Name: MPW London 2019: Will the Real Economy Please Stand Up?
Uploaded: 2019-06-06
Duration: 20 min 34 s
Description: What is the global consumer’s wallet saying about the state of the world today?

Again, we have two of our amazing list women with us on stage this afternoon. Alex, of course, is the CEO of Procter & Gamble Beauty, goods that pretty much everyone else in this room, and half the population of this planet, use and cannot live without. Ash is the transformational specialist who has changed the business brought it back to life. Melanie has been breaking corporate barriers in Germany a really tough place for women in the roles that you have been in. And she handles our CFO a business at the core of Germany's export driven economy. At Deutsche Post DHL so she gets. Her creams and lotions to pretty much all of us and our shops. Right. So we heard from way and an about their view on the drum beats of trade wars. You both have been pretty much on the record looking at your businesses one which is a consumer goods business relatively protected from concerns and worries. Where do you come down on the way the world is viewing uncertainty and even you know at the European central bank sending out warnings about all of these. Tariff and trade war battles having an impact on the real economy. Who wants to go first? Let's start with you Alex. Okay, fine. So I think, as you mentioned, I think we are in the business of daily use products that play a major role in people's lives. And we compete in categories where performance drives regards product purchase. I think ultimately what's important is keeping the consumer at the center of all of that so, so yes, there's lots of warnings and our consumers hear them and and we hear them But ultimately what I have found, and what we have found, in the categories in which we compete they are all growing kind of low to mid single digits in all the major regions of the world, including Europe. So I think ultimately We are focused on delighting that consumer, and we know that that can continue the markets in which we compete being healthy. So the wallets are still open? They are, now we compete in categories that people tend to need to use. Daily use categories, shampoos, and conditioners, and soaps, and lotions, as you said, so I think ultimately, they aren't really discretionary categories. At the same time, know there's always the potential that people will trade down and put less cash out of their wallet in times of economic uncertainty. And that's where keeping the consumer at the center and making sure we're providing products that delight him and her. At current and even higher prices can allow our markets to be healthy. And that's our ultimate goal, is to keep our markets healthy. Ellen? Yes, so we are the postal office for Germany but we are also the largest logistics company in the world. So we work in 220. countries and territories and logistics companies are seen as bellwethers for what is happening in the global economy, and of course tariff conflicts and so on to have an impact. [ INAUDIBLE ] On us but when you look at the numbers we see for us as a company in the first quarter we saw continued growth. It was not on the same level that we had in 2018 and 2017 but so for example when you look at our global cross- border express shipments we saw a shipment growth of 5 % in the first quarter of 2019. So there is growth. It is at a reduced level, but growth continues. And what we also try to do is look at it in a more systematic way across a logistics industry. We publish a global trade barometer every quarter. And when you look at what we saw for the first quarter, end of March, the numbers had come down compared to December By four points but we were still above 50 so there was still also from this big data sample clear evidence for continued growth. It's a bit of a question that i've always had when you look at the Germany economy. And you being at the heart of it There are concerns about the dependence on exports. When you look at the German economy with the number of, I think the number you gave me was one in every 400 Germans works for you? Does that worry you that they're talking about consumer demand in Germany just not being strong enough to sustain A trade war if it happens. Obviously the German economy is export dependant but what we have now seen also over the last quarter is actually there has also been some solid internal demand and this is quite clearly in our numbers. So I suppose to operate from our legacy we have a share 45 % on the German market. And when we look at the parcel growth, we saw, and that's kind of domestic parcel growth, we saw a 7. 7 % volume growth in the first quarter. So there is also continued internal demand. Obviously, there is a lot of fear and a lot of concern. And you can also see that in the political debates And that is maybe one of the most concerning things for me. At the moment, there is a tendency over the last years, that people don't look so much at the facts, but more at sentiments. And I think fear is a bad advisor. We talked about that in the free discussion, that we all have a scientific background. So I think one other really important thing is Yes, they are concerning science, but there's also a lot of evidence that the economy continues to do surprisingly well despite all the talks about trade wars and so on. All right, let's get some questions from the room. You've had a chance to have to appetizer whet your appetite a little bit on a bit of the main course. Do we have questions? [ BLANK_AUDIO ] Not yet so here's what I'm going to say, there's one if you can get someone with a mic. Perfect, thank you. [ BLANK_AUDIO ] Yes hi [ UNKNOWN ] Rosen my question is for Alexandra what do you think is underpinning [ UNKNOWN ] I think the structural growth in the beauty cosmetics segment that we are seeing and what are the kind of key drivers that you see? I think human emotion [ LAUGH ] is the biggest driver- Is my mic on? Mm- hm. >>of the beauty categories. I mean I think ultimately, and I'm sure people have heard of the lipstick index. I mean, even when the economy gets starts to struggle. Lipstick does fine, because ultimately, the products that we sell are largely accessible in the industry, I mean. Of course, you can choose to buy something for $ 100, or something for $ 5 in the US, or euros, or pounds, or whatever currency you'd like to speak in. But ultimately, it is such a core part Of who a woman is how she presents herself to the world. That I think ultimately the beauty industry always has that expansive growth potential even in times and sometimes especially in times of Of challenge. So I think at the end, that's the core of it. I would say also though that there is with the rise of influencers and social media and the accessibility of brands and branding That has kind of grown the industry, in terms of people wanting to try more and more things. And they may have one face cream in their cabinet, but then they see an influencer who they really trust and follow And they recommend something else and so they'll try something else and so I think ultimately we're just seeing more and more expansion of the market behind expansion of the number of products in any given category in a woman's repertoire. Is there one product that you think of Melanie that would start raising along Bell for you? That the real economy is starting to look shaky. Is there one segment, one industry in all your logistics business that would be part of your index? There's not the one single sign, and I think there's also, for us, one of the comforting dimensions. Being active in 220 countries and territories There's always something going wrong, right? Like you always have a conflict. You always have some strange tariff behaviors, you have a currency devaluing. So I think it's not the one indicator, of course, we also look at what is happening from China to the US. I think for me, one of the real challenges now particularly with regard to the last four weeks is Tariffs are the one thing. I think now using more and more regulatory tools to ultimately play tariff politics, or trade politics, is making things increasingly complex. I mean just looking at the list of regulations you have to comply with if you want to transport stuff from one country to the other, to certain companies It is really getting complex. And I think that, of course, for us also, one of our key competencies, to have our customers being able to find their way through this jungle. But I think this increasing amount of regulation is just making trading increasingly complex, and that is, for me, a big concern. [ BLANK_AUDIO ] There we go. Got a question from the room. [ UNKNOWN ] My question is for Melanie. As you described yourself at the bell weather if you will, how do you relate to companies like Amazon, who are moving From book selling to selling everything, to now going into the logistics business. In other words, where is your real competition coming from? That is a very good questions which I also tend to get quite frequently from our shareholders. So Amazon is a very important customer of ours and we have worked with them successfully for a long time. They are an important customer and we are an important supplier for them. But, of course, where it makes sense for them, they also start doing their own logistics activities. When you look at what happened in Germany It has been at a significantly lower pace than what we saw in the US and also in the UK, but of course, it's everybody's right to start doing their own logistics activities. I think for us, the most important differentiator is, going back a little bit to what you said, Be extremely customer focused. I think as long as we give the best service including all the technology features that makes an incentive to move away from us slower. So, I think for us, the best way forward is to focus on our product offering and on delighting our customers. What are the innovations both of your companies are doing when it comes to technology to ensure that the real economy keeps ticking along? So, in our skincare business, one of the biggest challenges in skincare is women don't know which products they ought to use to deal with the skin concerns they have or the areas of opportunity they have. We launched a tool called Olay Skin Advisor, a couple years ago now, to really help women find those right products for them. And it is a combination of IP on photographic technology that compares skin to a data base. And artificial intelligence and machine learning that makes it smarter with every woman that has used it. So now, 5 million women around the world have used it and it recommends a lineup of products that it will tell you your skin's age versus your chronological age and then the products you can use to. To help improve your skin where you care the most. These are the kind of things that are allowing us to help women find their navigate their way through a confusing category using their smartphones and it's increasing basket size and regimen usage and it's growing the category in our brand because of that so It's a great I think way to help have technology intersect with the consumer products market. Technology plays a big role already at [ FOREIGN ] Yes, so I think there are many examples from supply chain resilience based on big data to drones. I think for me one of the most Relevant and interesting trends is sustainability in the supply chain. I mean obviously as a logistics company we have a very sizable CO2 footprint and we recognize that more than 10 years ago so in 2008 we put out our first goals to increase our carbon efficiency. We have now given ourselves as first as a six company the goal to be carbon neutral by 2050. And we have an interim goal by 2025. I mean just looking at the European elections here from a week ago, that is obviously a big topic also for the younger population and we want to find a way to make our Carbon footprints are greener over time. One very concrete example is, we were the first logistics company to start with electric delivery vehicles. As we couldn't buy them from the traditional automotive manufacturers, we started manufacturing our own electric delivery vehicles. We now have 9000 electric delivery vehicles all out in the streets in Germany and this spreading them across Europe now and that makes it the largest Electric delivery fee to in the world and of course when you think about diesel van and or the my pollution problems I think that's a clear trend. They are from a financial perspective. I'm the CFO after all, I think that this is also going to be financially relevant for any logistics company. So I think we're doing the right stuff, which is also important for our younger colleagues. But I think it's also an economical imperative for logistics company. So this is core to your what if scenario where if. Say the ECB or anyone else's warnings come true, these are the technologies and the innovations that will keep you ticking along, right? I think if you add value, if you add value to people's lives, then it makes you relevant and you can weather those things. Right. Yep. Question at the back, please. Is it on? Yes, good. [ INAUDIBLE ] It's a question for Alexandria which actually I had earlier, but follows perfectly from what you just said. And it's not about the real economy, it's really about the future of society. I'm talking a bit to let you start thinking about it. [ LAUGH ] It's about note packaging. Cause I can imagine it's a huge dilemma and that you've been thinking about it for a long time. All these things that are sold to help make us beautiful or whatever it might be come normally and terribly biodegradable packaging and 20 years ago nobody cared 10 years ago not many people cared but today everybody cares. And you spoke about innovation, I'm really interested if you could just share a little bit about how you are thinking and doing research on changing the way you package the billions of things that you produce, because we'd all be really interested in it. Terrific. So, I do think there is There is the societal need. There's the there's the earth need, I think Procter and Gamble in general, we we view ourselves as a force for growth and a force for good. And we view innovation as the intersection of these things. So one of the innovations that we've recently we highlighted at the Consumer Electronics Show As well as in several of our analyst calls, is a fantastic innovation that we're building off of our paper making business that ultimately is a their single use no water. Cleaning products whether they're for your home or for yourself and you add the water and you use them. And so when you combine the challenges of shipping and logistics big plastic packages full of water. We are looking to really, of course, we're looking to also improve the footprint of our existing products and the existing packaging. Looking at biodegradability, and all those things. But really, really, we think the breakthroughs will come with some of the innovations that we're working on, that would eliminate water in products entirely, and eliminate the need for bottles, then, to hold the products. So these are the type of things we are doing to be both a force for growth in the world, but also a force for good in the world. You want to take that since we're at the which boasts we are looking at the sustainability angle I mean how is it going to be different from the massive amounts of packaging that usually come in. Yeah I mean if you have been working with our customers of for example and you can most area I'm particularly the start of some don't have some logistics competence themselves. To make sure that intense of packaging in terms of volume metric features they really get the optimal jaw but of course V. are transporting stuff and that is why all focuses particularly on making sure that we get to the most you too efficient way of transporting goods around the world. I'm gonna do a rapid fire because we're almost out of time. If you had to name three bright spots in the global IQ of, you know, the global environment. Three countries that you really are excited about and three that you're worried about when it comes to the economy, which one would they be? We know we talk about the US and China a lot. But give me some idea what you're thinking of Alex .>> Well its hard not to say the US and China they are both huge markets and there are so much upward mobility still happening in China, I mean I think there is just tremendous growth in China. But a lot of the Southeast Asia countries also are very interesting. Indonesia is a great space for growth and then India as well, in terms of growth factors that I'm really looking at. Current countries I'm worried about, I mean I think the countries with aging populations are concerning for a long term business. Whether it be Japan or some of the European countries. Or, frankly, the US to. So I think that there's, that's the way I think about it, consumer based. Yeah, it's funny I would have said Southeast Asia first I was just in Vietnam and the amount of economic potential and growth and dynamic you see there is just overwhelming. And I'm going to India next, because I think that is also I mean it has been talked about for a long, long time. But we are seeing real progress there, so I think those countries are clearly growth potentials going forward. I think generally in terms of countries I'm concerned about or trends I'm concerned about is when we look at the last four decades Global trade has increased wealth for mankind in an unparalleled way. And yes, we all know that there are injustices and not everybody has benefited in the same way. When you look at all the data, global trade has really increased Standard of living across the planet in the developed countries and in the developing countries has reduced child mortality and so on. There's not a single country which has been successful by going that isolation, isolation route. So I'm deeply concerned about the isolationist trends and countries thinking that by decoupling themselves from the rest of the world They have found a way for bright future because that is not the case. [ BLANK_AUDIO ]

MPW London 2019: Will the Real Economy Please Stand Up?

Finance

What is the global consumer’s wallet saying about the state of the world today?