November 10, 2009 By: Ron Sivick

 Current price: $61.94  52 week range: $  Market cap: 180B  Large Core, Classic Growth  Sector: Consumer Goods  Industry: Personal Products  Rating:  Beta: 0.55

Company Overview  Founded in 1837  Headquarters: Cincinnati, Ohio  engages in the manufacture and sale of consumer goods worldwide  Offers products to mass merchandisers, grocery stores, drug stores, and membership club stores  Operates in three global business units  Beauty  Health and Well-Being  Household Care

Company Overview Cont’d  Largest consumer product manufacturer  Offers multiple products in a category and often more than one brand, in order to reach the most possible shoppers  Continually improving products to increase brand loyalty  Has 23 brands which generate more than $1 billion in sales annually and another 20 brands that generate more than $500 million in sale  Focuses marketing and product development on its beauty-care and health-care segments as well as on developing markets

Overview cont’d  Continuing to expand to countries where they have no presence  Has doubled the sales it derives from developing markets, acquired and integrated Wella and Gillette, and divested a number of lower-margin brands  Beat EPS estimates for fourth quarter and year

Categories of Products  Air Fresheners  Antiperspirants & Deodorants  Baby and Child Care  Hair Care  Hair Color  Health Care  Pet Nutrition  Prescription Drugs  Prestige Fragrances  Batteries  Household Cleaners  Shaving  Skin Care  Small Appliances  Snacks  Paper Products  Oral Care  Laundry & Fabric Care  Cosmetics  Dish Washing  Feminine Care  Body Wash & Soap

Global Presence ArgentinaEgyptJapanPoland AustraliaFinlandLebanonPortugal AustriaFranceMexicoSpain BelgiumGermanyMoroccoSweden BrazilGreat BritainNetherlandsSwitzerland CanadaGreeceNorwayTurkey ChinaIndiaPanamaUSA ColombiaIrelandPeruVenezuela Czech RepublicItalyPhilippines

Net Sales Change Net Sales Change Drivers vs. Year Ago (2009 vs. 2008) Volume with Acquisitions & Divestitures Volume Excluding Acquisitions & Divestitures Foreign Exchan gePrice Mix/ Other Net Sales Growth BEAUTY Beauty-2%-1%-4%2%0%-4% Grooming-6%-5%-6%5%-2%-9% HEALTH AND WELL- BEING Health Care-4%-3%-5%4%-2%-7% Snacks and Pet Care-6% -4%9%-2%-3% HOUSEHOLD CARE Fabric Care and Home Care-3% -5%6%0%-2% Baby Care and Family Care1%2%-4%5%-1%1% TOTAL COMPANY-3%-2%-4%5%-1%-3%

Net Income Year Net Income (Millions) 2000 $3, $2, $4, $5, $6, $7, $8, $10, $12, $13,436 TTM $13,395

Sales by Business Segments

Cross Sectional Analysis ValuationP & G Johnson & Johnson Kimberly-Clark P/E P/B P/S P/CF Dividend Yield 2.90%3.30%3.80% Forward P/E Wall St. Rec Sell (5) Hold (3) Buy (1)

SWOT Analysis Strengths  Strong focus on Research and development  Leading market position  Diversified product portfolio  Strong brand portfolio

SWOT Analysis Weaknesses  Increasing instances of product  Dependent on Wal-Mart Stores for majority of its revenue

SWOT Analysis Opportunities  Expansion in developing markets  Future growth plans  Growing Indian FMCG market

SWOT Analysis Threats  Regulatory Environment  Global Economic Conditions  Counterfeit goods

Valuation Morningstar  Fair Value $77.00  Consider buying $61.60 My Estimate  $80.36

Recommendation Investment rationale  Focus on disciplined cash and cost management along with investing in capacity, innovation and consumer value to sustain market share during the recession  Continuing to utilize their billion-dollar brands in growing markets  Have turned their focus to the business segments that will derive the most profit growth  Extended the availability and affordability of P&G brands to more low-income consumers

Recommendation  Have chosen to focus on five core strengths that are required to win in the consumer products industry:  Consumer understanding  Interact with more than five million consumers each year in nearly 60 countries  Brand-building  Built the strongest portfolio of brands in the industry with 23 billion- dollar brands and 20 half-billion-dollar brands  Innovation  Leader in the industry  Go-to-market capability  Scale  Knowledge sharing, common systems and processes, and best practices as it is by size and scope