, are sharpening their strategies and translating it into operating plans, and that our execution is improving but this is an intensely executional industry.

And we just absolutely have to be at the top of our game.

You know?

All the time.

And just one more point on this.

While we did have problems in a couple businesses as A.G. described we had many businesses that had the best year they've had in a long time.

That's right.

So for instance our Duracell business had a fantastic year.

Our salon professional business had one of its best years in quite a long period of time so there are many more things working than not working.

Dara Mohsenian, Morgan Stanley.

So A.G., on the portfolio rationalization, can you discuss why you're implementing it now?

The met strategy makes sense but what's kind of changed that's driving you to undertake this now?

You'd previously outlined that 90% of the business was core and you expected divestitures.

I'm assuming the brand rationalization announcement today includes those businesses you already expected to divest or should we look at this as rationalization on top of that?

And then last just given the process will take one to two years are you committed to staying on board as CEO for as long as at least the bulk of the brand rationalization process takes?

Okay.

Dara, stop me if I don't capture all of your question.

Okay.

Last question first.

The Board -- I'm serving at the pleasure of the Board and criteria driven.

We are not schedule driven.

Okay?

So obviously I wanted to drive this strategy and accelerate it but that's totally driven by our understanding of shopper and consumer needs and wants and the realities, okay, of the marketplace.

Whether we're talking about channels and customers.

Whether we're talking about competitive factors or whatever.

So this is purely consumer market and competitive driven strategic choice.

Second thing is we are already underway, okay?

So this is a continuation and acceleration.

I mean, we're underway and on the portfolio pruning.

I just want to accelerate it.

Okay?

We're underway on the organization redesign.

I just want to accelerate it.

We're underway on the major restructuring and productivity savings that were announced 2 to 2.5 years ago.

I just want to get it to a logical endpoint for the first phase so that we can focus on operating with excellence and growing this business and performing at our peak.

And I'm sorry, the third part of the question was, Dara, remind me.

Just why now specifically.

I mean it makes sense but what drove you to make the change at this point?

Okay.

Look.

In an ideal world, okay?

In an ideal world, we would've done this at the depth of the financial crisis and recession.

That would've been the perfect time to do it if you think about it., right, dramatically focus.

dramatically simplify.

Get the cash flowing.

Right?

And then once the bank is full, bide your time until the market starts to come again.

Right?

That would've been perfect.

If we work Monday morning quarterbacks I could look over the last 40 years, that would've been the perfect time.

But I missed.

We missed some of that opportunity, and frankly when you're in the middle of a financial crisis, when you're watching oil approach $150 a barrel and chaos is reigning around you in the biggest recession since the 30s, you always -- you don't always have the time to think through or the resources to act on a transformation of this size and scope.

But having said that, I don't see any reason to wait.

I don't see any virtue in waiting another minute.

And I guess the last thing I would say is just think about what we're going to undertake.

I don't want to go out and spend $1 billion round numbers on totally redoing the sourcing and supply chain in North America and do it for the wrong business.

Shape and size.

That would be a terrible mistake.

Right?

So in a lot of other places, we are making investments that are going to make this company stronger, help us operate better et cetera and we have to make sure that we're doing this for the business that we think we're going to have and we think we are going to run for at least the next 5 plus years or so.

Olivia Tong, Bank of America.

Can you talk about what other strategies you've considered?

Why is this the right strategy?

Why doesn't this at least in the interim take some focus away from fixing issues in the 70 to 80 brands that you are planning on keeping?

I don't see any trade-off there, Olivia.

In other words, we will have more talents, more resource, financial, and people, against the 70 to 80 brands.

So I mean, we're -- we have been all over several of those businesses and frankly I'm involved with 10 to 15 of them working with the leadership teams.

So I don't see any trade-off.

Now, I won't tell you that we haven't taken on extra work for another year.

Year and a half.

Maybe at most for parts of it.

As Jon said, it may be the last disposals are as far as 18 to 24 months away, but no.

Job one is take care of shoppers and consumers, work with our customers and suppliers, and deliver the operating plans and commitments on the 70 to 80 core brands that make up the portfolio that's going to drive this company ahead.

Chris Ferrara, Wells Fargo.

A.G, you highlighted P&G following the consumer as it relates to innovation at premium side of categories and at higher-priced categories and I think you called out the success of the innovation in high end laundry as an example.

Now, I understand that you don't report laundry standalones but fabric and home was up 1% organically.

The Nielsen data in the US shows share erosion and even following the launch activity.

Obviously there was a lot of competition there with a lot of deep discounting.

You responded with your own deep discounting.

I guess is this an anomaly what's happened in this category?

How do you reconcile that with the view that innovation is successful at the high end at least in this category?

Okay.

Chris, let's go through this one in some detail because I think it's instructive.

If you have the patience, we'll go through one or two others because I think they are instructive too.

But let's just take US laundry and let's go back to about a year ago in early September when we were at Barclays.

You may recall that we announced a series of fabric care category brand and product innovations that would be coming to market in the middle or end of the first quarter of 2014.

I think we said at the time that they included the extension and expansion of our Pods product innovation to Gain and Ariel and to other countries like China and Japan which I spoke about.

We announced strengthening of our heavy-duty liquid product offerings, the so called value added offerings to meet consumer needs that were unmet.

I announced the introduction of Tide Simply Clean & Fresh to meet unmet consumer needs in the mid tier segment of the category.

I think at the time we pointed out that virtually all of the category growth and most of our P&G sales growth and value creation would come from the Pods and the value-added heavy-duty liquid brands and product lines.

So let's look at what happened.

Well, in September and October, the media and many of our analysts commented on the program and 95% of the commentary was on Tide Simply Clean.

In October, November, and December, our three main economy competitors all unleashed a series of essentially price rollbacks and price discounting and temporary promotion after temporary promotion, all of which has continued to the present.

We started shipping in mid-to late February and frankly we couldn't keep up with all of the demand of our customers so we were probably well-established in stores at retail by March and the beginning of April.

Now let's look at what's going on with the market shares.

Week-by-week from let's say the time that we really got established by retail.

Well, lo and behold, we've increased market share every week.

Okay?

And if you look at our past 52-week share and compare it to our past 4-week share, we're up a full share point.

Now, what else went on the market?

Well, with all of that spending by the economy players, they essentially took dollars out of the category, which concerned some of the retailers and basically they traded cases, dollars, and share and made less profit on the ones they traded.

So yes.

There was a winner in that group.

But there were also losers in that group.

I think there's some indication -- we think there's some early indications that maybe we've reached the point where it's pretty clear about what the middle and premium part of this category is going to look like and what the economy part of this category is going to look like.

And then if we turn to Tide Simply, I think we said last September that the worst-case scenario would be we'd get a big share and we'd cannibalize from ourselves.

Well, we've gotten a medium sized share, frankly about what we thought it might be and we still don't know where it'll end of because it still only got 50% plus retail distribution and relatively low trial rates among its target but over 60% of it has been net extra to us.

So I don't look at this week versus the same week a year ago.

I don't look at this quarter versus the same quarter a year ago.

I look at shares over time.

We're on our way, we think back to a 60% share.

We have only had a 60% share of dollars a few times in the history of this company and in fact peaked at about a 62% to 63% when one of our principal competitors withdrew from the market back in 2007.

But we have a higher share, the highest share we've ever had of the value created.

So that's how we think about it.

I know I've gone on a bit but I just want to mention a couple of others so that you get the point.

We didn't talk about it this morning but in our diaper business in the US and North America, we rather quietly moved back to share leadership which we lost 20 years ago when our competitors bought training pants to market and we recaptured it in the last 18 months and we've opened up a spread of almost 6 points -- 6 share points on diapers and I think a couple of points plus on the whole baby care category.

That counts wipes and some of the other product lines.

But how did we do that?

Okay?

How did we do that without pants?

Well, we did it because our baby stage of developments line of products, and particularly Swaddlers which is unique, consumer preferred, et cetera, has just cumulatively year after year slowly but surely increased its trial, increased its share, and is now just in and of its own right a $600 million sub brand that we think, now that we offer Swaddlers in all sizes, now we're finding moms actually prefer the design, could become $1 billion business.

So my only point is, I want to look at the cumulative impact of our brands and our products.

Last point.

In 2007, we introduced a novel totally new proprietary product and technology on Always.

It was called infinity.

I think we weren't as clear as we could be with consumers about what the product was and what it did but without boring you on all the details, it is a very unique ultra-thin product, far and away the best absorbing.

This past year we had all kinds of issues trying to get a totally new technology and manufacturing process started up.

We struggled as I said to connect with consumers but this last year we did over $200 million on Always Infinity.

We've now expanded into parts of Asia and parts of Europe.

It represented 15% to 20% of our growth.

It's a clearly superior product.

Women who have tried it and purchased it are repurchasing it at a rate of 60% to 70%.

So I actually see across most of our categories, brands and products that are really unique and/or highly differentiated that when properly presented to consumers, when the value is clearly explained, and if they have a chance to try it, that we can drive a lot of conversion.

And final point, I'm not going to take you through the details but virtually every brand and product line we sell, even in the US, is dramatically under tried.

Dramatically under tried.

So we will be back at ensuring that consumers who are prospects for these brands and product lines have a chance to really try the product and give it a chance.

Sorry Chris.

I went on a long time but I wanted to make the broader point about brand differentiation, product superiority and consumer preference.

Nik Modi, RBC Capital Markets.

A.G., maybe you can just provide a little bit more context on the streamlined portfolio.

Will there be a geographic angle for this as well or is it just the 80 brands that we are going to focus on globally, or if you look at it on India or Venezuela or Brazil, are there certain brands that maybe you'll pull back from even though they're a global brand?

Thanks.

Okay.

Understandable question.

I'm going to -- hopefully I'll be able to answer this as clearly as possible.

Remember Nik we are shopper and consumer driven.

That means we're -- all of the shopping and consumption occurs locally.

So if and when we get this right, we'll have the right mix of brands, product lines and SKUs for China.

We'll have the right mix for Brazil.

We'll have the right mix for the Arabian Peninsula and Turkey.

We'll have the right mix for India and the Sub-Sahara.

Okay?

So this is totally shopper and consumer driven.

We looked at the real growth and value creation potential.

And as I pointed out, these are brands that for some time have been not delivering on that front.

Okay?

So yes.

If we get this right we will have the right -- we will not be short of brands or products to win in any market we choose to compete in.

And eventually I think as you know, that's going to mean all the emerging markets of the world because that's where the demographics will be driving us.

That's where the babies are born, that's where the households form, that's where incomes are rising so we think this positions just as well in emerging markets as it does in any developed market.

If you think about the screen we talked about earlier Nik which is businesses that play to our strengths, typically when we are operating a business that does play to our strengths, we can operate that business globally.

So this is not a -- there's not a geographic frame to this.

It's as A.G. said, consumers, shoppers match with P&G strengths.

Yes, and Nik just one more thing, so again in an attempt to help everyone understand, in some cases, it's simple.

We sell one brand name everywhere in the world.

Pampers.

Pantene.

Okay?

In some we sell two.

Always Whisper.

In some of our lines in fabric, in home, in beauty and personal care, we sell what we call clone brands.

Okay?

So the principal brand might be Rejoice but it -- we sell Rejoice under a different name.

Okay?

In individual markets because that's sort of the history of the brand.

We keep those brands.

Same in laundry, same in cleaning.

So we're very practical.

We are very consumer and customer driven and we worked outside in from the markets to our brands and then to our business categories and sectors.

Ali Dibadj, Bernstein.

So before I get to the question and I often hate doing this but I think it's worth just a comment because I've heard it from many investors.

I'm not sure you did yourselves many favors on the -- in the press release not talking about the quarter really at all.

So we all got to page 13 or whatever it was saying that there's some rounding and beauty was down three but there's no explanation.

I'm not sure you did yourself any favors, so just for the sake of it heard from a lot of people, wanted to put it out there.

The question though more is around just again learning more about this very interesting structural change.

So it feels like I think most people's in-going assumption was 10% of the business that was going to be divested was going to be more along business segment lines and now I think you're flipping a little bit and talking about it from a branding line.

So I want to understand that if that's true and then a few questions that come out of that.

One is lots of changes and the rationale is focus, which I get.

But where do you know where the right balances?

So why isn't something even further like a bigger break up not the right answer?

How did you make that decision?

And then also from a focus perspective, if these brands are going to sell, are about 10% of the sales, 5% of operating profit, can you give us a sense of how much of your time, management's time and resources were on those?

And then last, want to go back to a question from before, I give you another chance.

If A.G. the Board says we want you here through this 12 to 24 month period, big transition period, we trust you to do this, do you want to be there for that time?

Thanks for all those.

Criteria driven.

I'm having fun.

I'm full of energy.

I'm 24/7 so that will take care of the last one.

If my e-mail volume is any indication, it's just backs up what A.G. said.

He's here and working hard.

Second point Ali.

It's strategy first.

Structure second.

Right?

Structure supports strategy.

Third point is still -- ultimately it's about competitive advantage and value creation.

Right?

So we don't see -- we see competitive advantage and multi-industry sector participation.

We see competitive advantage in technologies that flow across categories and industries.

We see competitive advantage in sourcing as a company.

And providing information and other services as a company and purchasing as a company.

So when we do the math on the value creation, we get to this choice -- strategic choice.

This set of businesses has the potential to be the biggest value creator.

Right?

Which should be in the interest not only of our company but also of our shareowners.

But yes.

The balance point is a very fair one.

And I'm not going to tell you that any of us are good enough to get this precisely right, and you know what?

We'll adjust as we go.

I can't tell you whether a 50 brand company might not be a little bit better than a 70 brand company.

If you see what I mean.

Okay?

The last point to your direct question is a management distraction is episodic, intermittent, and not the driver.

The activity and complexity that clogs us up is the real issue.

Okay?

Let's just take SKUs.

Okay?

I don't know what the end result will be here.

It's being worked business by business and iteratively but believe me the SKU reduction will be a lot bigger than the 10% of the sales line or revenue line.

Let's take product lines.

The same.

Okay?

So all of a sudden, one of the reasons that a number of our businesses have performed better is because the businesses and the R&D team and I all sat down in July and we've sat down several times since and we just pruned out the bottom 10%, 20%, 30%, 40%, of the activity and focused on a few others and that has accelerated better products to market.

The businesses -- some of the businesses that Jon mentioned and other businesses that did really well this last year did well because they were extremely focused.

The last point, and I could use a whole bunch of different examples here, when you're carrying the bag, I'll use the old metaphor, with all the P&G brands and product lines in it, to a distributor or wholesaler or to one of our sophisticated retail customers, believe me, it is a huge advantage to be selling fewer, leading consumer and shopper preferred brands and product lines.

Michael Steib, Credit Suisse.

I have a couple questions please.

A.G. you mentioned, you emphasized really the importance of having the right balance between premium priced products on the one hand and affordable products on the other hand.

Where the consumer demands it.

I was wondering in the core brand portfolio of 70 to 80 brands that you have identified now, do you think that that balance is right at this point?

And in other words, should the sort of negative mix effect on the top line going forward be less of a headwind once you've gone through these various disposals?

That's my first question.

And then Jon, forgive me just for asking a financial question but given your outlook for FY15, you suggested that essentially the top line growth is going to be against tough comps in the first half and cost savings will build through the year.

Should we therefore expect earnings growth to be sort of flattish in the first half and it all come good in the second half?

Thanks.

A couple things and one on the expectation of the reduction and negative mix on the top line as we go forward.

That will in all likelihood continue.

We've been pretty clear about that.

It's driven by disproportionate growth in developing markets which we expect to continue.

And as we move consumers up those portfolios over time, that impact will lessen.

As developed markets growth is reinvigorated that dynamic will lessen but it has been with us and will likely be with us for some period of time.

On the guidance question, we are not providing quarterly guidance.

But all the dynamics that you talked about are the right ones.

I think you are focused on the right things and I'd encourage you to follow-up with the IR team later today.

And I'll let A.G handle the question on whether we're priced right broadly or --

Yes.

Michael let me try to make a couple of strategic points and then I'll try to give you some insight into where we think we are at this moment in time.

The first thing is incredibly important and often not well understood.

That is the issue in our industry, in household products and personal care products is almost always consumer perception of value.

Value has different drivers in different categories and different brands.

Price is one of them.

Okay?

Price is one of them.

But brand awareness and trial rates and household penetration, brand equity.

Okay?

Product performance also are incredibly important.

Second point.

We have a huge opportunity to get a lot clearer with consumers about what the value equation really is.

I'm going to give you a specific example from Gillette.

We talked earlier that we just introduced FlexBall and it's off to a good start and we'll see how it does.

All right?

We did premarket research in a blind context so they don't know what the brand is.

And the new FlexBall razor was preferred 2 to 1 by system users versus the best performing product in the market which happened to be our ProGlide.

We are now in the market four, six, eight, weeks.

We went out and did a 400 male person panel where we asked them to use the new FlexBall razor versus whatever they are using today so we had disposable users.

We had shave club users, we had system users, we had electric razor users.

95% of them preferred the FlexBall.

95%.

Interestingly, a lot of disposable users, by the way half the world, okay, uses a disposable razor today.

The interesting thing is disposable users often say they use disposables because they think it shaves just as well as a system.

Many of them have never used a system.

And they think it's a better value.

So their first belief, if they try and use the FlexBall, they see it is a totally different experience and results.

And then the second thing is when you ask them what they think the price is or the cost is or the value is, they always say it's way more expensive and when we tell them you can have a cartridge for $1 a week, they're astounded.

And then we show them the math.

So my only point here is if you just read the Wall Street Journal, okay?

Or if you just listen to the anecdotes in the Street or if you look at the $50 for 10 cartridge pricing in some retail establishments, you may perceive that the price is high but the actual price per use and the actual quality and performance of the use is better.

And that's incredibly important.

Now to the direct question.

I said in my prepared remarks, we're in some businesses where the price point doesn't matter or in fact a higher price point is better.

I sell more SK-II when my price point is better.

We sell a lot of Oral-B electric toothbrushes at very high price points and I could go on, on, on throughout our line.

But if you step back and look at all of our businesses around the world, we are in the best shape we've been in in three years in terms of our relative pricing.

In other words, we have the smallest percentage of our total business that has a price gap and is losing share and here's the important part.

The three biggest opportunities are tissue towel, in North America, which is Bounty and Charmin and laundry which Chris asked me about earlier all of which are being addressed.

Okay?

Interesting point there.

On laundry is major retailers are sort of discounting Tide 15% to 20%.

It's still a better deal for them because Tide at a 15% discount is a higher price and generates more value for them than the balance of the category.

Last point on this one.

The number of opportunities we have where we are priced below where we should be, or mixing below where we should be are as large or greater than the opportunities we have to adjust our price.

Steve Powers, UBS.

Believe it or not a few more questions.

If I could.

First, Jon, maybe I missed it but did you offer any cost or timing estimates associated with the supply chain restructuring that you're undertaking?

And then second, taking a step back, you are clearly making progress on the cost-cutting especially in SG&A.

But the top line continues to lag a bit.

This quarter it does feel like you rounded up 2% organic growth in the quarter.

So does it make sense to drop all these marketing efficiencies to the bottom line or should you be reinvesting even more aggressively?

And then lastly, maybe related to that A.G., as you said it all starts with the consumer.

And you guys have been long known for leading consumer insight capabilities, so what specifically is the consumer telling you that you need to do better in the market that you're not doing?

And maybe you could just talk about that in the context of beauty for example.

Thanks.

In terms of the marketing, I mean, we're perfectly to happen to reinvest and are looking for opportunities to reinvest and feel that we can do that and continue to become both more effective and more efficient.

We are going through a transformation in this industry that we want to take advantage of while remaining fully in front of consumers with our marketing efforts.

So we look at things like the reach, the frequency, the targets that we're reaching, the conversion rates on the messaging, and that's much more important than actual dollars spent given what's happened in that industry.

But you should not mistake this for a second as lack of willingness to invest behind smart ideas to build the top line.

Yes.

We are maintaining or increasing our investment in marketing that works.

And we are driving savings in frankly non-working dollars or other efficiencies that you get from the move to more digital, mobile, social, et cetera.

On the consumer insight side, that is the focus, the sole focus of a lot of people in this organization and again I think we had a lot of activity going on and we weren't relentless about digging, digging, digging for shopper insights and consumer insights.

Very simple thing.

The mindset at Gillette was to test the new system with system users.

You sort of slap yourself in the forehead and say, well, wait a second.

Everybody grooms.

Some people do a clean shave.

Some people do a sculptured groom in the face.

Some people body groom.

Let's first of all understand what the job to be done is and then second of all, let's make sure we're putting together instruments, okay?

And experiences that meet all the needs so we are going to sell an opening price point disposable razor from Gillette at $2 to $3 and we'll take you all the way up to $200 to $300 if you want to buy an Art of Shaving product or a top of the line Braun product.

Specifically, regarding beauty, look here's the headline on beauty.

In terms of value creation, they were one of the better performing sectors this last year.

Unfortunately it was a little unbalanced.

Too much of the value creation came from cash and profit improvement.

Although I'll take it and there's a lot more there.

Secondly, the progress we are making, okay, on the Old Spices and Safeguard's, some of the hair care brands we had -- we showed some real progress on Pantene in a lot of important countries around the world.

Still not the progress I would like in the US, we had a little bit of share pick up in the first quarter, which excited some of our competitors and it turned into a second quarter that was heavily promoted.

But at any rate we'll get through that.

But Pantene is growing very strongly in important places like Brazil, it was growing sequentially in China.

It's growing in a lot of developed and emerging markets and I can see the product program starting to come.

Head and Shoulders has just gone from strength to strength.

Herbal is growing again.

Vidal is growing again in key markets so I think that's going to come.

And then before the year was out, even on Olay which is still struggling, we have some real encouragement in a couple of places.

We had two of the top five new facial cleanser products, two of the top five new facial moisturizer products and this line called Luminous is actually driving a little bit of share growth in the past couple of months.

So the bigger point, okay?

The bigger point is the one you made which is everything begins with shopper understanding and consumer understanding.

And when we have it and understand it, that informs importantly and allows us to do a much better job with our brand idea and our product pipeline and portfolio.

I want to thank everybody for joining us this morning.

I realize we did not get to everybody, it's a cheap substitute but I'm available the balance of the day.

Don't hesitate to call.

John and the team are here as well.

And we thank you for your participation.

Ladies and gentlemen, that concludes today's conference.

Thank you for your participation.

You may now disconnect and have a great day.