It’s not news that the pandemic drove streaming video and grocery delivery leaping into the mainstream. That’s last year’s news. But brands have also had to learn how to adapt to an ever changing environment, and shift the way they connect with consumers. In this year-end Signal Conversation, we asked Marc Pritchard to reflect on this year and offer some insight into what P&G will focus on in 2022.
“Digital commerce accelerated, and over-the-top and connected TV accelerated — the old linear world is starting to fade away,” he says. “Sustainability activity really accelerated as people were at home and looking at the planet and their own consumption habits in a more objective way.”
The changes, says Pritchard, are having a “profound effect” on the way P&G builds its brand, from an increasing emphasis on retailer media to baking sustainability into the supply chain and doubling down on digital commerce.
Learn more about Pritchard’s outlook on the year that was and the one still to come:
Transcript
John Battelle
Hello, and welcome to another and very special Signal Conversation. This one, the year-end conversation with our very own Marc Pritchard, the Chief Brand Officer of P&G. Marc, welcome back to Signal.
Marc Pritchard
Well, thank you, John, good to be here with you again.
I always enjoy our conversations, I’ve stopped counting how many between onstage during the speaker dinners. And this will be our second time for Signal360. So thank you for your time. I know it’s valuable. And it’s a busy season, it’s the holiday season. So let’s get right into it. We want to take a look at the year that was. And you know, when we spoke about the year 2020, the word that seemed to describe that year was “resilience.” We were all trying to figure out how to get through something that was momentous and ongoing. When you look back at the year that was 2021, is there a word or a phrase or an insight that jumps to mind for you?
You know, John, the first one that jumps to mind for me is “acceleration.” I felt that there was a lot of acceleration on a number of fronts. In particular, the digital commerce world accelerated, because what happened during the pandemic, as people got accustomed to being at home, they got accustomed to shopping online. That just completely accelerated that part of the business. I think it also accelerated in the media world, over the top streaming and connected TV. That was another major shift. And you can see that the old linear world is starting to really fade away and give way to over the top streaming, which has then accelerated content, and in many ways the democratization of creating content.
Then, I think the sustainability activity really accelerated. I think being at home and being able to take a look at the planet in a more objective way and thinking about one’s own consumption habits. I think consumers are really paying attention to that. And then you started seeing businesses pay more attention to it, and investors pay more attention to it. So, you know, a real acceleration on all those fronts. And I think it’s just going to keep going, I think we’re gonna see a lot more of that going forward.
Can you dig into some of the areas that might broadly be called, you know, changes in consumer behavior? What changes did you notice in the last year that you think are going to drive this coming year?
One of the changes was really around how people shopped. And because of being at home more and learning how to operate in more of a virtual world and the hybrid environment, people really got accustomed to buying a lot of products online. Then that shifted into our retailers changing their approaches. So they gave options to curbside pickup, delivery, and different apps that are helping people be able to make their selections. So that was a big change. And I think that’s gonna have a pretty profound effect on how we build our brands in the future.
We’re thinking more and more about how to create an irresistible superiority across our product package communication, retail and value in a digital commerce environment. Now more than 50% of purchases are made online, in China. We’re about 20% in the rest of the world, but you can see that that’s going to accelerate even further and it’s going to change the game. That’s probably the biggest shift that at least I observed. And then I did see people being more conscious of their effect on the environment, in terms of how they’re either consuming and throwing away plastic, using water, using energy. But that’s going to require a lot more innovation. I think we’re probably going to see that accelerate even further in the next couple of years.
And that’s a key area of focus of the Signal platform. And it’s the focus of, as I understand, several areas of I guess you could call it concentration for P&G. You’ve touched on two of them, digital commerce to sustainability. I know the third is supply chain, I kind of want to dig into those a little bit. Sustainability: what are the lessons learned there? And how do we get on the right footing to innovate there going forward?
You know, the key lesson on the sustainability front is how, from a societal and planet standpoint, the need to keep that temperature from not going up more than one and a half degrees Celsius, which means we have to cut emissions, carbon emissions everywhere. And then our understanding of that, as we looked at, number one, our operations and our supply chain, we’ve already done a lot over the course of the last 10 years, but we need to do more. And so we set an ambition to get to net zero emissions by 2020 by 2040. That is from our supplier base all the way to where we drop it off at the retailer.
But probably a bigger opportunity for us is how we can help consumers do their part because the largest part of our company’s footprint, from an emissions standpoint, is actually in use. And so what we have done is we’re shifting our innovation program pretty substantially toward irresistibly superior products. So we still have to deliver the superior benefit of our everyday household cleaning health and hygiene products in an environmentally sustainable way. So a simple way to think about it is delivering superior cleaning for laundry, with less energy, less water usage, delivering, you know, superior beauty products with less packaging, waste. And I think we really have gotten that crystallized because we devoted our leadership meetings to spending time on case studies, where we have done just that, created the superior performing products and packaging and doing it in a way that’s sustainable, that reduces water reduces energy, energy reduces waste. And what the lesson is, John, is that it’s being laser focused on the consumer job to be done, and the problem to be solved, but thinking about it in two ways. One is the core cleaning, health and hygiene job to be done from a benefit standpoint. And two is how do you reduce energy water waste from a sustainability standpoint, and we combine those two, from an innovation standpoint, like Cold Water Clean, like Oral-B click, durable toothbrush, like what we’ve achieved on Cascade dishwashing to save water. Then you have real superiority that can drive our business, and I think can create huge competitive advantage.
Yeah, it’s interesting to think of it that way, it’s almost like you’re turning the prism and saying consumers care about this, number one. Number two, the markets are starting to reward this kind of innovation and sustainability. So there’s a real business opportunity there. And, you know, it’s gonna be fun to cover this, both in the Signal publication as well as in the conference itself, which we’re going to get to in a minute, because I want to ask you about that. But first, the second area of focus, which you touched on, was digital commerce. And I know that the innovation there is really important. And you mentioned the lessons from the last year. What do you see, and how is P&G embracing that and pushing innovation forward in digital commerce?
Same type of mindset. We have to deliver superiority and product and packaging and communications, retail and value in a digital commerce environment. So what it does is it actually has this thinking again about okay, what is the job that needs to get done? So think about, you know, the simple ordering of your products, now that you have to win in retailer search. It changes the nature of how we communicate. So we still keep broad awareness. But what we do is we want to get more connected to retailers. So retailer media networks take on a higher importance, it takes on a higher importance of first party data. So creating a relationship with consumers in such a way that they reward us with providing some data with permission that allows us to be able to deliver a better experience for them, a better product selection, and even how to use the product.
Then, you think about once you order, well, how do you get it to the consumer in a way that is more efficient than them having to come to the store? It’s now you got to think about, well, how do you ship that product? What is the experience when you get that product? At your home? What is the unboxing experience? How does all that work? Now, what do you do with all that waste? So it just changes the whole game. Now in terms of how we think about that, again, competitive advantage is where we really believe we can achieve on both of these fronts. Because these two areas are hard. Because what they are is they’re having us figure out how to do our classic strength of superiority, but doing it in, one, a sustainable way. And, two, in a digital commerce environment. So that creates trade-offs that we have to solve. And P&G is really good at that. And we get that. Yeah, competitive advantage.
Now related to both those things, and I’m certain kind of deeply intertwined, really, is the third area, which we’ve touched on in the Signal publication from time to time, and has become national, international headlines, which is supply chain. As the global economy, you know, froze, and then unfroze and lurches back and forth a little bit here with the Delta variant and all the other, you know, obstacles, supply chain came really into focus. What have we learned in the past year? And what have you learned specifically at P&G? And what’s the role of innovation in the supply chain going forward?
Well, you know, one of the interviews I’d invite you to consider is Julio Nemeth, who is our chief product supply officer who can help you understand how, number one, we really owe a giant debt of gratitude to our supply chain colleagues. I mean, really, there’s 60,000 of our employees in some aspect of the supply chain at P&G, and they are true heroes, because they first had to deal with the pandemic and all the demand creations that occurred and the extra work that needed to happen. And then they’ve been dealing with, you know, now, supplier challenges in terms of materials being available. But the increased expectations of retailers and consumers. So what is happening is that the supply chain is an integral part of the superior consumer experience. Because if you think about one of our five vectors of superiority, which is superior retail execution, well, that starts with the supply chain. You have to make sure that you can supply the products for the retail experience, whether that be a brick and mortar, or an online or a direct to consumer. So it really carries now a much higher weight.
Our retailers, they’re raising the bar on expectations, not only how we need to perform, but also just how we need to ensure that we have certainty in the supply so they can count on us. And that’s a big part of what we’re working on with them. Now. It’s creating innovations because we have to be thinking about how we’re going to deal with things from a capacity standpoint. How, you know, who are the suppliers that we have? How can we automate activities to ensure that we can make sure that we can spend our time in the right places? It’s put a big premium on data and planning. It’s actually we’ve thought through our assortment, in many cases, because you know, what this does is it starts to — you have to start eliminating SKUs that aren’t fast movers so you can make sure that the fast movers can come. It’s compressing the time of supply chains, so we have to make sure that we’re looking at, you know, how long does it take to get a product from raw material all the way to the shelf. So, you know, it’s already our supply chain has been important. And our colleagues are, as I said, our heroes, but it’s really raising the bar in terms of how important this is for the overall consumer experience. And it’s actually quite exciting. I’m really looking forward to learning more about that and helping others learn more about it.
Yeah, one of the things that I learned, you know, about how P&G innovates, is this P&G Ventures that’s been set up. Can you tell us a little bit about that, and what its role is in the innovation ecosystem at P&G?
Yeah, you know, you know, innovation is P&G’s lifeblood. We’re constantly looking at how we can innovate and where we can innovate in order to be able to create growth. What the P&G Ventures does is it helps us identify new spaces and we’re always looking at new markets. And so, what the P&G Ventures helps us do is to find those new areas, and we’ve got some pretty, pretty interesting propositions. Zevo, really think about it as a market that we’re focusing on. Of course, it’s insect control, but it’s doing it in a way that without chemicals, or a chemistry, with more of a natural solution. And that has been one that we’ve really cut our teeth a lot in terms of direct to consumer now getting it to a larger, larger footprint on retail. We’ve got another one around skincare with Bodewell, we’ve got another one, Opte. There’s some exciting base business innovations that are out right now like Oral B I/O, which is just a blockbuster proposition, and we’ve made some major upgrades on our Pampers business, and we’ve cold water cleaning across the entire fabric care business. So it’s just a lot of really, really good work that is happening. Our innovation engine has never been stronger.
Now, it’s good to hear. Last question, relating to Signal itself, the conference. This is about the time of year when we turn our thoughts towards what we are going to do next year? What are the themes going to be? Where are we going to take it? Do you have any initial thoughts on what we might expect from Signal in July of 2022, our 11th gathering.
Our 11th gathering. Yeah. Which is remarkable. And what makes Signal great is being able to bring the outside in, see around corners and figure out what we need to do to keep constructively disrupting ourselves so we can sustain excellence. Signal 2022 will be no different.
What we’ll focus on is some of the areas that I spoke about today. We’ll focus on how we can accelerate our superiority in a sustainable way, how we can accelerate digital commerce, or our superiority in a digital commerce environment. How we can really look at the supply chain, as a contributor to our superior experience. So those are at least three of the areas that we’re very interested in making happen.
I do want to consider the multicultural area, too, and see if that might be another area for us to to look at, since it’s such a growth opportunity. The reason why those are important is because they all require innovation. They all require superiority, they all play to our strengths. And they’re all huge growth and value creation drivers. They’re very, very important for our future. And we want to sustain excellence. We have had several really strong years. And we want to keep that going. I’ve been around long enough to know, you know, sustaining excellence for multiple years is hard. And I would like P&G, as would many, and I know all of our great P&G colleagues would like to see us have a sustained run of multiple years, if not decades. We’d like to see if we can make that happen. And that’s part of what Signal will be all about.
Absolutely. And I think you know, with fingers crossed, we will at least partially be together.
Yeah, I am, too.
Well, Marc, thank you so much as always for being you know, such a supporter of Signal and for joining us for this conversation.
Thank you, John. Thanks for your partnership, my friend.
