Below is the transcript of an interview with P&G APAC and IMEA President, Magesvaran Suranjan. The interview will play out in CNBC's latest episode of Managing Asia on 20 December 2018, 6.30PM SG/HK (in APAC) and 11.00PM BST time (in EMEA). If you choose to use anything, please attribute to CNBC and Christine Tan.
Christine Tan: Suranjan, the last few years have been rather challenging for P&G. The company has been undergoing a restructuring process, trying to cut costs amid flagging sales. How has that affected your operations in Asia Pacific and IMEA, the regions you're in charge of?
Magesvaran Suranjan: These regions have done fairly well, and the APAC region has shown tremendous growth over the last three years in terms of how we're serving the consumers more and more. You can read that in shares and therefore what we have done here is actually invest. We've invested to grow and the growth is coming.
Christine Tan: So, you're still upbeat about growth in this part of the world?
Magesvaran Suranjan: Oh absolutely.
Christine Tan: What's driving it?
Magesvaran Suranjan: By 2030, 60 percent of the world's spending is going to be here. The population demographic trends are here and we are poised just right, I believe, to be able to innovate into these phases and we will grow. We will grow, we're growing now, and we will grow in the next 10 years.
Christine Tan: P&G relies a lot on China for its products and raw materials to manufacture and package many of its brands, like Head and Shoulders, Downy, Oral-B's toothpaste and toothbrushes. How is the company grappling with President Trump's latest round of tariffs against China?
Magesvaran Suranjan: First of all, we aim to serve our consumers as locally as possible. So, most of our manufacturing is local. Our supply chains are global in terms of ecosystems, and therefore, it doesn't impact us much. We obviously believe in free trade and that allows better competition and a fairer competition, but we are not impacted as much.
Christine Tan: But you still do import some raw materials and products from China?
Magesvaran Suranjan: Absolutely, absolutely.
Christine Tan: What are these raw materials? And is the company looking to find alternative sources?
Magesvaran Suranjan: We have multiple supply chains around the world and we leverage the supply chains optimally. We have to, just from a business continuity standpoint. And in China as with any other supply chain, it's similar.
Christine Tan: Ultimately, this means of course higher prices in the end for the consumer. How much can you pass on these costs without hurting demand?
Magesvaran Suranjan: I'm not sure this will translate to higher prices, if at all. Again, our supply chains are fairly local and therefore we don't see that much of an impact to our business model. Our business model at the end of the day, is going to be innovation, superior value to consumers, and superior go-to market. All that should not change and will not change.
Christine Tan: Where do you see profit margins here in this part of the world?
Magesvaran Suranjan: I think it will keep getting better as we do better at serving the consumer. We aim to be able to premiumize our products. We aim to serve in the categories with broader benefit space, and as we do that, I expect us to grow top line as well as bottom line.
Christine Tan: What's the biggest headwind you're facing here in Asia-Pacific?
Magesvaran Suranjan: As a global company, it'll be foreign exchange and commodities. These are the standard two. And if one isn't spiking, the other one is, and we have to have a business model that's able to cater to either of them, or sometimes both together as headwinds.
Christine Tan: How do you deal with, you know, fluctuating currencies when you're expanding your footprint in so many countries here in the region?
Magesvaran Suranjan: The best way is to be able to innovate, because when one innovates, one is able to premiumize the portfolio. And the second is productivity. In this business, in a fast moving consumer goods business, productivity is paramount. And this is finding better ways, cheaper ways, to do the same thing and do things better.
Christine Tan: Here in Asia, in particular, there is rising competition. You have to battle your rivals, to name a few, Unilever, Amway, L'Oreal, Shiseido. You have a product portfolio of 65 brands across 10 product categories. How are you fighting for market share?
Magesvaran Suranjan: There is a standard, the consumer will pick. She's the boss and she'll pick based on superiority, who is the most famous in the store, and how she hears about our products. And the brand that's able to achieve the three the best, will at the end of the day, serve their consumer best and be the choice.
Christine Tan: So does that mean you constantly have to revamp your product lineup just to make your products more compelling?
Magesvaran Suranjan: The consumer is evolving. The trends are evolving so fast. Just to keep up with her, we have to be able to innovate. And this is what's so magical about what we do, that you cannot stand still. You cannot stand still on innovation, you cannot stand still from a cost standpoint, and you cannot stand still from a communication standpoint. You know how we used to hear about products years back – TV… Today, it's digital and even digital is passé, now it's mobile. You have to be mobile friendly as a first line of communicating to the consumer.
Christine Tan: You talk about the consumer person in a feminine form. Why is that?
Magesvaran Suranjan: Most of our products are for the female. We've got Gillette, awesome product, and that's one to the male. I believe the male part of the portfolio can expand and should expand. But today, most of our portfolio serves the female consumer.
Christine Tan: So you've just recently launched this E-Center 2.0 today. What exactly is it all about?
Magesvaran Suranjan: This is our latest and flagship on innovation centers. And this is focused on digital innovation, we know this is the future, and specifically what we hope to achieve here and learn from, is areas of iSupply- the future of supply chains, of e-analytics- data science and data hubs - e-commerce. These are three pillars of the E-Center 2.0.
Christine Tan: What does all of this say about the retail of the future? What are you gearing up for?
Magesvaran Suranjan: I mean just look around us, this is fast evolving. The way they shop the shops in the traditional format, and more importantly the way the shopper will shop in future formats, especially online, is something that we have to learn.
Christine Tan: How will retail shopping change in the future?
Magesvaran Suranjan: I think it's going to be much more personalized; it's going to be much more of what one does in one's spare time, as one is doing other things. It's one that's going to be direct, direct engagement with the brand versus a mass engagement. The second aspect is going to be the way of advertising before they get to the store and how to direct their attention to the brands in the news. The third is delivery. Who wants to lug shopping baskets anymore? You want to be able to pick, and you want it to come to your house. An idea is that it happens within 30 minutes.
Christine Tan: This data analytics that you're talking about, is it also a way for P&G to figure out what new products to launch in the future as they get closer to the consumer?
Magesvaran Suranjan: Absolutely, I think first of all, identifying what are the needs before one even knows what one's need are. And then secondly, as we think about different products for different consumer segments, is how we'll be able to position the product uniquely to that consumer.
Christine Tan: P&G is fast expanding into the health care OTC consumer or "over the counter market". The company recently did a deal with Merck to take over its consumer healthcare business. Is consumer healthcare the next big area of growth for the company?
Magesvaran Suranjan: I believe it is an area of growth. I don't know the specifics of it, since the Merck acquisition will only take effect on December 1st, but it's certainly an interesting area when we look at where the demographics are going and how we can...
Christine Tan: And where are the demographics growing?
Magesvaran Suranjan: At the end of the day the population is aging. There are millennials and the new age population, there are trends in the naturals. This is a wide area to play in in this area.
Christine Tan: What can you tell us about the tastes of the millennial consumer? How do you appeal to this younger generation of shoppers?
Magesvaran Suranjan: It's certainly different. And this is one of the trends that we have to get with and in front of. Their shopping experience to start with, is different. Mass marketing versus one-to-one marketing. The stores that the millennials will shop versus the past is different. We have to figure out how to serve these in the places where they shop, in the places where they can be communicated with, and then it goes to innovation as well, innovation...
Christine Tan: Is it all about hiring millennial employees just to get the thinking right?
Magesvaran Suranjan: We will be hiring, because at P&G, there's a flow of talent and our recruiting classes are significant. We've got great innovation on that front too.
Christine Tan: Are you coming up with specific products just for the millennial market?
Magesvaran Suranjan: Not that I know of. I think the extension of our brands, at the end of the day, we believe in the strength of our brands appealing to a broad set of consumers and I believe our brands have still got legs to be able to serve for millennials to the to the later stages in life.
Christine Tan: Suranjan, just down the road from here, P&G launched an innovation center in 2014 which houses some 500 scientists and engineers. What signature products have you developed from the center that's reached commercialization?
Magesvaran Suranjan: This is a center that we've invested half a billion dollars. We've got some of the most amazing people, scientists, PhDs, the best of the best, I'm so inspired. What they've been creating, and there's so much more in the pipeline, are things like the Pantene 3-minute Miracle. The latest one we just launched about three weeks ago was the Febreze micro mist with the finest mist one can get in a product out of a spray. We are working on skin technologies out of this center and there's many more. The ones I've described are the ones in the market right now.
Christine Tan: It's interesting you talk about how there are 14 smells that are present in this center. I want to know what this is all about?
Magesvaran Suranjan: You have to see this. I mean, it is a state-of-the-art facility where you've got rooms that we can use as labs. And you may know this, there are certified noses and these are folks that can discern the most minute of smell differences. And you'd want to certify the list, we've got a number of those folks here, these are people who we formally call the "noses" here at the Singapore innovation center.
Christine Tan: How exactly do you certify for a nose?
Magesvaran Suranjan: I don't know. But I do know that it's a long, lengthy and training process over many years. I'm always inspired when I see them, I've always wanted to test how many they can really do, but I trust that they're the most discerning noses in the world.
Christine Tan: These products that you come up with at this innovation center, are they mostly developed for the global markets or for Asia-Pacific?
Magesvaran Suranjan: It'll be for the global markets. We look at the consumers broadly, and then we will customize it as needed for the local segment. Of course we'll launch in a specific market first, we will learn, and depending on the consumer segment, it may have an applicability that's broader.
Christine Tan: I'm thinking that the idea is that whatever works in Asia can work anywhere else in the world. Has Asia become the global litmus test?
Magesvaran Suranjan: It has in some products and for some other products, not necessarily. The tastes are different. There are certain characteristics, and the need for fragrances is different. But that said, the products like, say the Tide pods, is universal. Everybody wants an easier way to do their laundry. The micro mist in Febreze, whether it's Olay's skin mask, these are all universally applicable and are universal needs that I think these brands can serve around the world
Christine Tan: So what are you working on next?
Magesvaran Suranjan: Goodness, our pipeline, as you can imagine, is rather full. What we have is looking at how we can appeal to two segments of the population; to what I like to call "the boomers", and the millennials, the new entrants to the market. Different needs, you've got the aging population's specific need of skin creams, of innovational packaging, you still do laundry, but you don't want to lug a 3 kilogram liquid bottle with you. Then, with the millennials and new entrants to the market in the future, their needs are very different. The shopping experience and the products that they're looking for are different. They're willing to try different stuff. They no longer look to their parents for inspiration to say, "Well, my mum used it, so I'll use it as well." Rather, it's different. So, we have to cater to that and find products that are able to uniquely appeal to them.
Christine Tan: Well, consumers are naturally attracted to the packaging of a product. What are you doing on this front to entice the shopper to buy your products?
Magesvaran Suranjan: The Asian consumer is certainly a very discerning consumer on packaging. More so than anyone else that I have seen. They require an innovation cycle that is almost independent of the product, "the juice within", if you may. And what we need is greater lightweight products, what we need are products that are easy to carry, easy to ship by e-commerce, more vibrant, if you walk the shelves today, or a store of today versus the store of yesteryear, you find that the shelf is so much more vibrant. The third, which is amazing, is the instructions. Asian consumers read the back label. It's amazing.
Christine Tan: And western consumers don't?
Magesvaran Suranjan: Well, not as much. Well, I grew up in the East and in the West, and I remember trusting the brand from the name, from the advertising and picking it and trying it. Here, when you stand in front of the shelf and observe, folks take the product and carefully read it for a couple of minutes, and I think that's a very unique and endearing habit that is different.
Christine Tan: As part of the overall restructuring efforts, your group CEO, David Taylor, has pledged to make another $10 billion in cost cuts by 2021. How does that affect you as you run Asia-Pacific and IMEA? What process do you have to go through to streamline the company further from here?
Magesvaran Suranjan: At the end of the day, cost is an essential part of the business model. And as we look at the different areas, and you may have seen this in the public space of our media costs, we are one of the highest spenders in media. We have got costs on the product side and I would say these are the two biggest spend elements, Christine. And as we look at those areas, there are still lots of room to grow especially with the evolution of technology. We can get things done so much faster, we can reach consumers so much more efficiently. And in these areas, I think we can achieve our share of the $10 billion and more.
Christine Tan: As part of the restructuring efforts, are you under pressure to cut costs and to keep your headcount low?
Magesvaran Suranjan: The headcount is a function of growth. So, there is no specific headcount that I would necessarily focus on. What we focus on is making sure we are winning, we're growing and as a result, do we make the needed margins and the cost pools in the product side and in the marketing side which are our biggest spend areas.
Christine Tan: You're 49 years old, born in Sri Lanka, a trained public accountant, MBA in marketing and finance, spent the last 24 years working for P&G in the various product departments, now in-charge of Asia Pacific and IMEA. How would you describe your leadership and your management style?
Magesvaran Suranjan: Goodness. It's been an amazing journey -- Sri Lanka, to the US, to China and now, here in paradise. No one has ever told me "no". They guided me and this has translated to into desired style of allowing people to go as far out to the frontiers as possible and if they fall, catch them so they don't get hurt. But let people go right to the edge and try stuff, let them experiment, let them innovate. My mentors and my bosses taught me and gave me that confidence, so every day I aspire to give the confidence to the people who work with me.
Christine Tan: How do you go about inspiring your employees and nurturing talent?
Magesvaran Suranjan: The thing that unites us all, that our parents taught us, is growth. Every parent wants their kids to grow. Every manager wants their employee to grow. Inspiration is about keeping true to growth. We all want to grow. We want our families to grow. We want to grow. And as long as we keep that growth in front of each person, every day, then I believe that inspiration, like it is for me, will happen for all of us.
Christine Tan: So, how is decision making carried on within a company? How much autonomy do you have?
Magesvaran Suranjan: I have full flexibility to run the region in the way that I and my leadership team sees best. Of course, we get clear guidance from my boss David Taylor and the global leadership team, and we use it as guidance and it's very helpful. The beauty of P&G is that we are a large company and we're able to get the perfect ecosystem of "g-local"-- global and local. From a region standpoint, across the 14 markets in APAC, and the many more outside APAC, that we serve what I'd like to see is a more localized decision making. I'd like folks to try stuff and learn. Learn about the consumer, learn about the customer, and learn about the shopper. And we do that by trying.
Christine Tan: So a little bit of trial and error?
Magesvaran Suranjan: It has to be. It won't be as random as that, but it has to be one in which, one has to feel that you've got enough rope to go to the edges and try.
Christine Tan: And finally, what's kept you in P&G all these years? What is it about the company that's kept you at P&G all these years?
Magesvaran Suranjan: Folks have not told me what not to do, and that has allowed me to grow every day. It is so liberating to come to work to have these kinds of resources, to work with this quality of people, to work with people not just within P&G, but all the other stakeholders we get to work with. And this everyday growth has been something that you wake up every day and say "Wow. I can't (wait) to get to work today".
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