P&G Corporate Espionage

Procter & Gamble’s
Corporate Espionage
Presented by:
Gaurav Thakur  92
P&G

Established in 1837 by William Procter &
James Gamble.

One of the Largest FMCG Companies in the
world.

Number One maker & Marketer of Household
Products in U.S.

Five Business Segments includes Fabric &
Home Care, Baby, Feminine and family care,
Beauty care, Health care, Food and Beverages
P&G

Ranked 31st among the Fortune 500
Companies in 2003.

Operations in more than 80 countries world
wide

Employee strength of more than 110,000
worldwide.
Unilever

Formed in 1930 By the merger of Margarine
Unie (Dutch Company) & Lever Brothers
(British Soap Company)

Main Focus on it’s Foods, Personal care &
Home Care Business.

Second largest Consumer goods Company
(After P&G)

Third largest Food Firm after Nestle & Kraft
Foods in the world.
Unilever

The Group operates through seven segments:
a) Soaps and Detergents
b) Personal Products
c) Exports
d) Beverages
e) Foods
f) Ice Creams and Other

Significant Business in US, Europe, Asia & Latin
America.
P&G and Unilever

Unilever entered the u.s market in late 19 th cent.
& Competed with the market leader P&G.

P&G dominated the U.S household & personal
care market while Unilever dominated the
European market.

Equal Dominance of P&G & Unilever in Asia.

Both Competed in every aspect of their
operations.

Fiercest Competition in Soaps (Body care &
Fabric Care) & Shampoo (Hair care)
segments.

Both among the Heaviest users of CI.

Many instances since 1940 proving their
involvements in Corporate espionage.
All’s Fair in Love, War - and Hair

P&G and Unilever are fierce competitors in
the shampoo industry.

P&G, the world’s largest producer of hair care
products & trying to increase its position in the
industry by introducing new brands, like
Physique, and buying others, like Clairol.
Competitive Intelligence vs.
Corporate Espionage
Competitive Intelligence (CI)

CI is Information acquired by a market competitor
about the companies with which it competes.

CI may be acquired from,
the competitor's customers (current and former),
suppliers,
former employees,
stockholder meetings,
industry associations and
trade shows, trade journals, newspaper articles,
research studies, or advertising copy
CI Practices
Companies need to be aware of their competitor’s
strategies and make efforts to effectively counter those
strategies in order to sustain themselves in the market
Major companies using CI are;
• Microsoft
• Motorola
• P&G
• HP
• IBM
• Coca-Cola
• Xerox
Corporate Espionage (CE)
Acquisition of trade secrets from business competitors,

a reaction to the efforts of many businesses to keep
secret their designs, formulas, manufacturing
processes, research, and future plans.
Practices that fall under CE are;
• Dumpster Diving
• Social Engineering
• Interviews
• Bugging offices and Hacking systems
Difference between CI & CE
A dumpster diver would say ‘I want it all’ & a

savvy CI analyst would say ‘I have to act
quickly, so what is the minimum
information I need to draw a conclusion?’
Evolution of Corporate Espionage

History dates back to sixth century.

China had monopoly in silk production.

Justinian hired monks to gain understanding
about silk production.

Monks succeeded in smuggling silkworm eggs
and mulberry seeds out of China.

Byzantine empire replaced China as the largest
silk producer.

18th century France sent spies to steal Great
Britain’s Industrial secrets.

Power loom plans were stolen by Americans
from England in 1811.

Technological advancements in 1990’s made
companies invest heavily in R&D activities.

The late 20th century corporate world had to
have the right information at right time to
make decisions

21st century, CE had found wide acceptance
and usage in many nations.

Almost every Fortune 500 company was
engaged in some form of CI activity.

Companies engaged in Illegal or Unethical
activities were not negligible.
Economic Espionage Act, 1996

To prevent the theft of American Intellectual Property by
Foreign companies and Governments.

The act made CE (buy or possess trade secrets obtained
without owners authorization) a criminal offense.

10 years imprisonment or a fine of $250,000 on any
person or $ 5 million on any company violating the Act.
Leading Brands
A Shocking Revelation
“Procter & Gamble found engaged in illegal
Corporate Espionage against archrival,
Unilever” – Fortune magazine August 2001
John Pepper, then chairman of Procter and

Gamble, discovered this operation which
did not violate U.S. law but, violated strict
guidelines regarding P&G business policies.
P&G’s Secret Operation

Begun in late 2000 to spy on hair care business of Unilever

Planned by the Competitive Analysis team by hiring
outsiders

“Dumpster Diving” also called as Rubbish archeology

Misrepresentations as market analysts & journalists

$3 million was spent on the operation.
Shampoo Giants Tell Spies to
Wash and Go
Advertising
budgets
launch plans
market
strategies
Spying Operation
prices
margins
Product
Development
plans
P&G’s Top Management Shocked !!

P& G’s Top Management found about CE in
early 2001.

Unilever & P&G were competing to acquire
“Clairol”.

Decision on offer price was to be made after
considering CI on Unilever’s hair care business
which was far too detailed & sensitive.

P&G sacked the 3 executives involved in the
covert operation.
P&G Makes Admission on Violation

P&G wrote letter to Unilever.

Company’s chairman John Pepper called
Unilever’s co-chairman Niall Fitzgerald to
settle the issue.

Invitation to Unilever to interview P&G staff
as well as the agents to identify the extent of
transgression.
Unilever Dissatisfied
 Unilever was not satisfied by the level of co-
operation.
 P&G did not sack any of their employees.
 P&G won the auction for Clairol for $4.95

billion in May 2001
Settlement Terms & Conditions

Reassignment of key personnel to other business
divisions of the company

Restriction on launch of certain new products
until the end of 2003

Appointment of a 3rd party investigator to
review P&G’s Business & Marketing strategies

Cash payment of more than $10 million in
settlement.
Lessons to be Learnt

90% of the information on any company is available in the
public domain if the investigators know what and where to
look for.

Unilever should have at least taken routine precautionary
measures to destroy its documents

Laws related to espionage practices should be more stringent
by clearly defining every activity that falls under CE.

Companies should formulate an internal code of Ethics &
ensure that employees abide by that code and the concept of
CI should not be maligned by CE.
THANK YOU

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Procter & Gamble’s

Acquisition of trade secrets from business competitors,

A dumpster diver would say ‘I want it all’ & a

John Pepper, then chairman of Procter and

 P&G did not sack any of their employees.

 P&G won the auction for Clairol for $4.95

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