2014 EMEA EXPATRIATE MANAGEMENT CONFERENCE CONSUMER GOODS, FOOD AND RETAIL BREAKOUT 3-4 APRIL, BUDAPEST, HUNGARY

Kate Fitzpatrick, Principal London, UK Agenda What We Will Cover Today

• Proctor & Gamble Case Study: Managing International Mobility in a VUCA World • Consumer Goods Industry Future Trends: Impact on Mobility • Q&A

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 1 1 Section 1 PROCTOR & GAMBLE CASE STUDY MANAGING INTERNATIONAL MOBILITY IN A VUCA WORLD

Leonid Davydov Senior HR Manager Expatriate Compensation & Policy EMEA MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 2 Agenda

The case study will cover:

• P&G (Procter & Gamble) global business and global talent • International Mobility Programme and its evolution • Facing the challenges of 2008-2013 • Key learnings and Q&As

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 3 3 Our Heritage - More than 175 Years of Growth The Company was founded in Cincinnati in 1837 by William Procter and James Gamble, a candle maker and a soap maker who started a small business that has grown into one of the world’s most admired companies and includes brands that have become household names, used and trusted by consumers every day in nearly every part of the world.

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE P&G at a Glance

Countries of Operations ~70

Countries Where Our Brands Are Sold 180+

Consumers Served by Our Brands 4.8 billion (Approximate)

Financial Highlights NET SALES ($ billions)

13 $84.2

12 $83.7

11 $81.1

10 $77.6

09 $75.3

Fiscal years ended June 30 2013 Net Sales BY BUSINESS SEGMENT

20% 24%

9% 32% 15%

Beauty Grooming Health Care Fabric Care and Home Care Baby Care and Family Care

*Results exclude net sales in Corporate, fiscal year ended June 30, 2013 2013 Net Sales BY GEOGRAPHIC REGION

15%

10% 39%

18%

18%

North America Western Europe CEEMEA Latin America Asia 2013 Net Sales BY MARKET MATURITY

39% 61%

Developed Developing Leadership Brands Global Beauty

2013 NET SALES GLOBAL BUSINESS UNITS CATEGORIES LEADERSHIP BRANDS Beauty Care Antiperspirant and Deodorant, Cover Girl, Max Factor, , $ Cosmetics, Personal Cleansing, , Safeguard, 20 billion* Skin Care Hair Care and Colour Hair Care, Hair Colour Head & Shoulders, Herbal Essences, Nice ‘n Easy, * This reflects an estimate. Our historical , Rejoice financial data will be restated to reflect the new structure in fiscal year 2014. Prestige Fragrances, Prestige Skin Care Gucci, Hugo Boss, SK-II Salon Professional Salon Professional Wella Global Baby, Feminine and Family Care

2013 NET SALES GLOBAL BUSINESS UNITS CATEGORIES LEADERSHIP BRANDS $ Baby Care Baby Wipes, Diapers, Pants , * Family Care Paper Towels, Tissues, , , Puffs 22 billion Toilet Paper

* This reflects an estimate. Our historical Feminine Care Feminine Care, Incontinence , Naturella, financial data will be restated to reflect the new structure in fiscal year 2014. Global Fabric and Home Care

2013 NET SALES GLOBAL BUSINESS UNITS CATEGORIES LEADERSHIP BRANDS Fabric Care Bleach and Laundry Additives, Ace, , , Bounce, Dash, $ Fabric Enhancers, Laundry , Gain, 26 billion* Detergents Home Care Air Care, Dish Care, Cascade, , , Surface Care Mr. Clean, * This reflects an estimate. Our historical financial data will be restated to reflect the P&G Professional P&G Professional — new structure in fiscal year 2014. Personal Power Batteries Duracell Global Health and Grooming

2013 NET SALES GLOBAL BUSINESS UNITS CATEGORIES LEADERSHIP BRANDS $ and Appliances Beauty Electronics Braun * Oral Care Toothbrush, Toothpaste, Other Oral , Fixodent, Oral-B 17 billion Care

* This reflects an estimate. Our historical Personal Health Care Gastrointestinal, Other Personal Care, Prilosec, financial data will be restated to reflect the Rapid Diagnostics, Respiratory, new structure in fiscal year 2014. Vitamins/Minerals/Supplements Pet Care Pet Care Eukanuba, Iams Shave Care Blades and Razors, Pre- and Post- Fusion, , Mach3, Shave Products Prestobarba, Venus Worldwide Operations Developed Markets

Western Europe

Japan North America

SALES % OF TOTAL P&G VOLUME % OF TOTAL P&G MARKET DEVELOPMENT ORGANISATION (MDO) North America % % Western Europe 61 55 Japan Worldwide Operations Developing Markets

Central & Eastern Europe

Middle East Africa Asia Latin America

SALES % OF TOTAL P&G VOLUME % OF TOTAL P&G MARKET DEVELOPMENT ORGANISATION (MDO) Asia (excluding Japan) % % Central & Eastern Europe, Middle East & Africa 39 45 Latin America Procter & Gamble Case Study Managing International Mobility in VUCA world INTERNATIONAL MOBILITY PROGRAMME AND ITS EVOLUTION P&G International Mobility Programme Journey from1990s to 2010+

Differentiation of transfer packages • RIM/IM 14 types of transfers

Evolution and fine tuning of Policy • Basic Comprehensive

Compensation Data • Multiple sources One vendor

Technology • Basic processes Integrated solutions

Relo & Expat Services Operations • In-house BP Outsourcing Relo Vendor

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 18 International Mobility Programme and its Evolution Talent Mobility Drivers

• Grow/promote From Within – Recruit from Universities – 95% of Management from within P&G (or acquisitions) • Top Talent / High Potential – Strategic Expat assignments, 3-5 y., Director/GM/VP career path, across sectors/business units/regions • Early Career Development – HQ assignments, 2-3 y., return to home country to bigger jobs • Developing/Emerging Markets Expansion – China, India, Africa, Russia, Latin America – project assignments (short term expats, extended business trips), startups, critical skills and knowledge transfer

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 19 International Mobility Programme and its Evolution Talent Mobility Drivers

• Co-location with key global customers – e.g. METRO, CARREFOUR – rotational assignments focused on capability building • Evolving Geographic Footprint – New regional/global centers (e.g., Geneva, Singapore) and hubs – temporary assignments to foster collaboration/organisation – Shifting manufacturing and R&D capabilities – permanent moves with localisation • Talent Retention (career/life planning & flexibility) – Personal request temporary transfers (dual careers) – Personally initiated localisations

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 20 P&G Globally Mobile Talent 3,000+ Temporary Transfers/Assignments

Like-Location Package Dual Career 1% 7% Net Salary Package 5%

Temp Training 1%

Personal Request 1%

Early Career EXPAT 27% 58%

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 21 21 P&G Globally Mobile Talent 600+ Permanent Transfers/Localisations

Personal Request 23%

Local to Local 50%

Expat to Local 27%

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 22 22 Procter & Gamble Case Study Managing International Mobility in VUCA world FACING THE CHALLENGES OF 2008-2013

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE Facing the challenges of 2008-2013 P&G business in VUCA world

• VOLATILE – Commodities prices – Currency ex rates – Political/social instability • UNCERTAIN – Economic recession (US, Western Europe) – Hard-to-predict emerging markets • COMPLEX – Local/regional laws and regulations – Product customisation requirements – Increasing organisation complexity • AMBIGUOUS – New trends – consumers, customers & distributor channels, online vs offline – Competition, traditional and new (private labels)

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 24 24 Facing the challenges of 2008-2013 P&G business in UCA world

• Challenge for HR – Innovation – Productivity – Workforce flexibility – Engagement • Challenge for Talent and Global Mobility Management – Right people, assigned to a right job, at a right time, at a right cost – Balance of short/mid term needs for Talent with long term career development – Drive out unnecessary costs of expatriation/relocation, reinvest in key areas with maximum ROI – Deliver Expatriate/Relocation programme with excellence, maximise employees engagement

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 25 25 Facing the challenges of 2008-2013 Cost Saving Opportunities

• One-time Relocation Support – Top 10

COSTS TO BE REDUCED/OPTIMISED % of total Cost Saving Opportunity

1 HOUSEHOLD GOODS MOVE 26% limited

2 TEMPORARY LIVING (TEMP ACCOMODATION, RENTAL CAR) 17% yes

3 DESTINATION SERVICES 7% limited

4 IMMIGRATION SERVICES/COSTS 7% no

5 MISCELLANEOUS RELO ALLOWANCE 6% yes

6 CAR AND TRANSPORTATION SUPPORT 6% limited

7 LANGUAGE TRAINING 5% yes

8 EN-ROUTE TRIP 5% no

9 HOME FINDING 4% no

10 FAMILY RELO RESOURCE PROGRAMME (SPOUSAL ASSISTANCE) 2% yes

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 26 26 Facing the challenges of 2008-2013 Cost Saving Opportunities

• Ongoing Compensation & Support -Top 10

COSTS TO BE REDUCED/OPTIMISED % of total Cost Saving Opportunity

1 HOUSING ALLOWANCE 38% limited 2 COLA 19% limited 3 SUPPLEMENTAL ALLOWANCE 7% limited

4 INTERNATIONAL HEALTHCARE INSURANCE 7% no 5 UTILITY COST 6% no 6 LOCATION (HARDSHIP) PREMIUM ALLOWANCE 5% limited

7 DUPLICATE HOUSING 4% limited

8 HOME LEAVE 3% no

9 BELOW HOUSING MAXIMUM INCENTIVE 3% limited

10 HOST DIFFERENTIAL ALLOWANCE 2% limited

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 27 27 Facing the challenges of 2008-2013 Key Interventions • Expatriate Compensation – Tight control of host housing maximums (esp. in regional centers e.g. Dubai, Singapore, Geneva) – Host Housing Norms adjusted/increased (more realistic) – Caps on certain expatriate allowances, e.g. hardship premiums, miscellaneous relocation allowance – More conservative assumptions behind COLI • Relocation and on-assignment support ( Singapore / Asia ) – Replace air shipment by excess baggage support – Replace car rental support with transportation allowance (temp living in Singapore) – No home sale / re-purchase support for expats – Deliver cross cultural training via a web-based programme – Lower cost temporary living accommodation – Discontinue off-site language lessons – Differentiated international schooling support based on home country language/curriculum - Savings: current $ 1.4 MM - 2015: $ 4.0 MM

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 28 - 2017: $ 5.5 MM 28

Facing the challenges of 2008-2013 Key Interventions

Operational Excellence in Running Relocation Services • Policy Design • Governance • Exceptions P&G Expatriate Comp & Policy COE • Programme Administration • Cost Management • Service Quality • Talent Strategy • Employee Communication • Sensing and Feedback Cartus – P&G Relocation Human Services Resources Vendor

Third Party Service • Ownership of service and results in Suppliers immigration, destination services, tax, shipping, etc. MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 29 29 Procter & Gamble Case Study Managing International Mobility in VUCA world KEY LEARNINGS

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE Facing the challenges of 2008-2013

What did we learn …

• It is all about balance … – Changing too much might be as risky as changing too little

• Managing transition is key … – Which policy changes to apply to various groups of mobile employees, how quickly, who is grandfathered, etc ?

• Communication and service delivery … – This is part of the Mobility Strategy for expats because communication and service delivery influence how the expats experience the policy.

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 31 Section 2 CONSUMER GOODS INDUSTRY FUTURE TRENDS IMPACT ON GLOBAL MOBILITY

April 4, 2014 32 Consumer Goods Industry Future Trends – Research

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 33 Convergence with Divergence EIU/Mintel Research – Indexed Spending Growth

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 34 Convergence with Divergence EIU/Mintel Research – Fastest Growth Areas by Country

China • Prepared Food

India • Household products

Mexico • Beverages

South Africa • Household products

Turkey • Beauty products

UK • Non-alcoholic drinks

• Beauty products USA • Food service

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 35 Convergence with Divergence EIU/Mintel Research – Specific Growth Items and Rationale

• Growth in laundry detergent due to growth in washing machines (from 1- China 16% of rural households between 2010-2016)

• Growth in prepared foods has more than doubled with cereal India consumption increasing.

• Pet food sales doubled in last 5 years as pet owners shift from feeding Mexico their animals scraps to packaged food.

• Previously a tea-drinking market, coffee has started to gain ground in South Africa middle class households, with expected annual growth of 8.8%.

• Rise in sun cream sales – people want to be tanned, but are increasingly Turkey taking into consideration health concerns.

• Chocolate sales resilient during the recession, particularly individually UK wrapped sweets which feel indulgent but are inexpensive.

• Sparking wine sales have contributed to strong growth in alcoholic drinks USA sector, and carbonated non-alcoholic drinks expected to bounce back.

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 36 What does this mean for Global Mobility? Expatriate Destinations

Where do you expect the highest increase in the number of assignees (% of Consumer Goods respondents)?

45 40.3 40 38.5

35 31.5 29.6 30 27.5 EIU/Mintel Research Locations 25 Other Next Highest 19.6 Assignee Growth 20 Locations

15 11.3 9.8 10

5

0 China India Mexico Turkey South Africa Russia Brazil UAE

Source: Mercer Worldwide Survey of International Assignment Policies and Practices, 2012

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 37 What does this mean for Global Mobility? Expatriate Destinations – What We’re Seeing

• Larger consumer goods companies (like Proctor & Gamble) are already established in many emerging markets, but will need to keep up their ‘continuous improvement approach’ to continue to succeed.

• Smaller consumer goods companies are actively and aggressively seeking new markets.

• Even the large consumer goods players have ‘greenfield’ sites so will continue to face expansion challenges.

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 38 What does this mean for Global Mobility? Assignment Purpose

What is the current trend for each assignment purpose listed below (% of Consumer Goods respondents)?

For training purposes 6.2 66.2 27.7

Fulfilling a specific project need 46.2 53.8

Managerial skills not available locally 3.1 61.5 35.4

Technical skills not available locally 1.5 59.7 38.8 Decrease No change Corporate values transfer 9.4 59.4 31.3 Increase

Know-how transfer 1.5 44.8 53.7

Business expansion 22.1 77.9

Career/leadership development 47.7 52.2

0 20 40 60 80 100 120

Source: Mercer Worldwide Survey of International Assignment Policies and Practices, 2012

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 39 What does this mean for Global Mobility? Questions for Discussion

• How do you manage new location set ups, particularly in challenging locations?

• How do you identify and incentivise the right talent to take postings to open up new markets and share knowledge with new local teams?

• As local markets mature, how do you use global mobility to develop and retain local hires, and deal with the retention of internationally experienced staff?

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 40 The Decade Ahead McKinsey & Company Research

Trends that could influence performance over the next decade

• A billion new consumers in emerging markets • Consumers ‘going green’ • Shifting demographics Demand Trends • Rise of digital consumers • Health and wellness concerns • Modernisation and concentration of trade • Rise of the value segment

• Rising trade protectionism External Factors • Changing tax regimes

• Increasingly volatile input costs Supply Trends • Labour shortages in emerging markets

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 41 The Decade Ahead McKinsey & Company Research

Top five trends that could influence company performance over the next decade

• A billion new consumers in emerging markets • Consumers ‘going green’ • Shifting demographics Demand Trends • Rise of digital consumers • Health and wellness concerns • Modernisation and concentration of trade • Rise of the value segment

• Rising trade protectionism External Factors • Changing tax regimes

• Increasingly volatile input costs Supply Trends • Labour shortages in emerging markets

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 42 What does this mean for Global Mobility? McKinsey & Company Research

Top five trends that could influence global mobility over the next decade

• A billion new consumers in emerging markets • Consumers ‘going green’ • Shifting demographics Demand Trends • Rise of digital consumers • Health and wellness concerns • Modernisation and concentration of trade • Rise of the value segment

• Rising trade protectionism External Factors • Changing tax regimes

• Increasingly volatile input costs Supply Trends • Labour shortages in emerging markets

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 43 What does this mean for Global Mobility? Shifting Demographics and Labour Shortages in Emerging Markets

Source: “Talent Mobility Good Practices: Collaboration at the Core of Driving Economic Growth”, World Economic Forum and Mercer

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 44 What does this mean for Global Mobility? Health and Wellness Concerns

HEALTHY EMPLOYEES:

• Are present • Are less likely to have high claims costs HEALTHY HEALTHY, • Have fewer worksite injuries PRODUCTIVE ENGAGED WORKFORCE WORKFORCE • Set a social norm

ENGAGED EMPLOYEES: HIGH- PERFORMANCE • Are more engaged employees CULTURE BRAND • Are more focused on their customers ENGAGED STEWARDS • Leave the organization less often

EMPLOYEES WHO ARE BRAND STEWARDS:

• Help business grow

• Get the word out HIGHER TOP-LINE REVENUE • Matter more in emerging markets AND LOWER COGS

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 45 What does this mean for Global Mobility? Health and Wellness Concerns

Stress and engagement problems Health cost Legislation is increasing Changes Auto enrolment War for Potential talent increase in Aging Diabetes retirement Growth and epidemic age profitability, Low birth especially in rate emerging markets Governance, litigation and risk management Social media and technologies People getting Managing 4 Generations Corporate sicker but renewal risk social living longer responsibility

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 46 What does this mean for Global Mobility? Changing Tax Regimes Average Income Tax and Social Security Rates as a Percentage of Base Salary: Variance within Africa and the Middle East

45.0

40.0

35.0

30.0 Upper Middle Management 25.0

20.0 Senior Professional 15.0

10.0 Skilled Para-Professional

5.0

0.0

Source: Mercer International Geographic Salary Differentials, 2014 Edition

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 47 What does this mean for Global Mobility? Questions for Discussion

• Are shifting workforce demographics and labour shortages impacting workforce planning within your organsiation (eg. aging/retiring experienced workforce versus younger, inexperienced candidates). If so, what talent mobility strategies do you have in place to address them?

• Are Health and Wellness considerations prevalent in your mobility policies or strategy?

• How do you manage health benefits for your assignee population and their families while on assignment? What challenges do you face, and how have you overcome them?

• Do you use policy segmentation to optimise low income tax jurisdictions? If so, why and how? If not, why not?

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 48 QUESTIONS

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 49 Today’s Speakers

Kate Fitzpatrick Principal – Senior Mobility Consultant

[email protected] +44 (0)20 7178 5653

MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE April 4, 2014 50 April 4, 2014 51