Procter & Gamble Company
Procter & Gamble Company
The history of the Procter & Gamble Company, formed in 1837, is not nearly as well known as its wide variety of products. With over 250 brand names Procter & Gamble is the largest consumer goods company in the United States; virtually every American uses a Procter & Gamble product every day. Pringles potato chips, Sunny Delight citrus drinks, Cover Girl makeup, Crest toothpaste, and Tide detergent are some of Procter & Gamble's most popular brands.
Based in Cincinnati, Ohio, Procter & Gamble (also known as P&G) sells its products to more than 140 countries around the world, and has factories and manufacturing plants in seventy countries outside the United States. This huge multibillion-dollar company, which employs over 100,000 people, began as two small businesses headed by two immigrants, William Procter (1801-1884) and James Gamble (1803-1891).
A Chance Meeting of Minds
William Procter and James Gamble were strangers brought together by several twists of fate. Procter was born in England and Gamble was born in Ireland. Both emigrated to the United States and landed in Cincinnati, Ohio. Originally, neither man intended to settle in Cincinnati. Procter stayed in Ohio to care for his critically ill wife Martha, and earned his living as a candlemaker. After his wife died, Procter consoled himself by working long hours in his candlemaking business. Gamble became an apprentice soapmaker, and realizing he had a knack for soapmaking, started his own business and decided to settle in the area.
Within a few years, Procter and Gamble met by accident when they were dating sisters. Procter had fallen in love with Olivia Norris; Gamble fell for her sister Elizabeth. The couples married and the two men became brothers-in-law, frequently seeing each other at family events. It was their father-in-law, Alexander Norris, who first pointed out that William and James had very similar businesses and that the two should consider forming a partnership. The two businessmen realized it was true: making soap and candles required the same primary ingredient—vast quantities of tallow or fat. The processes also used much of the same equipment.
Procter and Gamble began working together in April 1837 and by August they each contributed $3,596.47 toward the creation of a new company. The brothers-in-law signed a formal partnership agreement on Halloween, October 31,1837, and the Procter & Gamble Company was born. Gamble oversaw the manufacturing side of the firm and Procter handled the money.
Procter & Gamble at a Glance
- Employees: 106,000
- CEO: Alan G. Lafley
- Subsidiaries: Charmin Paper Mills; Clairol; lams Company; Max Factor; Noxell Corporation; Tambrands
- Major Competitors: Kimberly-Clark; Johnson & Johnson; Unilever
- Notable Brands: Pringles; Sunny Delight; Crest; Tide; Downy; Pampers
The Civil War Years and Beyond
When they began their business, the partners sold their products by walking the streets of Cincinnati with a wheel barrow. By 1860—less than twenty-five years after it was formed—Procter & Gamble had become one of the city's most successful companies employing eighty people and bringing in sales near the $1-million-dollar mark. This was quite a milestone for the company's founders, who had never dreamed of such prosperity.
- William Procter and James Gamble create the Procter & Gamble Company.
- Ivory Soap is launched.
- P&G releases its first national advertising campaign.
- P&G's Cincinnati factory is nearly destroyed by fire.
- The new Ivorydale factory is built with state-of-the-art equipment.
- Crisco shortening is introduced.
- P&G celebrates its one-hundredth anniversary; sales reach over $200 million.
- The first Ivory Soap commercial airs on television.
- Tide laundry detergent is launched.
- Crest, the first fluoride toothpaste, is introduced.
- New P&G headquarters are built in Cincinnati.
- Pampers disposable diapers are introduced.
- P&G celebrates its one-hundred-fiftieth anniversary; sales reach over $10 billion.
- P&G purchases Cover Girl, Noxema, and Sunny Delight brands.
- P&G buys lams Company pet foods.
- P&G sells Crisco and buys Clairol hair products company.
The company worked overtime during the 1860s, especially when America became embroiled in the Civil War (1861-65). Given its northern location, Procter & Gamble was a firm supporter of the Union Army (supporters of the Union in the north), and contributed to the war effort by supplying Northern soldiers with candles and soap. At the same time, it continued to provide its loyal customers with Procter & Gamble products.
By the beginning of the 1870s the country was rebuilding, and at Procter & Gamble a second generation of family members had joined the company. This included James Norris Gamble, son of James, and William Procter's son Harley.
In 1875, James Norris, who was a chemist, began working on a formula for a new white soap. It was through the carelessness of a fellow worker, however, that the company's most successful product was developed. One of the machines used in the soapmaking process was left running too long. As a result, too much air entered the soap, which caused it to "float." Rather than waste the soap, Procter & Gamble decided to sell it. It was known simply as "P&G White Soap." Soon, however, the company began receiving positive letters about this amazing "floating soap." The customers wanted more and the company was happy to oblige.
The Moon and Stars
Procter & Gamble (P&C) has one of the most well-known trademarks in the world—a man in the moon surrounded by stars. The trademark originated in the early 1850s as a symbol for P&G Star brand candles. This was during a time when most products did not carry a recognizable brand name. By the 1860s, the symbol was used for all P&G products. The moon and stars was a sign to everyone, even people who could not read, that they were purchasing a P&G product and that quality was guaranteed.
The original trademark included a star, which eventually became thirteen stars symbolizing the thirteen original American colonies. The man-in-the-moon was added because it was a popular decoration during the 1800s. In 1882, the trademark was officially registered with the U.S. Patent Office.
Over one hundred years later, the trademark is still recognizable, but for a different reason. In the early 1980s, rumors began to spread that the moon and stars trademark was a symbol of the occult and that P&G executives practiced Satanism. The company publicly announced that the rumors were totally false. The rumor continues to persist, however, as a sort of urban legend into the twenty-first century.
Harley Procter was convinced the soap would appeal to buyers across the United States. He convinced the company to spend over $10,000 on national advertising in a weekly newspaper called the Independent in December 1882. This was Procter & Gamble's first major advertising, and it turned out to be a very smart move, one that would be copied by many companies in the future. Ivory Soap became a huge hit and enabled Procter & Gamble to begin selling more of its products to customers throughout the nation.
The remainder of the 1880s brought highs and lows for Procter & Gamble. In 1884, a devastating fire nearly destroyed the P&G factory. Beginning in 1886, however, construction began on a new, technologically advanced plant called Ivorydale. More family members joined the company, including Harley's older brother, William Alexander, and his son, William Cooper Procter.
It was William Cooper Procter, known as Cooper, who brought change to the P&G workplace. The United States as a whole was experiencing labor problems. Employees of large companies were tired of working long hours for low pay. They began to strike and demonstrate for change—even at Procter & Gamble. Cooper listened and decided to reward loyal workers by allowing them to receive or "share" in the money made by the company. Creating what came to be known as profit-sharing, each worker was given a yearly bonus based on Procter & Gamble's sales. Cooper eventually gave workers additional benefits such as health care, vacations, and a shortened work week.
Harley Procter believed that P&G White Soap needed a better name, one that would stay in customers' minds. He came up with "Ivory" after reading a passage from the Bible that described "ivory palaces" (Psalm 45:8). Ivory Soap soon became a household name. It revolutionized the soap industry because of its unique size, shape, and purity. Until then, soap was sold in huge wheels to grocers and shop owners who then chiseled or chopped off chunks for customers. Procter & Gamble changed this practice, and offered individually wrapped soap in a handy little rectangular bar. Ivory was introduced in 1879 and would prove to be Procter & Gamble's most successful product for decades to come.
In 1890, Procter & Gamble decided to stop being a private company and become a public company. A private company is one that is owned by a select group of people, in this case family members. To do so, Procter & Gamble became incorporated: it filed papers to be a public company, added "Inc." to its name, chose a board of directors, and installed officers such as president, vice president, and treasurer to run the business and answer to the board of directors. William Alexander Procter was named the company's first president. Procter & Gamble also decided to sell stock, or shares, in the company to raise money for expansion. Employees were offered the opportunity to purchase stock in the company, another bonus for Procter & Gamble workers, since few other companies gave their employees such benefits.
By the last decade of the century, Procter & Gamble was still most famous for its soap, of which there were over two dozen different kinds. Many were introduced through black-and-white ads in newspapers and magazines. The company's first color ad appeared in 1896 and was for its still immensely popular and best-selling product, Ivory. Again, Procter & Gamble led the business world by marketing its products through attractive ads in newspapers and magazines, when most other companies did no advertising at all.
A New Century
Although electric light had been established by 1880, it wasn't until the beginning of the twentieth century that electricity was used to light homes. Sales for Procter & Gamble candles fell, yet other products more than made up for the loss. Business was so good, the company expanded outside of Ohio for the first time in 1904, building a factory in Kansas City, Kansas, then another in Staten Island, New York. Three years later, in 1907, Cooper Procter took over running the company when his father, William Alexander, passed away.
The new century also saw the introduction of another well-known P&G product: Crisco shortening. Because candle sales had fallen, the company had a huge supply of cottonseed oil, an ingredient used in candlemaking. In 1911, they found another use for it by creating a vegetable-based shortening for cooking and baking. At the time, most people used lard or animal fat to cook with. Crisco gave buyers a healthier choice than lard. It was also a less expensive substitute for butter, which was very pricey at the time. In addition, the company found a terrific way to market Crisco: through free cookbooks that featured the product in a variety of recipes.
The first Procter & Gamble manufacturing plant built outside the United States came in 1915, with a new factory in Ontario, Canada, which employed seventy-five full-time workers to make Ivory Soap products and the increasingly popular Crisco. By the 1920s, Procter & Gamble had continued to grow and change: it stopped making candles completely since most homes used electric lighting; it was one of the earliest firms to hire salesmen to sell directly to grocers and stores; and was one of the first companies to advertise on radio, with the potential to reach thousands of homes.
In 1930, William Cooper Procter stepped down from running the company and for the first time, a non-family member, Richard R. Deupree, took over Procter & Gamble. Three years later, in 1933, the company introduced a very important new product: P&G's first synthetic, or man-made, detergent called Dreft. The company's first shampoo, Drene, debuted the following year. In 1939, just a few months after television service first became available, Procter & Gamble aired its first television commercial for Ivory Soap during a baseball game.
The First Soap Operas
Procter & Gamble sponsored cooking shows featuring Crisco, and also provided money to radio serials, which were weekly radio programs featuring a running story line and a well-known cast of characters. Because the company heavily advertised Ivory, Camay (a new perfumed soap), and other soap products before, during, and after these programs, they later became known as "soap operas."
The Tide Changes
In 1946, Procter & Gamble scored big with two new products, Prell shampoo and Tide laundry detergent. Tide very quickly dominated the market because it worked better than other detergents and was low priced. By 1950, just four years after its creation, Tide was America's favorite laundry soap. Several more products were released throughout the 1950s and into the 1960s: Crest, the first toothpaste with fluoride, which was proven to fight cavities (1955); Downy, a liquid fabric softener for use in washing machines (1960); and Pampers, the first disposable diaper (1961). The company also bought two well-known businesses, Charmin Paper Mills, which produced toilet tissue, paper towels, and napkins, and Folgers Coffee, a premier coffee producer.
The 1970s and 1980s were decades of expansion. Procter & Gamble purchased more companies and opened new factories. It also divided into specialized business segments, including health and beauty products, household cleaners, foods and drinks, and an entire unit devoted to "research and development." Procter & Gamble was one of the earliest companies to spend millions of dollars on research and development, or ways to use science to create scientifically advanced products. The company also began to devote energies to market research, studying customers and their buying habits to understand which products sold better and why.
In 1984, Procter & Gamble added a new dimension to its most visible and popular product, Tide laundry detergent, by introducing Liquid Tide. Two years after Liquid Tide, in 1986, came the first shampoo and conditioner combined into one bottle, called Pert Plus. Next came the company's push into makeup and perfumes, with the purchase of Noxell, which owned the Cover Girl, Noxzema, and Clarion brands. Procter & Gamble had now entered the all-important teen market.
In an effort to offer more products directed at teenagers and younger children, Procter & Gamble decided to buy the up-and-coming Sunny Delight brand of juice drinks in 1989. It marketed Sunny Delight as a healthy choice for kids, and was very successful both in the United States and the United Kingdom. Yet by 1990 there was controversy, as parent and consumer groups criticized the company for saying the drinks were better for kids than soda pop, when Sunny Delight actually contained very little juice, using flavorings and sweeteners instead. For its part, Procter & Gamble responded by pointing out that while Sunny Delight did have only a small amount of juice, it did have plenty of vitamins.
In the end, Procter & Gamble toned down its "healthy" advertising and sold Sunny Delight as a hip, flavorful alternative to soda pop and sales continued to be very strong. The company's quest to rule the youth beverage market gathered more steam in the 1990s with the purchase of the Hawaiian Punch brand from Del Monte. Like Sunny Delight, Hawaiian Punch drink blends were low on juice but high on taste and popular with children.
The Twenty-First Century and Beyond
For the remainder of the twentieth century Procter & Gamble was both buying and selling businesses. Some of the company's purchases included Old Spice bath and body products for men (1990), Max Factor makeup (1991), Giorgio Beverly Hills perfumes (1994), Iams Company pet foods (1999), and Clairol hair care products (2001). The company sold its Duncan Hines cake and cookie business in 1998 and its once-famous Crisco shortening in 2001. New household products like Febreze odor-fighting sprays and Swiffer cleaning wipes were launched, as well as more shampoo varieties such as Pantene Pro-V.
By 2002, Procter & Gamble had reorganized its entire business to focus on the global growth of its famous brands and to add new products ahead of its competitors. This plan paid off, since sales and profits were up when many other companies struggled. The firm's health and beauty products, such as makeup, shampoos, conditioners, and perfumes were big sellers, especially with teenaged girls. The teen market, both boys and girls, had become more and more important to Procter & Gamble, as well as to many companies, both in the United States and overseas. Ads in magazines and on television were increasingly aimed at children, and products were developed with children in mind. An example was the new blue Sunny Delight flavor, Caribbean.
Procter & Gamble, a company with sales topping $38 billion, continues to offer products that appeal to every age group: from infants (diapers and baby wipes) to teenagers (Cover Girl makeup, Hawaiian Punch, Pringles potato chips) to parents and grandparents (prescriptions, bath and body care products) to even cats and dogs (lams pet food and treats). That's a remarkable feat for a small soap and candle company.