In Focus

P&G: Is It Worth the Gamble?

About twelve years ago I joined the fitness craze. Remember aerobics? Yeah, it's a faint memory for me, too, with the introduction of cardio-kickboxing, Pilates, and yoga. But that's where it all began for me. I fell in love with exercise and worked out pretty consistently ever since, including a brief stint bodybuilding. And of course along with this madness came a whole new approach to eating. I went from Macaroni and Cheese in my dorm room to tuna out of a can, chickpeas and pasta. Whatever the scenario, it was with the strictest adherence to low or no-fat. Only on the most special occasions would I ever indulge in a burger and fries and it had literally been years since I'd munched on a bag of chips.

And then one day I saw these chips at the store and said "Wow!" Not only because that was their name, but because these dad-gumb things were supposedly fat-free. Usually fat-free meant flavorless, lackluster, and a bad aftertaste. But I'd heard about this new product and bought a bag. I didn't even leave the parking lot of the grocery store before ripping open the bag. They were potato chips, an old soul food for me, and the anticipation was overwhelming. I bit down on the chip, expecting some weird cardboard texture. Nope. I chewed and waited for that chalky coating to appear on my taste buds. Nothin'. Finally, the real kicker. I swallowed and waited for the tinny aftertaste. Na-da. You can't even imagine my excitement. I couldn't wait to get home and share them with my family. It was truly a remarkable day.

But (there's always a 'but' in my stories), in typical black-cloud fashion the rumors began. And the terminology to describe the goings-on with this product were, pardon the expression, hard to digest. Anal Leakage. I'm not kidding. People were complaining that they couldn't even make it to the bathroom after eating a few of these salty discs from heaven. I immediately jumped on the phone and called the manufacturer. The nice woman on the other end assured me it was a bunch of bologna and then shipped me some coupons for free WOW chips, bless her soul.

Eventually I needed to get to the bottom (no pun intended) of the situation and do some fact-finding. The important new ingredient that set these chips apart from other fat-free products is Olestra. Olestra is made from table sugar and vegetable oil and heated in such a way that when eaten, the fat is not digested or absorbed. Twenty-five years of research was done on the product before the FDA finally approved it. Studies done since they've hit the market have shown no increase in the amount of digestion problems when consuming Olestra. In various blind studies, participants not consuming the fat-free chip were experiencing the same amount of difficulty as those who were consuming the fat free chip. If these studies continue to bear out (and the rumors stop), then Olestra is the new wonder "diet aid." Anyone able to make fat-free this good is sitting on a potential gold mine.

Okay, so who's the genius? Well, Chicks, it's Proctor & Gamble (NYSE: PG). Just around the corner from me, this consumer-based, personal and household good manufacturer, makes too many products to list: Tampax, Tide, Pringles, Jif, Iams Pet Products, Downy AND Bounce, various cosmetics and shampoos and would you believe they also produce the soap operas Guiding Light and As The World Turns? (I bet Chick Cheryl knew that!) So how does a company with such incredible brand recognition (and a amazing fat-free potato chips) stand up to this Chick's scrutiny? Pretty well, indeed.

I started by delving into their management and liked what I saw. John Pepper, CEO, has been with the company since 1963; his style is "consensus-building." This is reflected in the P&G practice of favoring consistent low prices on many of their products, rather than using promotions to get their name out. Works for me! Although their last three quarters appeared to show a slowdown, there were legitimate contributing factors. One was the rising oil and pulp prices which hurt their overseas profits. But with the apparent improvement in the cost of these raw materials, business has stabilized.

Another bright spot for this company is their recent announcement that they will meet profit forecasts. Right now they are on track to increase earnings at the end of this quarter. What's more, they're expecting earnings growth of 7 to 10 percent by year end (June 30).

In a recent email to Chick Karin, I mentioned that I'd like to see this company run through the Chicks Dozen to see how it stacks up. I'll hope I'll be the one to track it. After all P&G has done for me, I feel it's the least I can do. And I'm sure barring any other reports of improprieties or oil difficulties (anal-related or plastic related); this company will be worth the effort.