P&G's Fabric Care and Home Care EBITDA Margin: EBITDA margin for the Fabric Care and Home Care division gradually declined from 23.7% in 2011 to 21.3% in 2015 due to a combination of commodity cost inflation, unfavorable product mix resulting from the disproportionate growth of developing regions and mid-tier products, and foreign currency headwinds. It improved significantly through 2022 to 24.5%, on the back of strong cost savings. Going forward, we expect P&G to witness further improvement in margins through its ambitious cost savings program and a heavy focus on productivity improvements. Divestment of under-performing brands will also provide a boost to margins. There could be a 10% downside to our price forecast if P&G's Fabric Care and Home Care EBITDA margins fall to 22% by the end of our forecast period in case of failure of divestment strategy and rise in competition from the local players.
P&G's Beauty EBITDA Margin: P&G's Beauty EBITDA Margins started the decade with a gradual decline, from around 26% in 2011 to 24.7% in 2015 mainly due to the higher commodity cost environment. However, margins improved to 31% by 2022 due to substantial cost savings and divestment of under-performing brands. Going forward, we forecast P&G's Beauty EBITDA margins to improve gradually, to approximately 32% by the end of our forecast period, as the company intends to focus more on core performing brands.
Procter & Gamble (P&G) is a global company with operations in over 180 countries. P&G manufactures and sells consumer goods across multiple product segments that are part of the larger beauty, grooming, health care, household care and baby care reportable business segments.
Note: After the divestiture of non-performing brands, P&G has restated its income statement for the last five years. Some values which were not restated by the company, have been estimated in the Trefis model and content, and the assumptions are stated explicitly in our content.
P&G's easy access to capital resources offers it capabilities to invest heavily in research and development (R&D) programs, brand building, marketing campaigns, direct-to-consumer advertising, and market research. P&G has an international presence with an established network of retail channels that provide it a route to leverage high growth in emerging markets by easily reaching the end consumer.
P&G invests about $2 billion annually in research & development, approximately 50% more than its closest competitor, Unilever, and more than most of its competitors combined. The high R&D outlay helps P&G launch improved and innovative products at regular intervals to maintain, as well as expand, its market share. The latest examples of innovation by P&G include Gillette Fusion ProGlide, Crest 3D White, Laundry additives, and the Pampers thinness and absorbency upgrade. Trefis believes that innovation, particularly in the premium categories, is the key to driving profitability as P&G already has significant scale and a high level of concentration in developed markets like the U.S., Western Europe, and Japan.
P&G continues to invest heavily on advertising and promotion of its brands. Trefis believes P&G's advertising and marketing capabilities are important growth drivers for sales as they help maintain brand novelty and defend the high market share position that P&G enjoys.