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The Procter & Gamble Company

Company Profile

Publication Date: 30 Jun 2011

www.datamonitor.comAsia PacificAmericasEurope, Middle East & AfricaLevel 46245 5th Avenue119 Farringdon Road2 Park Street4th FloorLondonSydney, NSW 2000New York, NY 10016EC1R 3DAAustraliaUSAUnited Kingdom

t: +61 2 8705 6900t: +1 212 686 7400t: +44 20 7551 9000f: +61 2 8088 7405f: +1 212 686 2626f: +44 20 7551 9090e: [email protected]: [email protected]: [email protected]


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ABOUT DATAMONITOR

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The Procter & Gamble Company Page 2 Datamonitor

The Procter & Gamble Company


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TABLE OF CONTENTS

Company Overview..............................................................................................4

Key Facts............................................................................................................... 4

Business Description...........................................................................................5

History................................................................................................................... 6

Key Employees...................................................................................................10

Key Employee Biographies................................................................................12

Major Products and Services............................................................................18

Revenue Analysis...............................................................................................21

SWOT Analysis...................................................................................................23

Top Competitors.................................................................................................30

Company View.....................................................................................................31

Locations and Subsidiaries...............................................................................39


The Procter & Gamble CompanyTABLE OF CONTENTS


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COMPANY OVERVIEW

The Procter & Gamble Company (P&G or the company) is one of the world's largest consumergoods companies. It markets branded products in the beauty, health, fabric, home, baby, family,and personal care product categories. The company operates in the Americas, Europe and Asia. Itis headquartered in Cincinnati, Ohio, and employs about 127,000 people.

The company recorded revenues of $78,938 million during the financial year ended June 2010(FY2010), an increase of 2.9% over 2009.The operating profit of the company was $16,021 millionin FY2010, an increase of 4.2% over 2009.The net profit was $12,736 million in FY2010, a decreaseof 5.2% over 2009.

KEY FACTS

The Procter & Gamble CompanyHead OfficeOne Procter & Gamble PlazaCincinnatiOhio 45202USA

1 513 983 1100Phone

1 513 983 9369Faxhttp://www.pg.comWeb Address

78,938.0Revenue / turnover(USD Mn)

JuneFinancial Year End

127,000Employees

PGNew York Ticker


The Procter & Gamble CompanyCompany Overview


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BUSINESS DESCRIPTION

The Procter & Gamble Company (P&G or the company) is a global manufacturer and marketer ofbranded consumer products.The company markets its products in over 180 countries spanningAmericas, Europe, the Middle East and Africa (EMEA), and Asian region.

The companys reportable segments are classified into six divisions, namely: beauty, grooming,health care, snacks and pet care, fabric care and home care, and baby care and family care.Additionally, the company's organizational structure is comprised of four divisions; Global BusinessUnits (GBUs), Global Operations, Global Business Services (GBS) and Corporate Functions (CF).

GBUs of P&G mainly focus on consumers, brands and innovations around the world. It is fur therorganized into three sub-units; Beauty, Health and Well-Being, and Household Care. The BeautyGBU includes the beauty and the grooming businesses.The beauty business is comprised ofcosmetics, deodorants, prestige fragrances, hair care, personal cleansing and skin care.The groomingbusiness includes blades and razors, face and shave products, beauty electronics, and small homeappliances.The Health and Well-Being GBU includes the health care, and the snacks and pet carebusinesses.The health care business includes feminine care, oral care and personal health care.The snacks and pet care business includes pet food and snacks.The Household Care GBU includesthe fabric care and home care, and the baby care and family care businesses. The fabric care andhome care business includes air care, batteries, dish care, fabric care and surface care. The babycare and family care business includes baby wipes, bath tissue, diapers, facial tissue and papertowels.

Global Operations is comprised of P&G's Market Development Organization (MDO). MDO isresponsible for developing go-to-market plans at the local level.The MDO includes dedicated retailcustomer, trade channel and country-specific teams. It is organized along five geographic units:North America, Western Europe, Central & Eastern Europe/Middle East/Africa (CEEMEA), LatinAmerica and Asia which comprises Japan, Greater China and ASEAN/Australia/India/ Korea (AAIK).

GBS provides technology, processes and standard data tools to enable the GBUs and the MDO tobetter understand the business and better serve consumers and customers.

CF provides the company-level strategy and portfolio analysis, corporate accounting, treasury,external relations, governance, human resources and legal, as well as other centralized functional

support.


The Procter & Gamble CompanyBusiness Description


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The company entered the European tissue and towel market with the acquisition of theGermany-based company, Schickedanz in 1994. In the same year, P&G added Giorgio Beverly Hillsto its fine fragrance business and also re-entered the South African market following the lifting ofUS sanctions against investment in South Africa. In the following year, P&G started managing itsbusiness through four geographic regions; North America, Latin America, Asia, and Europe/MiddleEast/Africa.

The company entered the global pet health and nutrition business by acquiring Lams Company, aleader in premium pet foods in 1999. In the following year, P&G gained Food and Drug Administration(FDA) approval for Actonel (risedronate sodium tablets) for the prevention and treatment ofpostmenopausal osteoporosis (PMO) and glucocorticoid-induced osteoporosis (GIO).The acquisitionof Clairol from Bristol-Myers Squibb, in 2001, provided the company with a number of establishedhair color and hair care brands. In 2003, P&G acquired controlling interest in a leading professional

hair care company, Wella. It added dental floss to its product portfolio by purchasing the Glide flossbusiness from W L Gore & Associates, later in 2003.

The company announced its agreement to acquire the commercial business of Grupo Vita in Spainin 2004. This provided P&G with strong commercial capabilities in Spain. In the same year, P&Gfinalized the sale of its juice drink brands, Sunny Delight and Punica, to JW Childs Associates, aprivate equity company. In early 2005, the company entered into an agreement to acquire the GilletteCompany, a leader in male grooming products.The proposed merger with the Gillette Companywas later cleared by the European Commission and was finalized later the same year.

Duracell, part of P&G, acquired Garrity Industries, a private US based manufacturer and marketerof lighting products in 2006. During the same year, Duracell launched new rechargeable cells

designed to meet the growing demands of high-drain devices like digital cameras.The companyopened its largest Gillette blades and razors operations facility in Poland in 2006.

In 2007, P&G reorganized its operations internally, in which the Gillette Blade and Razor and Braunbusinesses became part of P&G Beauty and Health, and the Duracell battery business joined P&GHousehold Care. In the same year, the company acquired HDS Cosmetics Lab from North CastlePartners, a private equity firm. HDS Cosmetics Lab manufactures and markets Doctor's DermatologicFormula (DDF) skin care products.

During the same year, Dunkin' Brands and P&G signed an agreement to launch Dunkin' Donutscoffee at retail. P&G Coffee was responsible for distributing Dunkin' Donuts packaged coffee togrocery stores, mass merchandisers, club stores and other consumer retail channels across the US.

Further, the company divested its Western European tissue/towel business to SCA, a global consumergoods and paper company. Later in the year, P&G realigned its business units into three globalbusiness units (GBUs): Beauty Care, Global Health & Well Being, and Household Care.

In 2007, Inverness Medical Innovations and P&G announced the completion of the 50/50 joint venturefor the development, manufacturing, marketing and sale of existing and to-be-developed consumerdiagnostic products, outside the cardiology, diabetes and oral care fields. Inverness contributed itsrelated consumer diagnostic assets, other than its manufacturing and core intellectual property


The Procter & Gamble CompanyHistory


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assets, to the joint venture, and P&G acquired its interest in the joint venture for a cash payment ofapproximately $325 million.

In the same year, P&G filed a patent lawsuit against Kraft Foods, manufacturer of the Maxwell HouseCoffee brand.The lawsuit alleged that the new plastic container for Maxwell House coffee directlyinfringes key P&G patents on Folgers Coffee. Later in the year, Koninklijke Philips Electronics (Philips)filed a lawsuit against P&G, alleging that P&G's advertisement for its Pulsonic line of electric shaversis false and misleading. In the same month, P&G filed a lawsuit against Fruit of the Earth for theinfringement of various patents of its Olay Regenerist trade dress.

In 2008, P&G filed a lawsuit against Blue Cross Laboratories of California, for the infringement ofits Herbal Essences trade dress. In the same year, Hindustan Unilever Limited filed a suit againstP&G in the Calcutta High Court for the alleged infringement of trademark of its product Sunlight by

Tide of P&G.

Also in 2008, P&G and Palomar Medical Technologies (Palomar), entered into a non exclusiveLicense Agreement to exploit home use light based hair removal devices for women. This newagreement will replace the Development and License Agreement entered into by Palomar and theGillette Company, a wholly owned subsidiary of P&G, way back in 2003. Further, P&G acquiredFrederic Fekkai & Co, which includes high-end hair care products and salons. Towards the end of2008, P&G completed the sale of its Folgers coffee business to the JM Smucker Company.

In 2009, P&G reached a settlement with Kraft Foods regarding P&G patents to plastic packagingfor roast and ground coffee. The settlement covered pending cases related to this matter betweenP&G and Kraft Foods. The financial terms and the details of this settlement were not disclosed.

During the same year, P&G and Fruit of the Earth reached a settlement in the lawsuit P&G filed inDecember 2007 against Fruit of the Earth for trade dress and patent infringement on its OlayRegenerist brand. Fruit of the Earth recognized the validity of P&G's rights in the Olay RegeneristTrade Dress and certain of P&G's patent rights identified in the lawsuit. Fruit of the Earth also agreedto revise its product offerings.The remaining terms of the agreement were not disclosed.

Later in the year, P&G, won a patent infringement lawsuit filed against Teva Pharmaceuticals forosteoporosis therapy, Actonel. Also in the year, the company acquired the high-end male groomingbrand, Zirh. Further in 2009, P&G sold its global pharmaceuticals business to Warner Chilcott, aleading specialty pharmaceutical company, for an up-front cash payment of $3.1 billion.

The company, in 2009, voluntarily recalled three lots of its Vicks Sinex nasal spray in the US, Germanyand the UK. In the following month, P&G voluntarily recalled its Vicks DayQuil Cold & Flu 24-CountLiquiCaps Bonus Pack in the US.

In March 2010, in response to a recommendation from the Food & Drug Administration (FDA) to thefood industry, P&G voluntarily recalled its Pringles Restaurant Cravers Cheeseburger potato crispsand Pringles Family Faves Taco Night potato crisps to protect consumers from potential Salmonellaexposure.




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P&G launched a new online shopping site, eStore, for the US consumers in May 2010. During thesame month, the company entered into an agreement to acquire Natura Pet Products, a privately-heldpet food business. In June 2010, the company voluntarily recalled a small percentage of 1-liter bottlesof Scope Original Mint and Scope Peppermint mouthwash with malfunctioning child-resistant capsin the US and Canada. During the same month, P&G recalled its 4-Hour Decongestant Nasal Spraydistributed in the US. Furthermore, the company recalled specific lots of its Iams canned cat foodin North America.

P&G completed the acquisition of the Ambi Pur Brand from Sara Lee Corporation in July 2010.

In August 2010, the company announced the introduction of a new line-up of one-click faucet mountfiltration systems. During the same month, the company entered into a co-promotion agreement withSomaxon Pharmaceuticals for Silenor (doxepin) drug, new approved drug for insomnia treatment.

The company announced a Joint Development Agreement (JDA) with Pursuit Dynamics in November2010 for developing specific applications using the PDX reactor technology in a wide range ofproduction processes at P&G. In the following month, Palomar Medical Technologies announcedthe amendment to its non-exclusive license agreement with P&G. Under the amended licenseagreement, P&G and Palomar agreed to reduce pre-commercial launch calendar quarterly paymentsfrom $1.25 million to $1 million for the quarter ending December 2010 and thereafter to $2 millionper year for an agreed period, after which the payments return to $1.25 million per calendar quarterif no product has been launched.

High Ridge Brands, a portfolio company of Brynwood Partners, acquired Zest brand from P&G inJanuary 2011. High Ridge Brands purchased the rights to the Zest brand in the US, Canada and

the Caribbean markets. Also in the month, P&G announced the expansion of its renewable energyportfolio by unveiling a wind turbine at pet care plant in Coevorden, Netherlands and extending itscommitment to solar energy with the installation of solar panels at its beauty and grooming plant inCologne, Germany.

In February 2011, the company entered into a research partnership with the Institute for SystemsBiology, to characterize the systems biology of various skin conditions including skin aging. In thefollowing month, Procter & Gamble Professional launched the P&G ProLine Floor Care System, acomplete product lineup of floor care solutions. In March 2011, P&G opened its new Box Elder, UtahFamily Care plant. Diamond Foods and P&G signed a definitive agreement to merge the P&GsPringles business into Diamond Foods, in April 2011.

The company made a voluntary recall of 12 shades of Clairol Natural Instincts in the US, Canadaand Puerto Rico, in April 2011. In the following month, P&G filed a lawsuit against Vi-Jon, aprivate-label manufacturer and distributor of mouthwash, in the US District Court for the SouthernDistrict of Ohio. The lawsuit alleges that Vi-Jon was violating P&G's intellectual property bymanufacturing and selling its private label mouthwash product to retailers.




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KEY EMPLOYEES

CompensationBoardJob TitleName

13115228 USDExecutive BoardChairman, President and ChiefExecutive Officer

Robert A. McDonald

82261 USDNon Executive BoardDirectorAngela F. Braly

251256 USDNon Executive BoardDirectorKenneth I. Chenault

258446 USDNon Executive BoardDirectorScott D. Cook

Non Executive BoardDirectorSusan Desmond-Hellmann

259334 USDNon Executive BoardDirectorW. James McNerney

245158 USDNon Executive BoardDirectorJohnathan A. Rodgers

Non Executive BoardDirectorMargaret C. Whitman

247800 USDNon Executive BoardDirectorMary Agnes Wilderotter

270808 USDNon Executive BoardDirectorPatricia A. Woertz

258714 USDNon Executive BoardDirectorErnesto Zedillo

5679308 USDSenior ManagementVice Chairman, Global OperationsWerner Geissler

6343477 USDSenior ManagementVice Chairman, Global HouseholdCare

E. Dimitri Panayotopoulos

5011454 USDSenior ManagementVice Chairman, Global Beauty andGrooming

Edward D. Shirley

4690344 USDSenior ManagementVice Chairman, Health CareStrategy

Robert A. Steele

3257561 USDSenior ManagementChief Financial OfficerJon R. Moeller

Senior ManagementChief Technology OfficerBruce Brown

Senior ManagementGroup President, Global MaleGrooming, Beauty and Grooming

Charles V. Bergh

Senior ManagementGroup President, Global FeminineCare

Steven D. Bishop

Senior ManagementGroup President, Western Europeand Global Discounter andPharmaceutical Channels

Giovanni Ciserani

Senior ManagementGroup President, Global FemaleBeauty

Virginia Drosos

Senior ManagementGroup President, Global Home CareDavid S.Taylor

Senior ManagementGroup President, Global Fabric CareJorge S. Mesquita

Senior ManagementGroup President, Global Oral CareCharles E. Pierce

Senior ManagementGroup President, Global FamilyCare

Mary Lynn Ferguson-McHugh


The Procter & Gamble CompanyKey Employees


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CompensationBoardJob TitleName

Senior ManagementGroup President, AsiaDeborah A. Henretta

Senior ManagementGroup President, CEEMEA andGlobal High Frequency StoreChannel

Laurent L. Philippe

Senior ManagementPresident , Global Female Beauty,Beauty and Grooming

Colleen E. Jay

Senior ManagementGlobal Product Supply OfficerR. Keith Harrison

Senior ManagementGlobal Human Resources OfficerMoheet Nagrath

Senior ManagementPresident, Global Business Servicesand Chief Information Officer

Filippo Passerini


The Procter & Gamble CompanyKey Employees


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KEY EMPLOYEE BIOGRAPHIES

Robert A. McDonald

Board: Executive BoardJob Title: Chairman, President and Chief Executive OfficerSince: 2010Age: 57

Mr. McDonald is the Chairman, President and Chief Executive Officer at P&G. He is also a Directorof Xerox Corporation. Mr. McDonald has nearly 30 years of brand-building, market development,

global business unit and global operations leadership experience across P&G.

Angela F. Braly

Board: Non Executive BoardJob Title: DirectorSince: 2009Age: 49

Ms. Braly has been a Director at P&G since 2009. She also serves as the Chairman, President andChief Executive Officer at Wellpoint.

Kenneth I. Chenault


Mr. Chenault has been a Director at P&G since 2008. He is currently the Chairman and ChiefExecutive Officer of the American Express Company. Mr. Chenault is also a Director of InternationalBusiness Machines Corporation.

Scott D. Cook



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Mr. Cook has been a Director at P&G since 2000. He is the Chairman of the Executive Committeeat Intuit. Mr. Cook is also a Director at eBay.

Susan Desmond-Hellmann


Ms. Desmond-Hellmann has been a Director at P&G since 2000. She is the Chancellor and Arthurand Toni Rembe Rock Distinguished Professor at University of California.

W. James McNerney


Mr. McNerney has been a Director at P&G since 2003. He is the Chairman, President and ChiefExecutive Officer of the Boeing Company. Mr. McNerney also serves on the board of InternationalBusiness Machines Corporation

Johnathan A. Rodgers


Mr. Rodgers has been a Director at P&G since 2001. He is the President and Chief Executive Officerof TV One. Mr. Rodgers is also a Director of Nike.

Margaret C. Whitman


Ms.Whitman has been a Director at P&G since 2011. She is the former President and Chief ExecutiveOfficer of eBay. Ms. Whitman also serves on the board of Hewlett Packard Company.




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Mary Agnes Wilderotter


Ms. Wilderotter has been a Director at P&G since 2009. She is the Chairman, President and ChiefExecutive Officer of Frontier Communications Corporation. Ms.Wilderotter is also a Director of XeroxCorporation.

Patricia A. Woertz


Ms. Woertz has been a Director at P&G since 2008. She is the Chairman, Chief Executive Officerand President of Archer Daniels Midland Company.

Ernesto Zedillo

Board: Non Executive Board

Job Title: DirectorSince: 2001Age: 58

Dr. Zedillo has been a Director at P&G since 2001. He is the former President of Mexico, Directorof the Center for the Study of Globalization, and Professor in the field of International Economicsand Politics at Yale University. Dr. Zedillo is also a Director of Alcoa and Citigroup.

Werner Geissler

Board: Senior Management

Job Title:Vice Chairman, Global OperationsSince: 2007Age: 57

Mr. Geissler has been the Vice Chairman, Global Operations at P&G since 2007. He joined thecompany in 1979 as Brand Assistant in the Marketing department. During his 30 years with the P&G,Mr. Geissler held positions of increasing responsibility in Brand and General Management.




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E. Dimitri Panayotopoulos

Board: Senior ManagementJob Title:Vice Chairman, Global Household CareSince: 2007Age: 58

Mr. Panayotopoulos has been the Vice Chairman, Global Household Care at P&G since 2007. Hebegan his career with P&G in 1977 as a Salesman in the UK. Presently, Mr. Panayotopoulos alsoserves as a member of various school Boards in Switzerland, Germany and Hong Kong.

Edward D. Shirley

Board: Senior ManagementJob Title:Vice Chairman, Global Beauty and GroomingSince: 2008Age: 53

Mr. Shirley has been the Vice Chairman, Global Beauty and Grooming at P&G since 2008. He joinedthe company with the acquisition of Gillette. Prior to the acquisition, Mr. Shirley led GillettesInternational Commercial Operations.

Robert A. Steele

Board: Senior ManagementJob Title:Vice Chairman, Health Care StrategySince: 2011Age: 55

Mr. Steele has been the Vice Chairman, Health Care Strategy at P&G since 2011. He joined P&Gin 1976 as a Sales Representative. Presently, Mr. Steele serves on the Boards of the KelloggCompany, the United Negro College Fund and the St. Josephs Home for Handicapped Children.

Jon R. Moeller

Board: Senior ManagementJob Title: Chief Financial OfficerSince: 2009Age: 46

Mr. Moeller has been the Chief Financial Officer at P&G since 2009. He joined P&G in 1988 as Costanalyst Food products after completing his MBA from Cornell University.




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Bruce Brown

Board: Senior ManagementJob Title: Chief Technology OfficerSince: 2008Age: 52

Mr. Brown has been the Chief Technology Officer at P&G since 2008. He joined the company in1980 and has nearly has nearly 30 years experience in both developed and developing markets.

Charles V. Bergh

Board: Senior ManagementJob Title: Group President, Global Male Grooming, Beauty and GroomingSince: 2009Age: 54

Mr. Bergh has been the Group President, Global Male Grooming, Beauty and Grooming at P&Gsince 2009. He joined the company in 1983. Presently, Mr. Bergh also serves on the Boards of VFCorporation, United way and Economic Development Board-Singapore.

Steven D. Bishop

Board: Senior Management

Job Title: Group President, Global Feminine CareSince: 2010Age: 45

Mr. Bishop has been the President, Global Feminine Care at P&G since 2009. He joined the companyas the Assistant Purchasing Manager, Foods Division in 1986.

Giovanni Ciserani

Board: Senior ManagementJob Title: Group President, Western Europe and Global Discounter and Pharmaceutical Channels

Since: 2010Age: 49

Mr. Ciserani has been the Group President, Western Europe and Global Discounter andPharmaceutical Channels at P&G since 2010. He joined the company in 1987. Presently, Mr. Ciseranialso serves as the Board member of AIM (Association des Industries de Marque / European BrandsAssociation), ECR Europe (Efficient Consumer Response), and American Chamber of Commerce,Zurich.




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Virginia Drosos

Board: Senior ManagementJob Title: Group President, Global Female BeautySince: 2010Age: 48

Mr. Drosos has been the Group President, Global Female Beauty at P&G since 2010. She joinedthe company in 1987 and has served at various capacities in the company since then.




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MAJOR PRODUCTS AND SERVICES

The Procter & Gamble Company (P&G or the company) is one of the world's largest consumergoods companies. It markets branded products in the beauty, health, fabric, home, baby, family,and personal care product categories. The company's key products include the following:

Products:

Beauty:

CosmeticsDeodorants

Hair carePersonal cleansingPrestige fragrancesSkin care

Grooming:

Blades and razorsElectric hair removal devicesFace and shaving productsHome appliances

Health Care:

Feminine careOral carePersonal health carePharmaceuticals

Snacks and pet care:

SnacksPet food

Fabric Care and home care:

Air careBatteriesDish careFabric careSurface care


The Procter & Gamble CompanyMajor Products and Services


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Baby Care and Family care:

Baby wipesBath tissueDiapersFacial tissuePaper towels

Brands:

Beauty:

Head & ShouldersOlayPanteneWella

Grooming:

BraunFusionGilletteMach3

Health Care:

ActonelAlwaysCrestOral-B

Snacks and pet care:

IamsPringles

Fabric Care and home care:

ArielDawnDownyDuracellGainTide

Baby Care and Family care:




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BountyCharminPampers




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REVENUE ANALYSIS

The company recorded revenues of $78,938 million during the financial year ended June 2010(FY2010), an increase of 2.9% over 2009. For FY2010, North America, the company's largestgeographic market, accounted for 42% of the total revenues.

The company is organized into three Global Business Units (GBUs): Beauty GBU, Health andWell-Being GBU and Household Care GBU.The three GBUs operate under six reportable segments:fabric care and home care (29.6% of the total revenues during FY2010; beauty (24.3%); baby careand family care (18.4%); health care (14.3%); grooming (9.5%); and snacks and pet care (3.9%).

Revenues by Division*

In FY2010, the fabric care and home care division recorded revenues of $23,805 million in FY2010,an increase of 2.7% over 2009.

The beauty division recorded revenues of $19,491 million, an increase of 3% over 2009.

The baby care and family care division recorded revenues of $14,736 million in FY2010, an increaseof 4.5% over 2009.

The health care division recorded revenues of $11,493 million in FY2010, an increase of 1.8% over2009.

The grooming division recorded revenues of $7,631 million in FY2010, an increase of 3% over 2009.

The snacks and pet care division recorded revenues of $3,135 million in FY2010, an increase of0.7% over 2009.

*Percentages are calculated including eliminations and are rounded-off.

Revenues by Geography**

North America, P&G's largest geographical market, accounted for 42% of the total revenues in

FY2010. Revenues from North America reached $33,154 million in 2010, an increase of 2.9% over2009.

Western Europe accounted for 21% of the total revenues in FY2010. Revenues from Western Europereached $16,577 million in 2010, an increase of 2.9% over 2009.

Asia accounted for 15% of the total revenues in FY2010. Revenues from Asia reached $11,840.7million in 2010, an increase of 10.3% over 2009.


The Procter & Gamble CompanyRevenue Analysis


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CEEMEA accounted for 13% of the total revenues in FY2010. Revenues from CEEMEA reached$10,261.9 million in 2010, a decrease of 4.4% over 2009.

Latin America accounted for 9% of the total revenues in FY2010. Revenues from Latin Americareached $7,104.4 million in 2010, an increase of 2.9% over 2009.

** CEEMEA includes Central and Eastern Europe, Middle East and Africa.

***Percentages as reported by the company


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SWOT ANALYSIS

The Procter & Gamble Company (P&G or the company) is one of the world's largest consumergoods companies.With revenues of $78,938 million, P&G is the world's largest consumer productsmanufacturer, with its products reaching 4.2 billion people worldwide. In addition, P&G has the largestlineup of leading brands in its industry, with 23 brands with over $1 billion in annual sales, andanother 20 brands generating about $500 million or more in annual sales. Leading market positionand strong brand portfolio provides P&G with significant competitive advantage as well as stabilizesthe company's financial growth. However, competitive environment could impact the companysprofitability and margins in the future.

WeaknessesStrengths

Increasing instances of product recallsLeading market position garnered on astrong brand portfolioSignificant R&D and marketing investmentsRobust cash productivity

ThreatsOpportunities

Competitive industry landscape posechallenges for profitability

Future growth plans with focus onincreasing concentration on its core

Rising inflation could cause substantial rise

in the operating cost

attractive businesses and enhancing its

customer baseCounterfeit goodsIncreased investment in manufacturing

capacity in developing countries Volatility in currency exchange ratesAcquisitions to expand portfolio

Strengths

Leading market position garnered on a strong brand portfolio

With revenues of $78,938 million, P&G is the world's largest consumer products manufacturer, withits products reaching 4.2 billion people worldwide. P&G was the 22nd largest company in terms ofsales and the 4th largest company in profits among the Fortune 500 list of 2009. The company'smarket capitalization of roughly $175.2 billion as of March 2011 far exceeds the $46 billion bookvalue of the companys tangible assets, which reflects the higher value placed on the companysbrands, the earnings and cash flow.

In addition, P&G holds leading global market shares in a variety of categories, including baby care(35%), blades and razors (70%), feminine care (35%), and fabric care (30%). The company's


The Procter & Gamble CompanySWOT Analysis


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leadership position is built on its strong brand portfolio. P&G has the largest lineup of leading brandsin its industry, with 23 brands with over $1 billion in annual sales, and another 20 brands generatingabout $500 million or more in annual sales.The companys brand strength is demonstrated by thefact that its brands are market leaders in 15 of the 21 major consumer categories in which it operatesglobally.

Leading market position based on a strong brand portfolio enables the company to achieve economiesof scale in distribution and retain a strong bargaining position with retailers. Furthermore, leadingmarket position provides P&G with significant competitive advantage as well as stabilizes thecompany's financial growth.

Significant R&D and marketing investments

Being a consumer products company, P&G relies heavily on innovation and continued marketinginvestments in order to establish a significant competitive advantage. As a result, the company hasmade significant investments in R&D and marketing.

Over the last decade, P&G has invested nearly $2 billion in consumer and market research (nearlytwice that of its closest competitor, Unilever, whose average R&D expense rounds up around $1billion-$1.2 billion). Virtually, all the organic sales growth delivered by P&G in the past ten years hascome from new brands and new or improved product innovation. As part of its R&D efforts, thecompany interacts with more than five million consumers each year in nearly 60 countries aroundthe world. P&G conducts over 15,000 research studies every year and invests more than $350million annually in studies focused on consumer understanding. Additionally, P&G also involvesexternal innovation partners to boost its internal innovative capability, an approach it calls 'Connect

and Develop.' Currently, more than half of all product innovation coming from P&G includes at leastone major component from an external partner.

P&Gs continued focus on product innovation has enabled the company to further enhance its marketposition through additional revenue streams. For instance, IRI Pacesetters study (which tracks andranks the most successful new consumer products introduced in the US) recognized P&G as themost innovative manufacturer in the consumer packaged goods industry for the last decade. Besides,the companys brands held five of the top 10 most successful non-food innovations as reported bySymphonyIRI in 2009. Furthermore, the study by SymphonyIRI revealed the fact that over the past14 years, P&G has had 114 top 25 Pacesetters, more than its six largest competitors combined.

P&G's strong R&D capabilities and consumer-based innovations are backed by significant marketinginvestments.The company invests nearly $8 billion in advertising annually, consistently making P&Gone of the world's largest advertisers.

Strong focus on research and development allows P&G to renew its product line at regular intervals,which boosts customer loyalty and revenue growth. Significant marketing investments to support itsbrands and a broad product portfolio help P&G to remain at forefront in a competitive market.

Robust cash productivity




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P&G's cash productivity, the percentage of earnings converted into cash, has averaged over 100%since 2001, consistently among the very best in the industry. This is primarily due to P&G's strongfocus on productivity, working-capital management and cost reduction. For example, P&G is thereceivables leader of the industry, operating more efficiently with fewer days of receivables outstandingthan any consumer products competitor. Furthermore, P&G is equally rigorous about managingcosts. The company has reduced overhead costs as a percentage of sales by more than 300 basispoints since 2001.The cash productivity allows P&G to maintain the company's strong credit rating,to pay strong dividends, and to have the flexibility to invest in the business organically or throughmergers and acquisitions. Therefore, robust cash productivity ensures that P&G has the flexibilityand the resources to invest in growth even in the most challenging environments.

Weaknesses

Increasing instances of product recalls

P&G has been registering increasing instance of product recalls recently. For instance, in November2009, the company voluntarily recalled three lots of its Vicks Sinex nasal spray in the US, Germanyand the UK. The recall was a precautionary step after finding the bacteria B. cepacia in a smallamount of product made at its plant in Gross Gerau, Germany. In the following month, P&G voluntarilyrecalled its Vicks DayQuil Cold & Flu 24-Count LiquiCaps Bonus Pack in the US. The product wasrecalled as it did not contain a child-resistant backing for the blister packs in the box, despite labelstatements that the product is in child-resistant packaging. Later in March 2010, P&G voluntarilyrecalled its Pringles Restaurant Cravers Cheeseburger potato crisps and Pringles Family FavesTaco Night potato crisps in response to a recommendation from the Food & Drug Administration

(FDA) to the food industry to protect consumers from potential Salmonella exposure.

Most recently in June 2010, P&G voluntarily recalled a small percentage of 1-liter bottles of ScopeOriginal Mint and Scope Peppermint mouthwash with malfunctioning child-resistant caps in the USand Canada. During the same month, P&G recalled its 4-Hour Decongestant Nasal Spray distributedin the US. The product was recalled as the product formulation did not meet the expiration dates onthe package. Furthermore, the company recalled specific lots of its Iams canned cat food in NorthAmerica as the diagnostic testing indicated that the product contained insufficient levels of thiamine(Vitamin B1).

Recurrent product recalls like these not only negatively affects the brand image of the company but

also impacts its financial performance in terms of ad hoc expenses.

Opportunities

Future growth plans with focus on increasing concentration on its core attractive businesses andenhancing its customer base




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In order to grow in a highly competitive environment, P&G is pursuing a clearly drafted strategy withfocus on two areas: increasing concentration on its core attractive businesses and enhancing itscustomer base.

The company is sharply focusing on its core attractive businesses (the beauty and health marketsegments and several household care categories) as these are fast-growing businesses. As perDatamonitor estimates, the global market for personal care products was worth $469,601.1 millionin 2009. The market is projected to grow at a compounded annual growth rate (CAGR) of 4% to thevalue of $565,817.4 million by 2014. In addition, the global household care market was valued byDatamonitor at $175,234.5 million in 2009 and is estimated to grow to the value of $209,514.4 millionat a CAGR of 4% during 2009-14 period.

In addition, P&G intends to increase its customer base in growth markets. In line with this, the

company is targeting developing markets; extending its distribution systems; and expanding its brandand product portfolio. Driven by the increasing disposable incomes and awareness, the importanceof emerging markets such as China, India, and Brazil is on the rise. The rising GDP and disposableincome and a growing middle class in these countries augur well for the demand of cosmetics andpersonal care products. For instance, according to the Associated Chambers of Commerce andIndustry of India (ASSOCHAM), the Indian FMCG sector is expected to double from $14.7 billion in2008-09 to $30 billion in 2012. Similarly, the Chinese FMCG market returned to double digit growthrate and recorded 15% growth rate year-on-year in 2010.

On an aggregate basis, P&G had a 19% share in developing markets as of 2009 and is growingsteadily by about half a share point a year. Furthermore, in order to tap new customers, P&G is alsoextending its distribution systems. In addition, the company expanded its portfolio both vertically, to

serve more consumers at more price points, and horizontally into adjacent categories. For instance,the company expanded its Tide (the leading laundry detergent brand in the US) and Ariel (the leadinglaundry detergent brand in Western Europe) brands horizontally into the laundry additives segmentwith the introduction of Tide Stain Release and Ariel Professional. P&G also expanded its portfoliointo the value priced segment by introducing a new line of diapers in Germany called Pampers SimplyDry, priced about 15% below the Pampers Baby Dry.

The twin focus on deriving growth from emerging markets as well as lucrative product categorieswill put P&G in a stronger position and will drive the company's profitability in the long term.

Increased investment in manufacturing capacity in developing countries

P&G is planning increase in its manufacturing capacity in order to expand into categories andcountries where it doesn't have a brand presence. The company plans to invest approximately 4%of sales in capital spending, including funding for new manufacturing capacity to support futuregrowth. Over the next five years, P&G will add 20 new manufacturing facilities. Almost all of thesefacilities are in developing markets, and almost all will be multi-product category facilities. By focusingon developing markets, the company would reduce the cost of serving these markets while alsobeing closer to regions with the greatest long-term growth potential.




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Acquisitions to expand portfolio

P&G has made significant acquisitions in the recent past. For instance, in June 2009, the companyacquired the Zirh skincare brand. Zirh is a leading super-premium, male grooming brand availablein high-end department stores, specialty outlets and online. Zirh enjoys unique positioning as ahigh-end "male only" brand and has one of the most comprehensive skin and shave care lines inthe male grooming market. Later in May 2010, P&G entered into an agreement to acquire NaturaPet Products, a privately-held pet food business. Natura's brands include Innova, Evo, CaliforniaNatural, Healthwise, Mother Nature and Karma. These brands are sold in a limited number of petspecialty stores and through veterinarians, mainly in the US and Canada. Most recently, in July2010, the company completed its acquisition of the Ambi Pur Brand from Sara Lee Corporation.Ambi Pur is a leading global air care brand with presence in 80 countries, and also has several toiletcare products, with strong presence in Western Europe and Asia. Acquisitions such as these will

strengthen P&G's presence across various categories and in turn enhance its topline and bottomlinegrowth.

Threats

Competitive industry landscape pose challenges for profitability

P&G's products are sold in a highly competitive global marketplace which is experiencing an increasedtrade concentration and the growing presence of large-format retailers and discounters. Thecompanys products compete against similar products of many large and small companies, includingwell-known global competitors like Unilever and Colgate-Palmolive as well as retailers' private-labelbrands.

Traditionally, the company relied on the North American and European markets for majority of itsrevenues. However, its limited market share in countries like Brazil, India and other African nationsposed challenges for the company during recession. The company had to face shift in consumerpreference towards relatively inexpensive products in developed markets, a trend more evident inthe consumer goods space in which P&G operates. A survey conducted on 834 consumers in 2010reported that nearly two-thirds of US consumers switched to a cheaper substitute for at least onebasic household product, food or beverage. Besides, more than three-quarters said they believeless expensive products were as good as or better than their costly counterparts. Additionally, thecompany had to face stiff competition from established players like Unilever in emerging markets

from where it expected growth potential.

The companys twin challenge witnessed during 2008-10 period reflected on its revenues when itposted its first annual sales decline since 2001, a decline of 3.2% to $76,694 million in 2009, andmarginal growth of 2.9% to $78,938 million in 2010. P&Gs price reduction strategy to stem marketshare, in turn, hampered its profitability in an inflationary environment. As per estimates, the companyreduced the prices of its several products categories; including reduction in the prices of batteriesby 13.3%, conditioners by 6.6%, fabric softeners by 5.8%, shampoos by 5.4%, liquid laundrydetergents by 5.1%, and sanitary napkins by 2.7%; for the 12 weeks ending period of July 2010.




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Besides, Wal-Mart implemented a 22% price cut on P&Gs Tide laundry detergents. Subsequently,the company registered 5.2% decline in profits to $12,736 million in 2010, compared to previousfiscal.

Overall, the competitive pressure from established players in developing markets and from privatelabels in developed markets hampered the companys sales and profit growth plans. Similarcompetitive environment and subsequent efforts of the company to combat competition; such asprice reduction, increased advertising expenses, and discount offerings; could have eventual impacton the companys profitability and margins in the future.

Rising inflation could cause substantial rise in the operating cost

As a diversified consumer products manufacturer, P&G depends heavily on a wide basket of global

commodities for manufacturing its goods, the prices for which have risen substantially in recentyears. Nearly half of the company's cost of goods is directly related to commodity goods. P&Gincurred roughly $2 billion in net commodity and energy costs in FY2009, in addition to the $1 billionin FY2008. This resulted in a gross margin declined by 100 basis points to 49.5% of net sales in2009. Of the several factors, higher commodity and energy costs negatively impacted gross marginby about 250 basis points. Furthermore, after posting gross margin growth of 250 basis points inFY2010 to 52.0% of net sales, the company reported decline in gross margins in the second quarterof 2011.The increased commodity costs contributed 160 basis points decline to gross margin. Thecompany estimates additional $1 billion expenses in commodities for 2011 fiscal. If input cost inflationpersists, the company would have to roll back price reduction initiatives aimed at improving its salesgrowth and market share. Besides, the increase in commodity prices have negative implications forthe operating costs and hence the profitability of the company.

Counterfeit goods

Trade of counterfeits and pass-offs products is negatively affecting the growth of FMCG companieslike P&G.The top two brands within any category be it cosmetics, detergents, or soaps are effectedthe most by counterfeiting and pass-offs. It is estimated that the loss due to counterfeit productsconvert into around E6 billion ($8.5 billion). Furthermore, with the advent of digital channels therehas been a surge in the sale of counterfeit products and online sales of these products increasedby 9% in 2009. In November 2009, the US Immigration and Customs Enforcement (ICE) agentsseized more than 17,000 counterfeit items worth an estimated $643,000 from 21 businesses in theMinneapolis-Saint Paul twin cities region in the US and the consignment included 3,524 bottles ofperfume. Besides revenue losses, counterfeits and pass-offs also affect the company's brand as

they are unsafe. Low quality counterfeits reduce consumer confidence in branded products. Also,what differentiates the offerings of companies such as P&G from its competitors is exclusivity;widespread counterfeits reduce this exclusivity. Counterfeits not only deprive revenues for P&G butalso dilute its brand image.

Volatility in currency exchange rates




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Currency exchange rate volatility places tremendous pressure on P&G's operations which spanacross 180 countries.

Although P&G is based in the US, it earns revenues, pay expenses, own assets and incur liabilitiesin countries using currencies other than the US dollar. As a result, increases or decreases in thevalue of the US dollar against other major currencies will affect the company's net operating revenues,operating income and the value of balance sheet items denominated in foreign currencies.Theunfavorable impact of currency fluctuations decreased revenues by about one percentage points,or approximately $789.4 million in 2010. The unfavorable impact was primarily due to a stronger USdollar compared to most foreign currencies. In addition, unexpected and dramatic devaluations ofcurrencies in developing or emerging markets, such as the recent devaluation of the VenezuelanBolivar, could negatively affect the value of the company's earnings from, and of the assets locatedin, the said markets.




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TOP COMPETITORS

The following companies are the major competitors of The Procter & Gamble Company

Avon Products, Inc.Colgate-Palmolive CompanyHenkel KGaAKimberly-Clark CorporationUnileverReckitt Benckiser PLCEnergizer Holdings

L'Oreal S.A.


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COMPANY VIEW

A statement by Robert A. McDonald, Chairman, President and Chief Executive Officer at P&G isgiven below. The statement has been taken from the company's 2010 annual report.

P&Gs Purpose-to touch and improve lives, now and for generations to come-is inspiring andpervasive. Our Purpose is tightly and deliberately linked to our business and financial goals: P&GsPurpose inspires our strategic choices; it leads us to bigger and better innovation; it drives brilliantexecution; and it compels us to make a difference in areas such as sustainability and socialresponsibility not merely to be a good citizen, but more importantly, to create future opportunities totouch and improve lives-and, in so doing, to keep our Company growing.

Last year, we updated P&Gs growth strategy to connect it explicitly to our Companys Purpose. Wefocused on three specific choices: to grow P&Gs core brands and categories with an unrelentingfocus on innovation; to build our business with unserved and underserved consumers; and to continueto grow and develop faster-growing, higher-margin businesses with global leadership potential.

These strategic choices are unified by one simple, over-arching growth strategy: to touch and improvethe lives of MORE CONSUMERS in MORE PARTS OF THE WORLD, MORE COMPLETELY. Wevemade this the centerpiece of our leadership agenda because we believe a Purpose-inspired growthstrategy is intrinsically rewarding and motivating. It unleashes creativity, commitment and peakperformance in P&G people. It attracts talent and partners. It builds goodwill with externalstakeholders.

We are executing across all three dimensions of this growth strategy on all of our businesses aroundthe world.The Companys performance in the 2010 fiscal year, and the strength with which we haveentered the 2011 fiscal year, demonstrate that our Purpose-inspired growth strategy is working.

Substantial Progress toward Growth Goals

We also renewed our growth goals last year. Our fundamental objective is the creation of value forshareholders at industry leadership levels on a consistent basis. More specifically, our goal is todeliver total shareholder return that consistently ranks P&G among the top-third of our peers-thebest performing consumer products companies in the world.

In addition, we measure our progress through a combination of consumer and financial goals. Wemade substantial progress in fiscal 2010:

Organic sales grew 3%, in line with Company expectations.

Core earnings per share grew 6%, roughly double our going-in objective for the year.


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Adjusted free cash flow was 125% of net earnings, well above our target level.

We also made substantial progress toward profitable share growth, a key priority. A year ago, ourglobal market share was down about half a point versus prior-year levels; today, as I write this, ourglobal market share is up nearly half a point and accelerating. Last year, we were building marketshare in businesses accounting for only about 33% of sales; today, we are building share in brandsand countries accounting for about 66% of sales and P&Gs market share is growing in 14 of ourtop 17 countries.

In addition, we reached an additional 200 million consumers, bringing the total served to 4.2 billion-ontrack toward our goal of reaching 5 billion consumers by fiscal 2015. Average per capita spendingon P&G products increased in 70% of our top countries, up from 60% in fiscal 2009. And, globalhousehold penetration-the percentage of households using at least one P&G products-increased

nearly two percentage points, to 61%.

On the strength of these results, we paid approximately $5.5 billion in dividends and returned $6billion to shareholders through the repurchase of P&G stock. Based on our current marketcapitalization, dividends and share repurchases provide shareholders with an effective cash yieldof more than 6%, with additional potential for capital appreciation.

In April, we increased our quarterly dividend by 9.5%, making this the 120th consecutive year thatP&G has paid a dividend and the 54th consecutive year that the dividend has increased. Over those54 years, the dividend has increased at an annual compound average rate of approximately 9.5%.

This is encouraging performance, inspired by the Purpose that motivates our people and partners

and driven primarily by our strong, multiyear innovation program.We are innovating to win in everyP&G category, we are investing behind these innovations to build profitable market share and weare continually increasing productivity that funds our investments in future growth. This investmentallows us to continually replenish our multiyear innovation pipeline.

Innovating to Win

Innovation has been-and will continue to be-at the heart of our success. In fiscal 2010, for the fourthconsecutive year, we invested nearly $2 billion in Research & Development. In fact, we invest about50% more than our closest competitor and more than most of our closest competitors combined.This leadership level of investment is multiplied by our global network of external innovation partners,

which leads to an effective investment in innovation that far exceeds the reported spending.

One measure of the strength of our innovation program is the SymphonyIRI Group New ProductPacesetters report-the annual list of the biggest innovations in our industry as measured by sales.Over the past 15 years, 125 P&G innovations have earned a spot on the Top 25 Pacesetters list-morethan our six largest competitors combined.

Based on this track record, SymphonyIRI recognized P&G as the most innovative manufacturer inthe consumer packaged goods industry for the last decade-presenting the Company with its




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Outstanding Achievement in Innovation award. In 2009, P&G launched 5 of the top 10 mostsuccessful non-food innovations as judged by SymphonyIRI:Tide Total Care, Gillette Venus Embrace,Bounty Extra Soft, Always Infinity and Secret Flawless.

Our innovation program is guided by the Company's Purpose-inspired growth strategy:

We are touching and improving MORE CONSUMERS lives by innovating and expanding vertically,up and down value tiers.

We are touching and improving lives in MORE PARTS OF THE WORLD by innovating andexpanding geographically, into new white spaces where we havent been competing.

We are touching and improving consumers lives MORE COMPLETELY by innovating to improve

existing products, by creating or entering adjacent categories and by driving regimen use thatbroadens our product portfolios.

We have a strong multiyear pipeline that will continue to drive growth in the future.The impact ofthis innovation program is already evident.We have featured six examples in the editorial sectionthat follows this letter, but I want to share perspective here as well to give you a sense of both thestrength and breadth of innovation coming from P&G. Ill highlight just three representative businessesto illustrate. Male Grooming

Fusion has now grown share for 18 consecutive quarters, and we recently launched Gillette FusionProGlide. Consumer testing shows that men prefer the Fusion ProGlide family at a ratio of up to2-to-1 over Gillette Fusion. In the middle tier, we recently launched a new Mach3 razor specificallydesigned to better meet the needs of emerging-market consumers. As a result, Mach3 shares areat record levels in Argentina, Brazil and India.

In February, we launched a complete line of Gillette male grooming solutions in Brazil, and are nowexpanding in several Latin American countries. In March, we introduced a scientific face care regimenunder the Gillette name in China. In June, we introduced Gillette Fusion ProSeries in North America.

Fabric Care

Were expanding our portfolio horizontally with Tide Stain Release and Ariel Professional in laundryadditives, and Bounce Dryer Bar in the fabric enhancer category. We are also expanding vertically

and into geographic white space. In Western Europe, we are innovating in the premium tier withAriel Excel Gel, a new-to-the-world gel that is consumer preferred by a margin of 2 to 1. In Japan,our newest laundry brand, Sarasa, is priced at a 15% premium versus the category average and isdesigned for consumers who want a laundry detergent that cleans well, but also provides naturaland gentle benefits.

We introduced Ace in Colombia during the September quarter and Tide Naturals in India during theDecember quarter.Tide Naturals is priced 30% lower than regular Tide, enabling us to reach a much




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broader spectrum of Indian households. Ace is a mid-tier laundry brand that complements Arielsstain removal equity and Bolds softness equity. Ace has become P&Gs 23rd billion-dollar brand.

Oral Care

Oral-B toothpaste and toothbrush shares in Brazil continue to exceed expectations. Based on ourin-market success, we have initiated the second wave of our toothpaste expansion plan which willtake us beyond the pharmacy channel.

The Oral-B toothpaste launch in Belgium and the Netherlands is also going well-with Oral-B toothpasteapproaching double-digit shares and driving P&G to overall Oral Care market share leadership inboth countries since being launched in February 2009.

Crest Pro-Health is off to a strong start in China, helping to drive Oral Care shipments in China uphigh single digits in the final quarter of the fiscal year.The Crest Pro-Health formula is being expandedto other markets around the world, as well.

In March, we launched Crest 3D White in North America. 3D White is a new regimen comprised oftoothpaste, brush, rinse and Professional Effects whitestrips that work in combination to clean, whitenand protect teeth while providing health benefits expected from Crest and Oral-B.

Looking Ahead

Many of our most significant innovations just launched in North America between March and June

2010.They will have a much bigger impact on fiscal 2011 than they had this past year as we continueto leverage them in North America and to expand them to additional markets. And, of course, wewill bring new innovations to market.

More specifically:

Pampers with Dry Max will expand across Western Europe this year.

Gillette Fusion ProGlide will roll out to more than 40 countries over the next two years.

The new Pantene formulations will expand globally over the next two years.

We are aggressively working to merge the product innovation and geographic expansion plans ofAmbi Pur with the Febreze franchise, following the close of the Ambi Pur acquisition in early July.Our air care business now spans 84 countries.

Oral Care is introducing a new Crest Clinical line of products to treat two of the most common oralcare problems: gingivitis and tooth sensitivity.The Crest Clinical Sensitivity toothpaste provides themaximum strength available over the counter. Crest Clinical will start shipping in North America inAugust.




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In total, P&G competes in 38 product categories globally, but we are not present in all these categoriesin all of our priority markets. For example, as a total Company, we compete in less than 50% ofpotential country/category combinations in our top 50 markets.This presents a tremendous growthopportunity. Our objective is to fill out our product portfolio in every category and then expand to themost relevant geographic markets.This objective is driving clear, strategic choices about where toinnovate and expand to ensure our total-Company lineup is reaching more consumers in more partsof the world, more completely.

There are examples in every P&G category. I cite these few just to provide perspective on thestrength and breadth of our innovation program.We currently have the strongest multiyear innovationprogram Ive seen in my 30-year career at P&G. And as strong as the program has been during thispast fiscal year, we are equally pleased with the quality of our pipeline going forward. Its full ofinnovations that are sure to touch and improve the lives of consumers for years to come.

Investing to Grow, Changing to Lead

We are supporting our innovation program with strong levels of marketing investment.We delivereda 20% increase in consumer impressions-the number of times consumers hear about our brandsand new products-this fiscal year, with most of the increase in the second half of the fiscal yearbehind many of the innovations I just described.

This investment is critical. Decades of experience have demonstrated that making people aware ofour innovation and motivating them to try our new products is the key to long-term success. Whenpeople experience the innovation we bring to market, they are frequently delighted, which in turndrives repurchase and sustainable share growth.This is the foundation of brand building, and P&G

is committed to investing sufficiently and consistently to support innovation and build brands thatthrive for decades.

One of the most important ways we fuel investments in innovation and brand building is throughcost savings and productivity improvements. P&G is very disciplined about cash management andcost reduction. We are strengthening this discipline with a culture that continually simplifies the waywe work and increases productivity.

Simplification is a significant opportunity for us, particularly given the breadth of our business andbrand portfolios. For example, we have more than 16,000 product formulas and use more than 4,000colors in our product labels and plastic packaging. Over the next two years, we expect to reducethe number of formulas and package specifications by 30% and to reduce the number of colors weuse by 50-75%. Color simplification alone has the potential to generate up to $50 million in annualsavings.We have simplification projects underway throughout the Company, led by line managementand managed with the same discipline and integration that we use for global product launches. Thiswill remain an ongoing priority for us.

Another good example of how were becoming more productive is the digitization of P&G. Withdigitization, our goal is to standardize, automate and integrate systems and data so we can create




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a real-time operating and decision-making environment.We want P&G to be the mosttechnology-enabled company in the world.

We are targeting a 20-25% reduction in some spending areas and we are looking for a sevenfoldincrease in real-time data. By getting the right data to the right decision makers at the right time, wecan become increasingly efficient and productive.

A good illustration is logistics. We are digitizing our Transportation Management systems, includingwhat we call our Control Tower. Think of this as an air traffic control system for groundtransportation. The real-time information this system provides allows us to coordinate schedulingand truck movement for all inbound and outbound transportation. So far, were on track to reducethe number of deadhead legs-or, empty truck shipments-by more than 15%. We currently havecontrol tower approaches in place covering about one-quarter of our business in both developing

and developed markets. We think increasing the capacity utilization of trucks can save more than$200 million annually.

Another way we are increasing productivity is by turning the Companys size into scale and our scaleinto growth. To do this, we are increasingly competing as one Company. Our individual categories,brands, countries and functions are all critical and each has unique value to add. But at thetotal-Company level, we can create scale advantages by allocating resources more strategically andefficiently than any individual business can do on its own.The combination of the individualcomponents is greater together as one Company than the sum of the parts-and we are focused onmaximizing this total value.

We are working across our businesses and markets to leverage P&G scale. A good example is the

global sponsorship agreement we signed in July with the International Olympic Committee (IOC).The partnership gives P&G global sponsorship rights for the next five Olympic Games, from London2012 through the 2020 Olympic Games, enabling the Company to take the Games to the more than4 billion consumers worldwide served by P&G brands today. The breadth of P&Gs portfolio and thedepth of our reach make this the most far-reaching Olympic partnership. It demonstrates the powerfulappeal of our brand portfolio and its tremendous global scale. No other consumer products companycould create a comparable partnership with the IOC.

As part of this sponsorship, we also announced the global expansion of our Proud Sponsor of Momscampaign. We will build upon the success of our Team USA partnership at the Vancouver 2010Olympic Winter Games, which resulted in increased favorability ratings for P&G and our brands,greater market share and nearly $100 million in incremental sales. P&G will leverage the IOC

partnership to deliver on our growth strategy and to help improve the lives of athletes, moms andtheir families around the world in several ways:

We will continue to support families of Olympians, reapplying on-site activities from the Vancouver2010 Olympic Winter Games.

As part of the Proud Sponsor of Moms campaign, our Thank You, Mom program will continue inconjunction with the IOCs inaugural Youth Olympic Games to be held in Singapore in August 2010,




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helping 25 moms of Youth Olympians from around the world with their travel and lodging costs sothey can be in Singapore with their children as they compete.

We will produce a documentary video series called Raising an Olympian, The P&G MomumentaryProject to celebrate the dedication and sacrifice of moms, families and their Olympians. The videoseries will tell the stories of Olympians as seen through the eyes of their moms. It will be shownleading up to and during the London 2012 Olympic Games and will aim to answer the question,What does it take to raise an Olympian?

By leveraging P&G scale and competing more effectively as one Company-rather than as individualbusinesses and brands alone-we are able to touch and improve more lives while creating meaningfulcompetitive advantage.

Work to Do

While we are encouraged by the Companys recent performance, I dont want to imply that we aresatisfied. Our results were ahead of our going-in expectations in nearly every area, but we still havesome significant opportunities for improvement.

Our results on some big brands and in some big categories have been soft. We are not yet growingshare on every business but we have robust innovation and marketing plans in place to accelerateshare growth across the portfolio.

We also need to continue our disciplined cost reduction and cash management efforts. We need totake even more cost out because there are still more investments we need to put in to keep drivingprofitable market share growth.

If we build on our successes, address our shortfalls and implement our strategy with excellence-whichis precisely what we are focused on doing-we will continue to accelerate growth on both the top-and bottom-line, and we expect this to be reflected in stronger market share trends.

Inspired to Perform

As I wrote at the beginning of this letter, we have placed significant emphasis on P&Gs Purposebecause we believe it inspires people to perform at their peak.

Fulfilling P&Gs Purpose is not merely a noble ideal. It is potentially a game-changing growth strategybecause it unleashes creativity and capability. Our purpose as individuals inspires our performanceas professionals.The congruence of our Company Purpose and our personal purpose captures ourimagination and passion. It focuses us on the consumers we serve and inspires empathy for themthat, in turn, leads to insights, big ideas and innovation that drive growth. Simply put: Touching andimproving peoples lives motivates peak performance. I believe that to my core.




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Everywhere I travel, P&G people and our partners tell me they are inspired by what we can accomplishtogether. They tell me that they are inspired by the thought of what we can accomplish if we caninfuse the work of our entire organization-all 127,000 of us-with the meaning that comes from ourPurpose. Were inspired by the thought of serving five billion people by the middle of this decade,and perhaps touching and improving the lives of nearly every person on the planet in our lifetimes.Were inspired to create new innovations, ideas, services and products that improve peoples livesin ways weve not yet foreseen.

It is all this, taken together, that drives my confidence in P&Gs future. We have all the elements ofa high-performing organization in place at P&G: passionate leaders at every level and in every partof our business; sound strategies that continue to provide abundant opportunities to grow; robustsystems that enable us to operate with discipline and to collaborate inside and outside the Company;and a culture that enables, demands and rewards high performance. These pillars stand on a

foundation of technical competence and the bedrock strength of our Purpose, Values and Principlesthat constitute the core of P&G.

I am honored to stand alongside Purpose-inspired leaders in every part of our organization whoensure that P&G touches and improves lives every day. It is a privilege to work with such outstandingpeople and I thank them for all they are doing to touch and improve lives and to grow our business.




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LOCATIONS AND SUBSIDIARIES

Head Office

The Procter & Gamble CompanyOne Procter & Gamble PlazaCincinnatiOhio 45202USAP:1 513 983 1100F:1 513 983 9369http://www.pg.com

Other Locations and Subsidiaries

Procter & Gamble Japan K.K.P&G Guangzhou17 Koyo-cho Naka 1-chome27-33/F Centre PlazaHigashinada-ku161 Lin He Xi Heng RoadKobeGuangzhou 510620Hyogo 658 0032CHNJPN

Procter & Gamble UKP&G FranceThe Heights163 quai AulagnierBrooklands92600 Asnieres-sur-Seine

WeybridgeFRAKT16 0XPGBR

P&G (Singapore)P&G Australia Pty. Ltd.238A Thomson RoadLevel 421-01/10 Novena Square1 Innovation RoadTower AMacquairie ParkSingapore 307684North RydeSGPSydney NSW 2113

AUS

Procter & Gamble Nordic Inc.Procter & Gamble OyHangovagen 20Lars Sonckin kaari 1010254 Stockholm02601 EspooSWEFIN


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P&G Espana S.A.P&G Srl

Av. de Bruselas 24.via Cesare Pavese 38528108 Alcobendas00144 RomeMadridITAESP

The Procter & Gamble CompanyLocations and Subsidiaries

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