Clairol Colorants “Innovation” To Reach Market In 2003, P&G Says

Clairol new product activity featuring technology advances in hair color is planned for 2003, Procter & Gamble Chairman, President and CEO A.G. Lafley told analysts during the firm's third quarter earnings presentation April 30.

Commenting on the "technology we hope to bring" to the hair color segment, Lafley said, "you'll see our innovation begin to come to market next calendar year." P&G previously said it hopes to combine its hair care expertise in areas such as bleach and conditioning with Clairol's know-how in shade management (¹ (Also see "Clairol $50 Mil. Marketing Boost Part Of P&G Blueprint For Growth" - HBW Insight, 28 May, 2001.), p. 3).

Sales of the Clairol colorant business "are currently showing softness due to aggressive competitive activity during the long acquisition period and the long business transition," noted P&G VP and Treasurer Juan Pedro Hernandez.

Hair color brands launched last summer, while the Clairol acquisition was undergoing regulatory clearance, include L'Oréal's Open and Garnier Lumia lines, as well as Revlon's High Dimension . The acquisition became final in November.

Lafley pointed out "in colorants, as we've said all along, it's going to take us a little while to really learn this business." He added the firm plans in the near term to focus on being "competitive to retain the loyalty of our current Clairol customers." Overall Clairol sales fell by "mid-single digits" during the third quarter, the company said.

"I think you'll see...the [Clairol] business benefiting from P&G's focus" and "just getting on our price list and being sold by our sales organization in key countries," lafley said. He predicted some "share progress in the next six months or so."

P&G "bought a very strong brand in Herbal Essences ," Lafley continued, adding "I think we'll find one or two jewels in the rest of the portfolio."

In addition to Herbal Essences, the purchase included shampoo and conditioner lines as Clairol Daily Defense , Renewal 5X , Aussie and Infusium 23 , as well as the color lines Nice 'n Easy , Natural Instincts , Hydrience and Ultress . Aussie comprises a number of products ranging from shampoos and conditioners to styling products, while Infusium 23 focuses on conditioners and leave-in treatments.

Driven by the addition of the Clairol business, P&G's beauty care sales advanced 18% to $2.11 bil. in the third quarter.

The growth also reflected gains in fine fragrances, including a 47% increase in revenues for Hugo Boss , the company said. The brand recently was extended with Boss In Motion , a scent aimed at active men (² , p. 10).

A 28% increase in beauty division unit volume was partially offset by "mix impacts" reflecting the inclusion of Clairol, the firm added.

P&G explained the mix effect related to the fact that Clairol products are priced on average lower than many of its existing beauty care lines.

"So it's bringing more cases in volume than it's bringing sales dollars on a proportionate basis," according to CFO Clayton Daley. Net earnings for the beauty division rose 11% to $269 mil. in the period.

Continued growth in P&G's oral care business contributed to a 13% rise in health care sales to $1.22 bil., the company reported. Crest Whitestrips and Spinbrush were "particularly strong" during the period, P&G maintained. Net earnings in the health care unit were $124 mil., up 36%.

Consolidated company sales rose 4% to $9.9 bil. for the period, while unit volume registered a 10% gain.

Net earnings rose 16.5% to $1.04 bil. Earnings include a $147 mil. after-tax restructuring charge related to operations and business portfolio streamlining. Earnings in the year-ago quarter included $113 mil. after-tax restructuring expenses.

For the fourth quarter, P&G expects sales, excluding foreign exchange, to be up by mid-single digits. Core earnings, excluding restructuring charges and adjustments for amortization, will rise in the low teens, reflecting strong volume and higher operating margins, the firm predicted.

For fiscal 2003, P&G is forecasting sales growth in the 4% range and a double-digit core earnings increase, "despite expected adverse movements in interest rates and lower income from minor brand divestitures."