Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Grocery Wars

Is Procter & Gamble (PG) Turning around

Procter& Gamble (PG) or P&G seems to be recovering from the retail apocalypse. America’s favorite soap company just concluded its fifth straight quarter of revenue growth.

To explain, P&G’s revenues have been growing for a year. Notably, Procter& Gamble (NYSE: PG) reports a revenue growth rate of 0.22% for 3rd Quarter 2018.

That marks the fifth straight quarter P&G’s revenues have increased. In detail, Procter & Gamble’s revenues began growing in 3rd Quarter 2017.

Additionally, some of that growth is impressive. For instance, P&G recorded revenue growth of 4.33% for 1st Quarter 2018, 3.2% for 4th Quarter 2017, and 2.64% for 2nd Quarter 2018.

Surprise Procter & Gamble (PG) is growing again

Hence, Procter & Gamble (PG) is growing again. That will increase the value investors’ interest because P&G is still a money maker.

For example, Procter & Gamble records revenues of $16.669 billion and a gross profit of $8.206 billion for 3rd Quarter 2018. That gives P&G an impressive gross margin of 49.17% for 3rd Quarter 2018.

Moreover, those numbers translated into an operating income of $3.554 billion and a net income of $3.199 billion. Hence, P&G is still making a lot of money by selling Tide detergent, Gillette razors, and Ivory soap.

Procter & Gamble (PG) has a lot of Cash

Not surprisingly, P&G is generating a lot of cash from all those soap sales. Specifically, Procter & Gamble (PG) achieved an operating cash flow of $3.567 billion and a free cash flow of $2.487 billion for 3rd Quarter.

Consequently, P&G reports a lot of cash at the end of 3rd Quarter. In particular, the company had $8.788 billion in short-term investments and $2.545 billion in cash and equivalents. Thus, Procter & Gamble is a cash-rich company.

Moreover,Proctor & Gamble (PG) is wisely using that cash by adapting its business model for modern America. Two recent moves, in particular, indicate P&G understands where the consumer market is going.

Procter & Gamble (PG) makes Strategic e-commerce move with new Tide Eco-Box

First, Procter & Gamble (PG) is introducing a new box for liquid Tide designed for e-commerce. The new packaging; called the Eco-Box first shipped in November, The Verge reports.

They build the new box like a wine box, which is attracting a lot of online mockery. However, P&G designed the Eco-Box to survive shipment. To explain, wine boxes are strong enough to resist damage during shipment.

In fact,I cut up old wine boxes and use the pieces to protect comic books I sometimes ship. To clarify, the wine box cardboard is so strong no letter carrier can bend it.

The Tide Eco-Box is a Brilliant Strategic Move for P&G

Therefore, the Tide boxes are less likely to get punctured and leak detergent over everything else during shipment. Under those circumstances, shippers will have no reason to refuse to ship boxes of liquid Tide.

In addition, there will be no pods; which children and stupid teenagers sometimes eat. In other words, P&G can avoid the bad publicity and big lawsuits that could result from sick pod eaters.

Most importantly, the P&G can easily ship the Eco-Box through the mail,couriers like UPS, and new shipping services. Therefore, P&G is cleverly positioning Tide for a new retail environment in which a large percentage of the population never sets foot in a brick and mortar supermarket.

Delivery is the Future of Retail and Proctor & Gamble (PG)

Specifically, the Eco-Box will make shipping through next-generation delivery services easy.Such services include Ocado, Boxed, Instacart, Shipt, Cornershop, Parcel, and Shipping by Amazon.

The Eco-Box will make it easier for P&G to sell laundry detergent, dish soap,and dishwasher soap through such services. Furthermore, it will be easier for P&G to ship Tide directly to dollar stores and other smaller neighborhood retail outlets with the Eco-Box.

The potential market for Eco-Box will be huge because Statista estimates there are 14,534 Dollar General (NYSE: DG) small-box discount stores in the US. Beyond dollar stores, there are next generation discount shipping services like Boxed.

Finally ,direct shipment of products like Tide to consumers will be a huge part of P&G’s business. Better packaging will enable P&G to expand its business while eliminating the middleman.

Proctor & Gamble (PG) makes a Smart Acquisition

In addition to new packaging, Proctor & Gamble (PG) is making smart acquisitions in the consumer products space.

The most notable recent P&G acquisition is Walker & Company which specializes in health and beauty products for people of color. Specifically, Walker & Company’s line includes the Bevel hair care products.

Recode estimates that P&G is paying between $20 million and $40 million for Walker & Company. Notably, Walker & Company CEO Tristian Walker will stay in charge.

Buying Walker & Company helps P&G in two very important ways. First, it offers new products that appeal to younger consumers with little or no loyalty to traditional P&G products. For example, people of color who recently immigrated to America.

Photographer: Daniel Acker/Bloomberg via Getty Images

Proctor & Gamble (PG) needs the word of mouth because old media is dying

Secondly, brands like Bevel rely on word-of-mouth advertising in specific community. Such advertising is vital for P&G because changing media consumption habits are killing off traditional media like network television.

For example, the streaming video service Hulu has 47.5 million subscribers in the United States, Market Mad House claims. Meanwhile,the most popular network TV show in the United States CBS’s The Big BangTheory averaged 22.73 million viewers in 2018, Statista estimates.

Under those circumstances, a majority of TV viewers are no longer seeing P&G ads for Tide and Crest. On the other hand, people still get recommendations from friends, family, and coworkers. Thus, the word of mouth is more important to P&G than ever in today’s digital world.

Procter & Gamble (PG) can tap huge new markets with Walker & Company

Third, Walker & Company’s nonwhite expertise can open up vast new markets for P&G.

African-Americans alone made up 13.4% of the US population in 2017, the US Census Bureau estimates. Thus there are around 43.6 million black people in the United States out of a population of 325.719 million.

Moreover,the Census Bureau classified 23.4% of the American population; or 76.22 million people, as “nonwhite” in 2017. Hence there are 76.22 million potential customers for Walker & Company products in the USA alone.

In addition, there are around eight million people of African descent living in Europe, Quartz estimates. Importantly, Quartz estimates Europe’s African population increased by one million people between 2010 and 2017.

Beyond Europe and America, there are fast-growing markets in developing regions like Africa.Theoretically, next-generation retail technology like cryptocurrency, and the blockchain could open those markets to direct sales from companies like P&G.

For instance, it could soon be possible for a P&G facility in Ohio to ship Bevel hair care products; or Tide, directly to customers in Nigeria or Kenya.

Procter & Gamble (P&G) is a Growth and Value Investment

All of this makes Procter & Gamble a growth investment, but P&G is also a value investment.

For example, Procter & Gamble (NYSE: PG) is a bargain when compared to Amazon(NASDAQ: AMZN). P&G was trading at $96.49 a share on 13 December 2018 while Amazon was trading at $1,658.38 a share on the same day.

Uniquely,P&G pays a dividend while Amazon does not. For instance, Procter & Gamble shareholders received a payment of 71.7¢ on 15 November 2018. On the other hand, Amazon famously pays no dividend.

Additionally,P&G’s dividend is growing; it increased by 2.7¢ during 2018. In detail, Procter & Gamble paid a 69¢ a share dividend in November 2017.

P&G offers some very attractive dividend data. For instance, its shareholders received a dividend yield of 3.05%, an annualized payout of $2.87, and a payout ratio of 64.9% on 12 December 2018. Finally, Procter & Gamble shareholders are enjoying their 69th straight year of dividend growth.

If you are looking for a solid moneymaking dividend stock with a lot of growth potential investigate Procter & Gamble (PG). P&G is a solid money maker with a lot of growth potential – so it is a value investment.