PROCTER & GAMBLE

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The official company website:  Procter & Gamble

HISTORY

The following is an excerpt from the book Ideas that Became Big Business by Clinton Woods. Published by Founders, Inc. Baltimore, MD, 1959, 414 pages.

Buy this book: Ideas That Became Big Business

The Procter & Gamble Story

The far-sighted policies of the founding partners live today in a business over 120 years old. Their pattern was one of durable values: fair dealing with employees, with the trade, and with consumers; a drive toward greater usefulness as a business institution.

"In Cincinnati, Queen City of the West, in the year 1837 two men, young and married to the daughters of a chandler, went in a business as partners at the suggestion of their father-in-law. William Procter was a candlemaker; James Gamble, a soap boiler.

Each partner brought $3596.47 into the formation of Procter & Gamble, plus ambition and courage. Mr. Gamble and a single helper handled production, while Mr. Procter attended to the buying of raw materials, to sales and deliveries and the bookkeeping. A wheelbarrow could handle the day's output at the start.

Volume increased as population soared; new types of soap were tried out and sold. By 1859, the factory had 80 employees, and annual sales totaled $1 million. Mr. Procter had five sons, James Gamble four, but only those who showed an aptitude were taken into the business. Cautious in admitting family members, the founding fathers were gratified to have worthy backstops in their eldest sons, William Alexander Procter and James Norris Gamble.

In 1878, experiments with a formula for a hard white soap without expensive olive oil were capped by a stroke of luck. The new mixture was poured into a blending machine. Apparently a workman forgot to shut off the power when he went to lunch. The result, a hard soap, floated! Customers who received the accidental batch called for "more of that floating soap." The company surmised that intensive whipping had beat air into the mixture, and thereafter, the accident was deliberately repeated. P&G found a catchy name, "Ivory". By advertising Ivory extensively, P&G became committed to brand name marketing, large-scale advertising, and mass production of goods of uniform excellence.

In 1886 P&G built its Ivorydale (Cincinnati) plant, the biggest in the industry. Many men came on the payroll who regarded their jobs as only temporary and their interests opposed to those of management. In a time of general labor unrest across the nation a new point of view was developed by William A. Procter's only son, William Cooper Procter. Some of his ideas such as giving Saturday afternoon off without wage loss seemed radical. But the innovation was adopted in 1886. More fundamental was his plan for inducing all hands to have a personal interest in the business by joining in a common effort to earn and share profits. A plan of profit sharing was announced in April, 1887--one of the earliest such attempts in American industry--and the only one of those pioneer plans that has endured to this day.

William Cooper Procter became president in 1907, and Procter & Gamble was reflecting his restless energy. The chemical laboratory first set up in a corner of the plant at Ivorydale in 1887 to maintain quality standards was becoming a source of new products. P&G was building regional plants and had become a truly national manufacturing company. Also, Procter & Gamble led in research to perfect a method for making a liquid oil plastic and creamy through the use of hydrogen. The result was Crisco--the first creamy-white, digestible, all-vegetable shortening--introduced in 1911.

In these years William Cooper Procter studied an industry-wide problem: speculative buying by wholesales alternatively slowed or speeded production, causing irregular employment for factory workers. Realizing that the public brought soap and shortening at a fairly even rate the year round, he reasoned that production (hence employment) should be geared to consumption and not spasmodic wholesale buying. To overhaul the entire mechanism of distribution, Mr. Procter called upon his 32-year-old general sales manager, Richard R. Deupree. Mr. Deupree had joined the company as an office boy in 1905 and had advanced to his high post in only twelve years. He realized that a switch-over to direct selling to the retailer was involved. It took the years 1920-23 to accomplish the change.

With direct selling a practicality, Mr. Procter was able to announce in 1923 a guarantee of 48 weeks of work every year to hourly-paid production employees, after a two year probationary period. Employment had never before been guaranteed by a major manufacturer.

Richard Deupree became president in 1930. In the depression years, the guaranteed employment plan received its sternest test and continued in full effect. Mr. Deupree made sure his company leaped ahead of the industry with new synthetic detergents. In 1933 he introduced these marvels of chemistry to homemakers in the form of Dreft and liquid Drene Shampoo. He also unchained Camay, a milled, perfumed toilet soap introduced in 1926, from sentimental subordination to Ivory and authorized free sway in advertising the merits of the newcomer. Each soap must fight for itself and make its own way in the market. To Neil McElroy, a young man in the advertising department, went the job of helping to promote the new brand. The upshot was, Camay won its place and good old Ivory went right on floating along. From this came a new idea in marketing: P&G brand promotion teams, each concerned with the success of its own product; each competing against similar company brands as vigorously as against competitor's products.

The postwar years marked the period of Procter & Gamble's greatest growth to date. New and improved products were introduced to meet consumer preferences. Moreover, synthetic detergents provided a wedge for wider overseas operations. Foreign subsidiaries including manufacturing plants were established.

In 1948 Neil McElry was elected president, while Richard Deupree moved up to chairman of the board. In 1957, when Mr. McElroy became Secretary of Defense, Howard J. Morgens succeeded him as president.

Procter & Gamble history is a single thread and pattern lasting well over a century, which is unusual in American industry. The basic idea that has guided P&G from its earliest days can be summed up thus: "Our organization has maintained a healthy discontent with the present and a confidence that new and better products are always possible, that there are better ways to make and sell them, better ways to solve every problem in the operation of our business."

By 1956 Procter & Gamble's policy of internal competition, diversification of the business, ability to move quickly to an objective, enlargement of post-war markets and suitable increase in factories had brought annual sales to $1 billion. By 1957 the business was active in eight major fields: soap products, food products, toilet goods, paper products, cellulose and specialties, oil seeds crushing overseas and liquid bleach. And all of it started with one man on the payroll and a daily production that could be carted in a wheelbarrow."