Procter and Gamble Company

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PROCTER AND GAMBLE COMPANY

In 1837 William Procter and James Gamble formed Procter and Gamble (P&G), a partnership in Cincinnati, Ohio, to manufacture and sell candles and soap. Both men had emigrated from the United Kingdom. William Procter emigrated in 1832 after fire and burglary destroyed his woolens shop in London; Gamble came from Ireland as a boy in 1819 when famine struck his homeland. Both men settled in Cincinnati, then nicknamed "Porkopolis" for its booming hogbutchering trade. The suggestion for the partnership apparently came from their mutual father-in-law, Alexander Norris, who pointed out that Gamble's trade— soap making—and Procter's trade—candle making— both required use of lye, which was made from animal fat and wood ashes.

Procter and Gamble first operated their business out of a storeroom at Main and Sixth streets in Cincinnati. Procter ran the store while Gamble ran the manufacturing operation, which at that time consisted of a wooden kettle with a cast-iron bottom set up behind the shop. Early each morning Gamble visited houses, hotels, and steamboats collecting ash and meat scraps; he bartered soap cakes for the raw materials. Candles were Procter and Gamble's most important product at that time.

Procter and Gamble were in competition with at least 14 other manufacturers in its early years, but the enterprising partners soon expanded their operations throughout neighboring Hamilton and Butler counties. Cincinnati's location on the Ohio River proved advantageous as the company began sending its goods down river. In 1848 Cincinnati was also linked to the major cities of the East via railroad.

Around 1851, when P&G shipments were moving up and down the river and across the country by rail, the company's famous moon-and-stars symbol was created. Because most people were illiterate at this time, trademarks were used to distinguish one company's products from another's. Company lore asserts that the symbol was first drawn as a simple cross on boxes of Procter and Gamble's Star brand candles by dockhands so that they would be easily identifiable when they arrived at their destinations. Another shipper later replaced the cross with an encircled star, and eventually William Procter added the familiar 13 stars, representing the original 13 U.S. colonies, and the man in the moon. The moon-and-stars trademark became a symbol of quality to Procter and Gamble's base of loyal customers.

By 1859, the company's annual sales exceeded $1 million, and Procter and Gamble employed about 80 people. Following the American Civil War (1861–1865), the transcontinental railroad, completed in 1869, linked the two coasts and opened still more markets to Procter and Gamble. In 1875 the company hired its first full-time chemist to work on new products, including a soap that was equal in quality to expensive castile soaps, but that could be produced less expensively. In 1878 Procter and Gamble's White Soap hit the market and catapulted P&G to the forefront of its industry.

The most distinctive characteristic of the product, soon renamed Ivory soap, was developed by accident. A worker accidentally left a soap mixer on during his lunch break, causing more air than usual to be mixed in. Before long Procter and Gamble was receiving orders for "the floating soap." Although the office was at first perplexed, the confusion was soon cleared up, and P&G's formula for White Soap changed permanently.

Harley Procter, William Procter's son, developed the new soap's potential. Harley Procter was inspired to rename the soap by Psalm 45: "all thy garments smell of myrrh, and aloes, and cassia, out of the ivory palaces whereby they have made thee glad." Procter devoted himself to the success of the new product and convinced the board of directors to advertise Ivory. Advertising was risky at the time; disreputable manufacturers placed most advertisements. Nevertheless, in 1882 the company approved an $11,000 annual advertising budget. The slogan "99 and 44/100 percent pure" was a welcome dose of sobriety amidst the generally outlandish advertising claims of the day. Procter, committed to the excellence of the company's products, had them analyzed and improved even before they went to market. This practice was the origin of P&G's superior product development. Procter believed that "advertising alone couldn't make a product successful—it was merely evidence of a manufacturer's faith in the merit of the article."

During the 1880s there was much labor unrest at many U.S. companies, including Procter and Gamble, which experienced a number of strikes and demonstrations. Thereafter, the company sought to avert labor problems before they became significant. In 1885 the company began giving workers Saturday afternoons off. In 1887 Procter and Gamble implemented a profitsharing plan in order to intertwine the employees' interests with those of the company. Although the semiannual dividends were received enthusiastically by employees, that enthusiasm rarely found its way back into the workplace. The next year bonuses were tied to employee performance, which produced better results.

In 1890 the Procter and Gamble Company was incorporated; by that time it was selling more than 30 different types of soap. Two years later, in 1903, the company implemented an employee stock-purchase program, which was tied to the profit sharing plan. By 1915 about 61 percent of the company's employees were participating. The company introduced a revolutionary sickness-disability program for its workers in 1915 and implemented an eight-hour workday in 1918. Procter and Gamble has been recognized as a leader in employee benefit programs ever since.

Experimenting with a hydrogenation process that combined liquid cottonseed oil with solid cottonseed oil led to the development of another well-known brand. After several years of research Procter and Gamble patented the procedure; in 1911 Crisco, the first all-vegetable shortening, was introduced to the public. Backed by a strong advertising budget, Crisco sales took off.

During the 1920s and 1930s the company introduced a flurry of new products. In 1926 Camay debuted, a perfumed beauty soap; Oxydol joined the P&G line of cleaning products three years later. In 1933 Dreft was introduced as the first synthetic detergent for home use. In 1937 the company celebrated its 100th anniversary, with sales having reached $230 million.

After World War II (1939–1945), the availability of raw materials and new consumer attitudes set the stage for unprecedented growth. Procter and Gamble's postwar miracle was Tide, a synthetic detergent that, together with home automatic washing machines, revolutionized the way people washed their clothes. The company was not ready for the consumer demand for heavy-duty detergent when it introduced the product in 1947; within two years Tide, backed by a $21 million advertising budget, was the number one laundry detergent. Despite its premium price, Tide remained the number one laundry detergent into the 1990s.

Tide helped to fund P&G's rapid growth into new products lines, both through acquisitions and new product introductions. By the end of the twentieth century, Procter and Gamble were the largest maker of household products in the United States, with annual sales in excess of $37 billion. The company boasted of 300 brands in several areas: baby care, beauty care, fabric and home care, feminine protection, food and beverages, health care, and tissue and towels.

See also: Porkopolis, William Procter