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A closer look at the innovation strategy powering P&G’s iconic brands – Business News, Markets & Economy
- 07 Apr 2026 19:15
- Updated: 07 Apr 20269 min. Reading Time
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A closer look at the innovation strategy powering P&G’s iconic brands
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Procter & Gamble is well known for iconic household brands like Tide, Gillette, and Pampers. Less understood is how the company maintains its leadership in a super-competitive market. It starts and ends with what P & G calls its “lifeblood”: innovation. In practice, this means heavy investment in research and development and the increasing use of artificial intelligence and other technologies to create products superior to those of rivals. With effective marketing, P & G can then charge premium prices across its many categories, including laundry detergent, razors, and diapers. The Cincinnati-based company has been building an innovation engine for nearly two centuries, since brothers-in-law William Procter and James Gamble merged their candle and soap businesses in 1837. For P & G, innovation is a system — combining deep consumer insights, advanced science, and a sprawling manufacturing network to consistently develop and improve everyday products. “At its core, it’s something of a chemical and engineering and increasingly a data science company that sells consumer products,” Robert Ottenstein, analyst at Evercore ISI, told CNBC. Of course, P & G’s peers, such as Kleenex owner Kimberly-Clark , also like to tout their focus on innovation. But by pure numbers, nobody in the industry spends more on research and development than P & G — and by a wide margin. Over the past five years, P & G’s $10 billion in R & D spending is roughly double that of its nearest competitor, Dove parent Unilever , according to FactSet data. Kimberly-Clark spent about $1.5 billion. The focus on premium has its shortcomings. P & G has lost some market share in recent years as inflation-wary shoppers turned to cheaper goods. With the Federal Reserve’s preferred inflation gauge above its 2% annual target since early 2021, the company was also forced to raise prices to offset rising costs, compounding the affordability squeeze. The company reported modest declines in global market share in fiscal 2025, which ended in June. And its current fiscal year has commenced with back-to-back quarters of declining total market share. Adding to P & G’s challenges: The spike in oil from the Iran war has the potential to rekindle inflation, presenting risks to both its input costs, especially plastics, and consumers’ willingness to pay premium prices. Reflecting those worries, P & G’s stock has been one of our worst performers since the war broke out on Feb. 28. New CEO Shailesh Jejurikar , who replaced longtime CEO Jon Moeller on Jan. 1, is counting on a revved-up innovation engine to reclaim some of that lost ground. He wants to sell better products worthy of their premium price, not to sell the same things for less. Investors, including us at the Club, are hopeful that it will bear fruit. “I’m beginning to sense a revitalized P & G right in front of us,” Jim Cramer said earlier this year, before the Middle East conflict began. And while the stock has underwhelmed since those comments, Jim said at the March Monthly Meeting, “I think we should buy more now. I see real value in Procter.” P & G’s innovation formula Procter & Gamble’s approach to innovation begins with identifying a clear consumer problem and designing a product solution that solves it better than competitors. Tide’s cold-water detergent is among its best-known examples. The product, which hit the shelves two decades ago , was designed to address rising energy costs by allowing customers to wash clothes effectively without using hot water. P & G is credited with introducing cold-water detergents to the North American market, but only after its scientists found new ingredients to overcome the scientific fact that heat does help clean clothes. Another famous example is Tide Pods, which solved several consumer pain points at once, according to Nik Modi, analyst at RBC Capital Markets. For a consumer going to a laundromat, “you have to carry your kids, your laundry, and a big bottle of detergent,” Modi said. Tide Pods eliminate that burden while also reducing packaging and shipping costs for P & G. While detractors point out laundry pods are more expensive per load than liquid detergent, some shoppers are happy to pay for convenience. More recently, in February, P & G launched nationwide Tide evo — a liquid-free detergent “tile” made from layers of concentrated cleaning fibers that dissolve in cold water, eliminating the need for liquid detergent and plastic bottles. The white tiles look like a thin stack of sticky notes that you add to the wash. “Tide evo represents over ten years of innovation and product development, and showcases Tide’s journey of reinvention every decade: from soap to detergent, powder to liquid, then Pods, and now, laundry tiles – the first-of-its-kind in the industry,” said Marchoe Northern, the president of P & G’s fabric care unit, in the press release. The launch highlights how P & G’s innovation strategy often builds on existing categories, using technology and formula improvements to create new product types rather than entirely new markets. History of our P & G position Initiation date: Nov. 18, 2025 Our thesis: P & G’s strong track record of growth, paired with a new CEO in charge, make it one of our preferred economically resilient stocks to own. Most recent trade: Bought 25 shares on March 11, 2026 Our stock rating: Buy-equivalent 1 Price target: $165 a share Modi said P & G has historically focused much of its innovation on higher-end market segments. Some recent success in China underscores the justification for that strategy. P & G introduced what it calls a super-premium line of Pampers Prestige diapers that contain real silk, a fabric with thousands of years of history in China. “The shiny, soft feel package conveys superiority at first touch,” chief executive Jejurikar said on P & G’s January conference call. Jejurikar said reframing its high-end lineup has driven double-digit organic sales growth for Greater China Baby Care over the past 18 months, with market share up nearly 3 points. At the same time, Modi said a wide net must be cast to win back lost share. “Innovating further down the price spectrum can help bring consumers back into the franchise,” Modi argued. On earnings calls, P & G executives have said they recognize the importance of doing that, with some success to their name. In October, CFO Andre Schulten highlighted the 2024 introduction of Luvs Platinum, a new product in its value diaper brand, which also featured a partnership with the popular kids show “Bluey.” With the introduction of Luvs Platinum, Schulten said, “We have been able to grow share, even competing in what is probably the most pressured tier within the Baby Care portfolio. And we are now expanding that same approach to the mid-tier.” R & D spending P & G’s sheer scale is an advantage in the pursuit of new and improved products. Its annual sales topped $85 billion in the fiscal year ended in June, more than $30 billion ahead of its second-place competitor, Unilever, which, unlike P & G, also has a food business ( for now ). The result: a lot more firepower to dedicate to the lab than its rivals. P & G spent $2.1 billion on R & D last fiscal year, nearly exceeding all its key consumer staples competitors combined, according to a CNBC analysis of FactSet data. A group of six companies — Huggies owner Kimberly-Clark, Colgate-Palmolive , Church & Dwight , Clorox , Sensodyne parent Haleon , and Unilever — spent around $2.3 billion combined in their latest fiscal years. Over the past five years, their combined R & D expense totals $11.3 billion, compared with P & G spending $10 billion on its own. P & G stands out even relative to others. “As a percentage of sales, Procter spends 2.5% on R & D, while peers on average spend 2%,” Evercore’s Ottenstein wrote in an email. “At its core, it’s something of a chemical and engineering and increasingly a data science company that sells consumer products,” said Robert Ottenstein, analyst at Evercore ISI, in an email to CNBC. Evercore ISI analyst Robert Ottenstein That R & D spending goes toward developing improved formulas for products such as detergents, Olay skin care treatments, and shampoo, as well as research to find more effective and sustainable solutions. Underlying many of these innovation investments is P & G’s deep expertise in chemical engineering, molecular biology, materials science, and other technical fields that help the company improve product performance. Its competitors are not standing still, touting their innovation bona fides to investors too. At a February conference hosted by the Consumer Analyst Group of New York (CAGNY), Kimberly-Clark’s chief R & D officer, Craig Slavtcheff, said the company’s growth last year was “overwhelmingly boosted” by its product innovations. A recent win: a retooled version of its Huggies Snug & Dry, which the company says is the softest diaper in the value tier. But for P & G, its “magic sauce” ultimately comes down to talent, according to RBC’s Modi. The company seeks to hire the best scientists who can improve what he calls “product efficacy” — or, simply, how well a product works. That focus on performance is becoming more important as consumers rely less on traditional advertising formats, like TV commercials, to learn about new products and more on word-of-mouth recommendations on social media, where products can go viral — for better or worse. Artificial intelligence Artificial intelligence now plays an integral role in P & G’s development process. Data is the lifeblood of AI, and P & G has plenty of it. The company has been collecting market research data on how consumers use its products for over 100 years . P & G has what it calls a “structured data lake,” an industry term for a massive repository of consumer, manufacturing, and financial data. The company uses that data to deploy AI tools across multiple parts of its operations, from product development to supply chain management and marketing. “Everything is />
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