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Procter & Gambl (NYSE:PG)

F4Q10 (Qtr End 06/30/2010) Earnings Call

August 03, 2010 8:30 am ET

Executives

Jon Moeller - Chief Financial Officer

Teri List - Senior Vice President and Treasurer

Robert McDonald - Chairman, Chief Executive Officer and President

Analysts

Linda Bolton-Weiser - Oppenheimer & Co.

Edward Kelly - Crédit Suisse AG

Victoria Collin - Atlantic Equities LLP

Constance Maneaty - BMO Capital Markets U.S.

William Chappell - SunTrust Robinson Humphrey Capital Markets

Lauren Lieberman - Barclays Capital

Mark Astrachan - Stifel, Nicolaus & Co., Inc.

John Faucher - JP Morgan Chase & Co

Ali Dibadj - Bernstein Research

Joseph Altobello - Oppenheimer & Co. Inc.

William Schmitz - Deutsche Bank AG

Douglas Lane - Jefferies & Company, Inc.

Jason Gere - RBC Capital Markets Corporation

Wendy Nicholson - Citigroup Inc

Jon Andersen - William Blair & Company L.L.C.

Andrew Sawyer - Goldman Sachs Group Inc.

Alice Longley - Buckingham Research

Caroline Levy - Credit Agricole Securities (NYSE:USA) Inc.

John San Marco - Janney Montgomery Scott LLC

Christopher Ferrara - BofA Merrill Lynch

Nik Modi - UBS Investment Bank

Operator

[Audio Gap] to Procter & Gamble's Fourth Quarter and Fiscal Year End Conference Call.

Today’s discussion will include a number of forward-looking statements. If you will refer to P&G’s most recent 10-K, 10-Q and 8-K reports, you will see a discussion of factors that could cause the company’s actual results to differ materially from these projections. As required by Regulation G, P&G needs to make you aware that during the call, the company will make a number of references to non-GAAP and other financial measures.

Management believes these measures provide investors valuable information on the underlying growth trends of the business. Organic refers to reported results, excluding the impacts of acquisitions and divestitures and foreign exchange where applicable. Adjusted free cash flow represents operating cash flow less capital expenditures and the after-tax impacts of the Global Pharmaceuticals divestitures.

Adjusted free cash flow productivity is the ratio of adjusted free cash flow to net earnings, excluding the gains on divestitures of our Pharmaceuticals business. Core EPS refers to earnings per share from continuing operations excluding certain items. P&G has posted on its website, www.pg.com, a full reconciliation of non-GAAP and other financial measures.

Now I will turn the call over to P&G's Chief Financial Officer, Jon Moeller. Go ahead, Jon.

Jon Moeller

Thanks, and good morning, everyone. Bob McDonald and Teri List join me this morning. I'll begin today's call with the summary of our fiscal year and fourth quarter results. Teri will cover business highlights by operating segment. Bob will then provide his perspective on our progress against our growth strategies and objectives, and I'll conclude the call with our outlook for next fiscal year and the September quarter. Bob, Teri and I will have plenty of time for questions after our prepared remarks. Following the call, Teri, John Chevalier and I will be available to provide additional perspective as needed.

Last year, when we provided our initial guidance for fiscal 2010, we shared our choice to invest behind a strong innovation pipeline and our continued commitment to simplification and productivity. The plan we outlined were focused on executing our overarching growth strategy of serving more consumers in more parts of the world more completely, with an objective of returning our business to profitable value share growth.

Our going-in guidance for organic sales was plus 1% to plus 3%, reflecting both the slowdown in global category growth and our commitment to grow market share. Our initial core earnings per share guidance was minus 1% to plus 3%. We have delivered on each of these objectives.

Global value share is up nearly half a point for the past three-month period. We're growing share in businesses representing nearly 60% of sales, and momentum is building sequentially in essentially every region around the world. All regions held or grew share for the first time in 11 quarters. Organic sales grew at 3%, at the high end of our going-in expectations. Importantly, the volume growth that underpins this accelerated each quarter from a reduction of minus 2% in Q1 to growth of plus 8% in Q4.

In conjunction with our cost and productivity efforts, our top line progress enabled us to exceed our core earnings-per-share targets. Against our going-in objective of minus 1% to plus 3%, core earnings per share increased plus 6%, including a negative two-percentage-point impact from Venezuela.

We delivered record adjusted free cash flow of $14 billion. Adjusted free cash flow productivity was 125%, well above our long-term target of 90% or higher.

In April, we increased our quarterly dividend by 9.5%, making this the 120th consecutive year we've paid a dividend and the 54th consecutive year the dividend has increased. In addition to raising the dividend, we increased our share repurchase levels as the year progressed, repurchasing $6 billion of P&G stock.

Consistent with our strategy, we have accelerated the expansion of product portfolios vertically, horizontally and to new geographies, and launched significant upgrades on some of our biggest brands. We have considerably strengthened our portfolio, divesting the Pharmaceuticals business, which did not fully leverage our core capabilities and acquiring Ambi Pur and Natura, which do.

We are operating more fully as one company, coordinating and scaling our activities in markets and across categories. Our overarching growth strategy of touching and improving more consumer lives in more parts of the world more completely is working.

Moving to April-June results, organic volume was up 8%, our strongest organic volume growth in almost six years. All six business segments, all five geographic regions, each of our top 17 countries and $19 billion of our $23 billion brands delivered organic volume growth in the quarter. Shipments also increased to 14 of our top 15 global customers.

All-in sales were up 5%, including a one-point benefit from foreign exchange. The foreign exchange impact and, in turn, all-in sales were somewhat lower than our guidance due to the significant strengthening of the dollar since we provided guidance in April. Organic sales were up 4% within our guidance range.

Pricing changes reduced sales by one point. Consistent with the impact we saw in our third quarter, mix reduced sales by three points. Geographic mix accounted for about half the total mix impact as shipments in developing markets grew at a 12% rate compared to a 5% rate in developed markets. The balance of the mix was driven by category and price tier mix about equally split.

EPS for the quarter was $0.71, in the middle of our guidance range of $0.68 to $0.74. As you know, we intentionally provide a guidance range versus a single-point estimate, and do not chase foreign exchange or commodities or back off on investments simply to deliver a top-of-range number or an external estimate. Our actions are guided by a desire to advance our strategy and by our overriding objective of creating long-term value for shareholders.

During the last quarter, we chose, for example, to make value corrections in a few key markets in the Central and Eastern Europe, Middle East and Africa region to reduce price gaps that had widened due to increased competitive activity. We could've waited to make this investment, but we felt it was right to address this issue right away.

We chose to increase our investment behind the Pampers Dry Max innovation, and we increased media and merchandising support across several other brands and markets. We made the choice to call a bond, which created higher expense in the quarter but will lower future financing costs and is value-accretive. These and other choices kept us from delivering at or above the high end of our guidance range but with the right value-accretive choices to make.

As we expected, operating margins were noticeably lower than prior year. This was due to higher marketing support levels behind the launch of important initiatives, such as Pampers Dry Max, ProGlide, Crest 3D White and the Pantene re-stage, which drove essentially all of the SG&A increase for the quarter. The lower operating results were largely offset by a low tax rate, driven by a number of small items.

On the year, the effective tax rate for continuing operations was 27.3%, in line with our beginning-of-the-year guidance of 27% to 28% and above last year's rate of 25.9%. As we've indicated in the past, quarterly tax rates can be more volatile as audits are resolved, as reserve balances are adjusted and as geographic mix changes.

Stepping back, we're pleased with our fiscal year results and the trend of the business. Volume growth and market share have accelerated throughout the year, delivering organic sales growth at the high end of our initial expectations. Core earnings per share grew ahead of going-in expectations. We had a record cash year and returned, through dividends and share repurchase, over 100% of net earnings from continuing operations to shareholders.

I'll now turn the call over to Teri to provide some additional perspective on our quarterly results.

Teri List

Thanks, Jon. As Jon indicated, overall market share growth was positive, with all regions flat or growing share for the first time in 11 quarters. Volume growth was also strong across the company, up 8% organically, with developing markets up 12% and developed markets up 5%. This geographic split was the primary driver of the mix effect on sales growth. You'll see how this impacted the business segments as we go through the results.

Starting with Beauty, organic sales increased 5%, driven by 8% organic volume growth. Geographic and category mix reduced sales by 2% as developing markets grew disproportionately at 14%, and retail Hair Care and Skin Care grew faster than the Prestige and Salon Professional categories. Price reductions, mainly in developing regions, impacted sales by 1%.

Retail Hair Care grew unit volume low teens, with share up slightly, led by the North America Pantene re-stage. Pantene North America shipments grew over 30% behind the base brand re-stage, which shipped in May. The launch is off to a good start, with Pantene U.S. all-outlet share up more than half a point for the month of June behind strong awareness and trial-building merchandising and consumer commercialization programs. Head & Shoulders delivered high-teens global volume growth, led by our scalp care innovation in Asia and Central and Eastern Europe, Middle East and Africa.

Female Skin Care grew volume double digits with positive share trends. In the U.S., Olay all-outlet value share of the Facial Moisturizer segment was up almost two points behind the continued strength of the Olay Pro-X line and the Olay Regenerist Rollerball Eye Treatment innovation. Olay also had strong results in developing markets, more than doubling shipments in India, Saudi Arabia and the Philippines.

Female Blade and Razor global shipments were strong in both developed and developing markets, with Venus volume up over 25% and global value share up over a point above 53%. U.S. all-outlet share is up over four points to almost 51%, driven by recent initiative launches including the introduction of the premium Embrace disposable razor and the introduction of the Simply Venus razor, the entry-level-priced disposable razor in the Venus lineup.

Professional Hair Care volume was down, reflecting continued market weakness that impacts some of our actions to streamline the portfolio. In Prestige Beauty, unit volume decreased mid-single digits due to initiative timing. Grooming segment organic sales were up 12% on volume growth of 9%, positive pricing of 2% and positive mix of 1%.

The Male Blades and Razors business delivered double-digit organic volume growth with all regions contributing. Fusion led the growth with shipments up 40% on a global basis, gaining two points of global market share and continuing to grow share in every quarter since launch in 2006. In North America, Fusion shipments increased over 70% behind the launch of Fusion ProGlide in June. In the second week of launch, ProGlide became the number one razor in the category. In Latin America, strong Blades and Razors shipments were driven by commercial innovation, which included major sporting event advertising and product tie-ins with MACH3 and Prestobarba disposable razors. In India, strong customer programs and continued strength of the new and more affordable MACH3 razor increased shipments over 50%.

Male Personal Care unit volume was up mid-single digits. Developing markets were up double digits. The U.S. Male Body Wash business delivered 45% share in June, with both Gillette and Old Spice growing ahead of competition. U.S. Old Spice increased shipments high-single digits, and market share grew almost a point to make Old Spice the number one male body wash brand. This growth has been driven by the Smell Like a Man, Man marketing campaign, which has generated almost 1.2 billion impressions since February 2010, and with the recent Twitter campaign, became the number one all-time, most-viewed sponsor channel on YouTube.

Volume in the Appliances category was up mid-single digits, driven by a combination of strong growth in developing markets where shipments increased over 20% and global strength in the Dry Shave category, which grew share about 1.5 points.

Moving to Health Care, organic sales increased 2% on a 5% increase in organic volume. Mix reduced sales by 3% due mainly to strong volume growth in developing markets where volume was up high-single digits, with the Central and Eastern Europe, Middle East and Africa region up double digits.

Oral Care shipments increased high-single digits. Western Europe delivered strong volume growth behind the continued success of Pro-Health Toothpaste in Belgium and Holland, as well as on the base Crest and Oral-B franchises. In the U.S., Oral Care shipments increased behind recent initiatives, and share increased almost one point. Crest 3D White launched in March and is exceeding internal objectives. The 3D White regimen has reached an 8% value share of the U.S. oral care market. In Mexico, the Crest brand grew its toothpaste share by nearly four points to 12% behind the Pro-Health expansion. Oral-B toothpaste shares in Brazil continues to exceed expectations, growing in all channels in which we compete. In India, Oral-B volume almost doubled behind our toothbrush distribution expansion program and entry-point brush innovations.

Feminine Care volume grew low-single digits. While global share declined slightly, the business grew in Western Europe behind vertical portfolio expansion in the U.K. and Belgium with the January introduction of mid-tier Always and premium-tier Tampax Pearl. Personal Health Care shipments increased low-single digits as we held market share.

Snacks and Pet Care organic sales were up 3%, with organic volume up 7%. Geographic and product mix reduced sales by 4% but was partially offset by one point of positive pricing. Snacks volume increased high-single digits with growth across all regions. Western Europe and Latin America led the growth, increasing market share about a point each behind strong consumer and customer support of World Cup commercial initiatives. Pet Care volume was up mid-single digits, driven primarily by solid growth in North America behind the Eukanuba and Iams with PreBiotics initiatives.

The Fabric Care and Home Care segment increased organic sales by 1%. Volume grew 7%, led by double-digit growth in developing regions. Geographic and product mix reduced sales by 3%. Value corrections in North America, Western Europe and Central and Eastern Europe, Middle East and Africa impacted sales by three percentage points.

Fabric Care shipments increased mid-single digits for the quarter behind incremental pricing investments. Tide led the category with double-digit growth. U.S. Tide gained over 1.5 points of market share behind strong retailer support. Western Europe also had a strong quarter, increasing share over 1.5 points driven by the Actilift innovation and the Ariel Professional laundry additive launch. Results in Germany were particularly strong and were driven in part by the endorsement of Germany's Consumer Testing Group getting the StiWa [Stiftung Warentest] seal of approval.

In developing markets, Fabric Care shipments grew high-single digits. Much of this volume was delivered in Central and Eastern Europe, Middle East and Africa markets where we invested in pricing corrections to reduce gaps versus competition. Tide in India was also strong, almost doubling shipments for the quarter driven by Tide Naturals, our value-tier powder detergent launched in December.

Home Care delivered another strong quarter, with shipments up high-single digits. Home Care increased U.S. share points to over 30%. Febreze U.S. market share grew by more than four points, with strong growth on the base business as a result of increased brand support and enhanced distribution.

Dawn grew U.S. market share by more than 4.5 points and now has over a 46% share of the Hand Dishwashing category. Western Europe shipments increased double digits as we added more consumers to the home care portfolio through strong consumer-focused initiatives. Developing market shipments grew close to 20%. Turkey was a strong contributor to this growth with the recent successful launch of Fairy Automatic in hand dish care.

Battery shipments increased double digits for the quarter. Shipments and share grew across all regions, with global market share increasing by almost one point to 26%.

Baby Care and Family Care delivered organic sales growth of 5% and organic volume growth of 9%. Mix reduced sales by 3% due mainly to strong growth in developing markets where unit sales grew close to 20%, and faster growth of value-tier products. Pricing decreased sales 2% behind value corrections in Russia, Turkey, Saudi Arabia and Japan.

Baby Care shipments were up high-single digits, and global market share increased over one point, with all regions growing share. Developing markets increased shipments double digits, with China delivering over 30% growth behind continued distribution expansion and a launch of a side-stretch initiative in January. The Central and Eastern Europe, Middle East and Africa region also delivered strong growth as countries such as Russia, Turkey and Saudi Arabia each increased shipments more than 15%.

Western Europe Pampers unit sales were up mid-singles, driven by the continued success of Pampers Simply Dry and the initial pipeline shipments for the Pampers Dry Max launch. Pampers share of the Western Europe diaper market continues to grow, up almost three points versus a year ago to over 56%. While Pampers shipments were relatively flat in North America as retailers adjusted inventory back to normal levels following the March launch of Dry Max, share increased about 1.5 points.

Family Care shipments were up double digits, driven by mid-teens growth of Charmin and high-single digit growth of Bounty. Charmin improvements were delivered through geographic and portfolio expansion. Shipments of Charmin in Latin America increased over 75% as we filled out our presence in the Americas, expanding into six countries in Central America.

Charmin Basic shipments increased almost 50% through distribution gains and the launch of Basic in Canada. Bounty shipments were up behind the launch of product upgrades coupled with the brand re-stage to focus on Bounty's clean benefits. Charmin's all-outlet value share of the U.S. Toilet Tissue category is up more than 1.5 points to almost 29%, and Bounty's share of the U.S. Paper Towel category is up about one point to over 46%.

That concludes the business segment review, and I'll hand the call over to Bob.

Robert McDonald

Thanks, Teri. P&G's purpose to touch and improve lives now and for generations to come is inspiring, and it's tightly and deliberately linked with our financial goals. P&G's purpose informs our strategic choices. It leads us to bigger and better innovation. It drives quality of execution. It compels us to make a difference in areas like sustainability and social responsibility.

Last year, we updated P&G's growth strategy to overtly connect it to our company's purpose. Simply articulated, our overarching growth strategy is to touch and improve the lives of more consumers in more parts of the world more completely. This strategy unleashes creativity, commitment and peak performance in employees. It attracts talent and partners. It builds goodwill with external stakeholders, and it ultimately drives financial returns and results. We are executing against all three dimensions of this growth strategy in all of our businesses around the world.

In fiscal 2010, we reached an additional 200 million consumers, bringing the total reserve to 4.2 billion, on track toward our goal of serving 5 billion consumers by 2015. We increased global average per capita spending on P&G products by over 2%, roughly on pace with our annual goal of 3% per capita spending growth. We increased global household penetration of P&G products by about two percentage points to nearly 61%, on track toward our goal of 70% by 2015.

And as Jon summarized, we delivered organic sales growth, core EPS growth and free cash flow productivity at or above the high end of our initial guidance ranges for the year. As I told you on the fiscal year-end earnings call last year, we are not going to accept sustained market share losses. Last year at this time, our global market share was down about a half a point versus prior-year levels. Today, our global market share is up nearly half a point and is accelerating.

Last year, we were building market share in businesses accounting for only about a third of our sales. Now we're building share in brands and countries accounting for about 60% of sales. And as Jon mentioned, global market share is up and accelerating.

Innovation has and will continue to be the heart of our success. In fiscal 2010, we invested nearly $2 billion in research and development. We, again, spent about 50% more than our closest competitor and more than most of our competitors combined. This leadership level of investment is multiplied by our open-innovation approach with external partners, which leads to an effective investment and innovation that far exceeds the reported spending.

One measure of the strength of our innovation program is the U.S. IRI Pacesetters report, the annual list of the biggest innovations in our industry as measured by sales. Over the past 15 years, 125 P&G innovations have earned a spot on the Top 25 Pacesetters list, more than our six largest competitors combined. Based on this track record, IRI recognized Procter & Gamble as the most innovative manufacturer in the consumer, packaged goods industry for the last decade, presenting the company with its Outstanding Achievement and Innovation Award.

We are leveraging innovation to expand our portfolio vertically, horizontally and geographically, and to continually improve the efficacy of our existing product portfolio. I'll provide just a few examples on how innovation brings our overarching growth strategy to life, starting with Male Grooming.

We continue to grow the Gillette Fusion brand and have now increased market share of this premium-priced offering for 18 consecutive quarters. We recently launched Fusion ProGlide. ProGlide offers a significant advancement in shaving performance and comfort. Our consumer testing shows that men prefer ProGlide over Fusion by a wider margin, and Fusion was preferred over MACH3. ProGlide cartridges are priced 15% above Fusion. After just two weeks in market, ProGlide has already taken leadership as the number one razor in the United States, with an all-outlet value share of 37%.

We recently launched the new mid-tier MACH3 razor specifically designed to better meet the needs of emerging market consumers. As a result, MACH3 shares are at record levels in India, Brazil and Argentina. In India, MACH3 razor value share has grown more than 10 points, and almost half of the incremental growth has come from consumers who have traded up from double-edge blades. We continue to innovate at the low end, as well as to ensure all consumer needs are being properly served and to stimulate future systems growth.

Gillette Vector, Prestobarba3 and MACH3 disposables are all performing well and are being expanded to additional markets. Several important horizontal portfolio expansions of the Gillette brand in the Male Personal Care are also underway.

In February, we launched a complete line of Gillette male grooming solutions in Brazil. Based on early results, we are now expanding Gillette male personal care products to more countries in Latin America. In March, we introduced the scientific face care regimen under the Gillette name in China. In June, we introduced Gillette Fusion ProSeries in North America. ProSeries is an advanced lineup of male skin care products, which fully leverages P&G skin care technology for the first time ever. After only the first few weeks of launch, ProSeries has an 11 share of the U.S. Male Skin Care category.

Moving to Fabric Care, we're expanding our portfolio vertically with premium innovations such as Excel Gel in Western Europe. Excel Gel is a new-to-the-world gel that gives superior cleaning performance and saves energy because it cleans well in cold water. It allows for controlled dispensing and is consumer preferred by a margin of 2:1. Excel Gel is priced to a 10% premium and continues to perform well, with value shares growing in all major Western European markets.

Our newest laundry brand, Sarasa, was introduced in Japan in September and is off to a strong start. Sarasa is priced to the 15% premium versus the category average, and is designed for consumers who want a laundry detergent that cleans well but also provides natural and gentle benefits.

We introduced Tide Naturals in India in December quarter and Ace in Colombia in the September quarter. Tide Naturals is priced 30% lower than regular Tide, enabling us to reach a much broader spectrum of Indian households. Ace or Ace is a mid-tier laundry brand, which complements Ariel's stain-removal equity and bold softness equity. Innovation and expansion of the Ace brand in Latin America have delivered continual growth for many years. In fact, we're pleased to announce that Ace has become P&G's 23rd billion-dollar brand.

We grew our Fabric Care portfolio horizontally with Tide Stain Release and Ariel Professional and laundry additives and Bounce Dryer Bar in the Fabric Enhancer segment. Both innovations continue to exceed our expectations.

In our lead market of Turkey, Ariel Professional is over a 15 share. In United States, Tide Stain Release shares exceed 10%, and the year one retail sales will be about $80 million, while Bounce Dryer Bar shares are nearly 6%.

Finally, we expanded our portfolio geographically with the introduction of Ariel in the Uganda and Senegal during the December quarter. This follows the launches of Ariel into Kenya during the September quarter and is part of our strategy to dramatically increase our presence in East Africa.

We also continue to expand our Oral Care portfolio. We extended our portfolio vertically in several key markets by leveraging our breakthrough and premium-priced Pro-Health technology. Crest Pro-Health is off to a strong start in China, with initial shipments ahead of our expectations. The equity benefit we've created is positively impacting other parts of our Oral Care business in China.

Blend-a-Med Expert, which uses the Pro-Health formula, was recently launched in Germany and has pushed total Blend-a-Med value shares to nearly 11%. In Mexico, the Pro-Health expansion has helped the Crest brand grow its toothpaste share by nearly full four points to 12% of the market.

We expanded our Oral Care portfolio horizontally in North America with our launch of Crest 3D White. 3D White is a new premium price regimen comprised of toothpaste, brush, rinse and white strips that work in combination to clean, whiten and protect teeth while providing significant health benefits. In fact, when these products are used together, consumers can start seeing results after just one day, a powerful claim for beauty-seeking oral care consumers.

Finally, we expanded our Oral Care portfolio geographically with the introduction of Oral-B toothpaste in Brazil, Belgium and the Netherlands. In Brazil, toothpaste and toothbrush shares continue to exceed expectations. Based on the success of our launch in the pharmacy channel, we started the nationwide expansion of Oral-B toothpaste in January. The launch in Belgium and Netherlands was also going well, with Oral-B toothpaste approaching double-digit shares and driving P&G to overall oral care market share leadership in both countries.

I've talked previously about 2010 being a year of big innovation, but this is just the beginning of an incredibly strong multiyear innovation program. Many of our recent innovations, including Pampers Dry Max, Fusion ProGlide, Crest 3D White and the Pantene restage, just launched in North America between March and June. They will have a much bigger impact on fiscal 2011 than they had on 2010 as we continue to build trial and repurchase in North America and expand them to additional markets. Dry Max will expand across Western Europe this year. Our Fusion ProGlide plans call for a geographic rollout to over 40 countries over the next two years. The new Pantene formulations will also follow a stage expansion over the next two years. And we will continue to bring new innovations to market.

In Fabric Care, we've just launched Tide Acti-Lift in North America. The Acti-Lift technology is designed to deliver deep cleaning of fibers, break up dry stains and provide a whiteness boost. Acti-Lift is rolling out to nearly all of Tide liquid detergent variants. We're also launching upgrade to alter Downy April Fresh fabric softener. We've improved the formulation to provide an entire week of motion-activated freshness. This improvement lets consumers enjoy the clean sheet day experience for a whole week.

We're planning a 33% compaction across all of our powder laundry detergent brands in the U.S., as well as formula upgrades on Tide and Gain powders. Compaction is beneficial for our customers, for our consumers and for the environment. Customers will realize supply-chain efficiencies. They can use this as an opportunity to drive category growth. Consumers will benefit from improved formulas and more convenience with a lighter, smaller carton. Compaction is also better for the environment using up to 33% less corrugate, nearly 6,000 fewer trucks and saving about 900,000 gallons of diesel fuel. The compacted laundry powder product will begin shipping in February 2011. We closed the acquisition of Ambi Pur in early July. This will expand our air care footprint from 17 to 84 countries.

Oral Care is introducing a new Crest clinical lineup products to treat two of the most common oral care problems: gingivitis and tooth sensitivity. The pro-health clinical gum protection toothpaste is our most advanced formula, clinically proven to help prevent and reverse gingivitis. Crest clinically sensitivity toothpaste provides the maximum strength available over the counter. Crest clinical will start shipping in North America later this month.

These are just some of the innovations we'll be launching this year. We are supporting our innovation program with strong levels of marketing investment. We delivered a 20% increase in consumer impressions this fiscal year with most of the increase in the second half behind many of the innovations I just described.

To invest, we must save. We are strengthening our efforts in this area with a culture that continually simplifies the way we work and increases productivity. A good example of how we're becoming more productive is the digitization of P&G. We are standardizing, automating and integrating systems and data, so we can create a realtime operating and decision-making environment. We want P&G to be the most technologically enabled company in the world. We project the 20% to 25% reduction in spending areas that benefit from digitization, and we're targeting a sevenfold increase in realtime data availability. By getting the right data to the right decision makers at the right time, we can become increasingly efficient and productive.

We are increasingly operating and competing as one company. Our individual categories, brands, countries and functions are all critical, and each has a unique value to add. But at the total company level, we can create scale advantages by allocating resources more strategically and efficiently than any individual business can do on its own. The combination of the individual components is greater together as one company than just the sum of the parts, and we are focused on maximizing this total value.

We're working across our businesses and markets to better coordinate the execution of our innovation program and leverage the scale and breadth of our brand portfolio. P&G's sponsorship of the U.S. Olympic team in the 2010 Winter Olympics is a great illustration. Not only did we sponsor 16 team USA athletes with 18 leading brands, but we seized the unique opportunity to sponsor the moms who have dedicated their lives to nurturing their Olympian children. The U.S. program was both effective and efficient. The "Proud Sponsor of Moms" campaign generated a record 6 billion consumer impressions for our brands, and the TV ads delivered 30% higher recall by our target consumers. The program helped accelerate share growth, and we estimate it resulted in nearly $100 million in incremental sales.

Based on the success of the U.S. initiative, we're taking this idea global. Just last week, we announced the worldwide partnership agreement with the International Olympic Committee beginning with the sponsorship of the 2012 Olympic Games in London. As part of this agreement, we are launching our "Proud Sponsor of Moms" campaign globally. The international reach of the Olympics will expose consumers worldwide to P&G's full lineup of global leadership brands.

As Jon said, we are pleased with the progress we made this last year. We delivered results ahead of our going-in expectations in nearly every area, but we still have some significant opportunities for improvement. Our results on some big brands and some big categories have been soft. Downy fabric enhancer share is several points below where it was two years ago. We're launching innovations and making consumer value corrections that will reverse this trend. The U.S. Oral-B Power Toothbrush business has been under pressure for two years due to the economic crisis. As the leader in that segment, it's up to us to get it growing again.

The Salon Professional business has been engaged in a multiyear integration and brand streamlining process. We're near the end of that work, and it's time for that business to start growing again. Battery shares have improved since the consumer value intervention we made in the U.S. in January. But to build long-term value for shareholders, we need to accelerate innovation. We need to continue our disciplined cost reduction and cash management efforts. We need to take an even more cost out, because there are still more investments that we want to put in to better serve the world's consumers and keep driving profitable market share growth.

If we can build on our successes, address our shortfalls and implement our purpose-inspired strategy with excellence, we should continue to accelerate growth on both the top and bottom line and create leadership levels of value for our shareholders. Thank you.

And now I'd like to turn the call back over to Jon.

Jon Moeller

Thanks, Bob. I'll close with guidance for the current fiscal year and quarter. We expect fiscal 2011 organic sales growth to accelerate with organic sales up 4% to 6%. This is based on estimates of global market growth in the range of 3% to 4%. Our market growth outlook assumes developed markets continue to grow at about 1% to 2%, and developing markets grow at about 6% to 8%.

Included in our guidance is the expectation that mix will continue to have a negative impact on sales growth as developing markets continue to grow 3 to 4x faster than developed markets. Also included is an expectation that pricing will be neutral to slightly positive for fiscal 2011.

Pricing will likely still be negative in the first half of the year and turn positive in the second half as we annualize many of the strategic adjustments we made last fall. We are largely on pricing strategy on our key brands and in our key markets, but we continue to monitor our price gaps versus competition. Foreign exchange-related pricing will likely be positive due to Venezuela, and we expect modest changes in promotional spending.

Based on this, we expect all-in sales growth of 2% to 4%. This includes roughly a 3% negative impact from foreign exchange rates and a 1% benefit from the net impact of acquisitions and divestitures. We expect core earnings per share growth to accelerate to a plus 7% to 9%. This translates to fiscal year 2011 earnings per share in the range of $3.91 to $4.01 compared to prior-year core EPS of $3.67. This guidance assumes current spot rates for foreign exchange. It also assumes we're able to continue to source sufficient dollars to fully support our operations in Venezuela. We expect to deliver free cash flow productivity of at least 90%, and are planning to repurchase between $6 billion and $8 billion of stock in fiscal 2011.

Turning to quarterly guidance. Our quarter-to-quarter earnings growth will be heavily influenced by the base period trends, including marketing spending, commodity costs and foreign exchange rates. As a result, first half earnings per share growth rates will be lower than growth rates in the back half, the opposite of last fiscal year.

For the September quarter, we expect organic sales growth of 3% to 5%, reflecting continued strong volume momentum, partially offset by mix, and to a lesser degree, pricing. All-in sales are expected to be up 1% to 3%. This includes a 3% negative impact to net sales from foreign exchange and a 1% positive impact from the net of acquisition and divestiture activity.

Earnings per share are expected to be in the range of $0.97 to $1.01 per share, in line to up 4% versus prior-year quarter earnings per share of $0.97. As I mentioned, higher year-on-year marketing spending and commodity costs are two of the main factors affecting core earnings per share growth in the September quarter. Compared to prior year, all-in GAAP EPS of $1.06 earnings per share will be lower by 5% to 8%, reflecting the pharmaceutical divestiture gain in the base period.

In closing, we are pleased with the progress we are making and excited by both the trend of the business and the opportunities that lay ahead of us this year. Bob, Teri and I would now like to open up the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Nik Modi with UBS.

Nik Modi - UBS Investment Bank

Just a quick question, Jon, for you, on the gross margins. If you can provide some context on the 50 basis points in terms of cost saves and commodities and operating leverage and negative mix, just to see how those all interact with each other, that would be very helpful.

Jon Moeller

Sure, Nik. As you know, gross margin was up about 50 basis points. Within that, there's about 200 basis point improvement in savings, which is consistent with what we have been showing in recent quarters. And there's also volume leverage on top of that savings number. So all-in, that benefit, let's call it, roughly, 300 basis points. And then offsetting that is the combination of mix and price which is about 200 basis points and commodity costs which are up year-on-year at about 50 basis points. I'm sure I got one of those numbers not exactly correct, but directionally, those are the trends that are affecting the gross margin and allowing us to improve it going this quarter. And I expect further gross margin improvement in the next fiscal year.

Operator

Our next question comes from the line of John Faucher with JPMorgan.

John Faucher - JP Morgan Chase & Co

So in looking at the organic revenue growth guidance, you guys put up 4% on a plus 2% comp this year, and you're looking for similar to better growth off of a tougher comp, especially with the weak start to the year in terms of what you've guided for, for the first quarter. So I guess it's a two-part question. Is it just simply the price mix, or at least the mix going from negative to neutral, that drives that acceleration? And can you walk us through the year in terms of the path that's going to get you to that range given the weak start to the year?

Jon Moeller

Sure. Let me try to answer two questions there. One, explain the sequential improvement in organic sales growth rate year-to-year, as well as address your question on the quarterly trends within next fiscal year. As we've said several times during the call, we're really seeing some pretty strong momentum in our business. Volume, we talked about growing sequentially from minus 2% in Q1 to plus 8% in Q4. We're seeing, if you look at share growth trends, sequentially, 12-, six-, three-, one-month improvements in, literally, every one of our regions. So that gives us a significant amount of confidence going forward that we're going to continue to grow. And then when you layer innovation on top of that, and as Bob said, most of our big innovations launched at the end of the year, we'll be leveraging them for the full year next year. So they will benefit 2011 to a greater extent than they even benefited 2010. And as you indicated, we'll start annualizing some of the price decreases that we took earlier this fiscal year, and as well the divergence in growth rates between the developing markets and the developed markets, we'll annualize as well. If I just give you some perspective there, if you look at the difference between developing market and developed market growth rates, Q1 of last year, developing markets grew one point faster than developed markets. Q2, it was even. Q3, it was five points ahead. Q4, it was seven points ahead. That's what's driven the increase in the negative mix. That should annualize as we go through next year. So that and the pricing annualization are the primary factors for why organic volume growth will accelerate sequentially quarter-on-quarter as we go through the year. So hopefully, that answers your question, John. And obviously, we'd be happy to provide any more detail after the call.

Robert McDonald

John, further color on that is the fact that many of our initiatives, as we talked about, are doing better than we expected and are somewhat capacity constrained. We're adding capacity as we speak. We've got one of our most aggressive-ever capacity-adding programs going in place. They have roughly 20 plants under construction, five on the drawing board, five getting ready to start up. And we're adding all of that capacity and still keeping our capital spending roughly 4% or less of sales. So the growth is good, it's strong, it's accelerating, and we're adding capacity.

Operator

Our next question comes from the line of Lauren Lieberman with Barclays Capital.

Lauren Lieberman - Barclays Capital

I was wondering, I know in -- Bob, in your prepared remarks, you talked a bit about launched activity in Fabric Care. But I think a question in everyone's mind after looking at the results this quarter with the combination of price and mix, but let's just focus on price so significantly negative. What do gross margins look like in that business? What's the outlook for profitability in Fabric Care and overall, kind of category dynamic? Or was this the quarter where there's significant pricing adjustments in here or things kind of normalize to what's a more traditional performance of that business?

Robert McDonald

Lauren, we're very bullish on our Fabric Care business. We are the leading company in the world. We have been growing share over an extended period of time. Many competitors have chosen to exit that business, if I step way back. When I joined the company in 1980, we competed with Unilever and Colgate in the United States. They are no longer in the business, and we're continuing to grow market share. And in that business, market share and margin correlate. So I feel very comfortable with the margins and the increasing margins in that business as we grow market share around the world.

Operator

Our next question comes from the line of Bill Schmitz with Deutsche Bank.

William Schmitz - Deutsche Bank AG

I'm just looking at the EPS guidance for next year, and I think you said there was negative 3% currency, and then probably, a 2% help in the base periods from a lower tax rate, and maybe I'm wrong in that number. So it looks like there's a sort of 7% to 9% core EPS growth rate. But if you add those two factors back in, doesn't it mean you're kind of doing sort of 12% to 13% EPS growth rate? I'm sort of wondering, what's driving that? And then just your outlook broadly on the consumer, and if you're seeing pockets of strength anywhere relative to the last six months or so.

Jon Moeller

Why don't Bob handle the consumer question, and then I'll explain the math on next fiscal year.

Robert McDonald

Well, as we talked, Bill, we're certainly seeing greater strength in developing markets and developed markets. Our organic volume growth in developing markets was 12% above year ago, which is an outstanding result given the global economic recession. In developed markets, our volume growth was 5%. That was comprised with pretty even growth between North America and Western Europe, both up about 5% and 4%, respectively, North America, Western Europe. In Japan, we grew 11%. We talked about some of our new innovations in Japan. So in a market that's been in an economic funk for nearly 20 years, we grew volume 11%. The developing world, greater China was about double digits; Central & Eastern Europe/Middle East/Africa, high double-digits; Latin America, high single-digits; and the ASEAN region with Korea, high double-digits. So the kind of growth we're seeing is obviously with stronger growth in developing markets and developed markets. And where we innovate, and we innovate well, we're able to grow.

Jon Moeller

And on core EPS, yes, we're guiding to 7% to 9% growth on core EPS. There is an element of an FX headwind, which we're overcoming. We're overcoming that through a combination of factors. One, hopefully, continued significant volume leverage. Also, as I mentioned in response to Nik, we continue to expect gross margin to improve savings and productivity offset the impact of higher commodity costs. And remember, we spent $1.2 billion the past two years in restructuring costs, and we do that to earn in return. So those savings as well should enable us to move forward with the program, which continues to invest significantly behind our innovation and our strategy while delivering this kind of core EPS progress despite the small FX and commodity headwinds.

Operator

Next question comes from the line of Chris Ferrara with Bank of America.

Christopher Ferrara - BofA Merrill Lynch

The market growth rate you guys are assuming, the plus 3% to 4%, I think that's in line with what you have traditionally seen. So does your outlook basically assume that we're at kind of normalized growth rates across the globe in your categories?

Jon Moeller

I would say that the market growth center is more closely on three than it does four, just based on what we're seeing today. So it's still slightly below kind of history which tended more towards 4%, but it's certainly getting better. As we indicated in our prepared remarks, we see growth continuing to be disproportionate developing market, driven with only one to two points of growth in the developed world which is lower than we've seen historically.

Robert McDonald

And when I answered Bill's question, I was talking about, in a sense, our volume growth rates by geography. And what I should have also mentioned was it's important to remember that from a value standpoint, North America and Western Europe were basically up one point in Q4. So we're obviously growing share in those geographies when we're shipping at 4% and 5%, and the market's only growing up 1%. Japan was down 1%. And obviously, with volume growth rate up 11%, we're growing share there. So our share growth is strong behind our innovation. But the market growth rates, particularly in value terms in developed markets, are virtually flat.

Operator

The next question comes from the line of Wendy Nicholson with Citigroup.

Wendy Nicholson - Citigroup Inc

My first question is actually just a follow-up, Jon, to something you said. When you walked through the gap between the developed and the developing market organic growth rate over the course of the year, has that been driven by a change in the rate of local market growth? Or has that been a change in where you've seen more market share expansion? And then second question, my own question, is just the fact that the margin expansion or the market margin contraction, if you will, was so severe in the fourth quarter, I'd love to get a feel for actually how much advertising was up in the fourth quarter, because it strikes me that given how big the June launches were, and May-June launches were, did you really spend that much that late in the quarter? And I'm wondering if that absolute number, once we see the K, advertising as a percentage of sales is actually going to have ticked up all that much.

Jon Moeller

The first, the follow-on question, on the divergence of growth rates in the developing markets and developed market, that is a function of both of the items that you mentioned, which is further divergence of actual market growth rates as well as a reflection of our portfolio expansion program, and therefore, our share growth in those markets. So it's both. In terms of advertising, year-on-year, advertising spending was up $1 billion. We've talked about how that was back-half loaded. In the fourth quarter, advertising expenditures drove a 400 basis point increase in SG&A, which explains essentially all of the operating margin, the difference between gross and operating margin. And put simply, we would have been crazy to do anything else. I mean, if you look at the strength of the innovation program that was coming to market, we've literally took every resource available to us and put it behind those innovations because we believe so strongly in them.

Robert McDonald

And Wendy, having said what we said about the increased spending in Q4, for the year, advertising spending was roughly 10%, 11% of sales, which is, historically, what we generally do. Of course that's because we are growing the top line at the same time.

Operator

Our next question comes from the line of Joe Altobello with Oppenheimer & Co.

Joseph Altobello - Oppenheimer & Co. Inc.

First question, in terms of the tailwind you guys got this year from commodities and currencies, could you quantify that and what you're expecting in terms of the headwind from both of those two items in fiscal '11? And then secondly, Oral-B in Brazil, it sounded like you expanded the distribution on that pretty significantly in the first half of calendar '10. Are you now fully distributed on that line?

Jon Moeller

In terms of the commodity and FX benefits that we had last year, which certainly was part of our going-in construct in terms of how we were going to fund innovation. We ultimately saw, between those items, a little less than $1 billion of year-to-year help. And your question on Oral Care, I'll let Bob answer.

Robert McDonald

Joe, the Oral Care Oral-B paste launch in Brazil is going really well. We are near full distribution now. Shipments are ahead of expectation. We continue to see distribution ahead of target after only about one year in market. Although remember, we just started the full distribution in January. We're growing value share in all channels where we compete and value shares in certain lead accounts so as high as 10% to 20%. Manual brush shares have grown since the launch. We've retaken and continue to hold share leadership versus Colgate, and we have a 1.6 value share advantage over Colgate.

Operator

Our next question comes from the line of Andrew Sawyer with Goldman Sachs.

Andrew Sawyer - Goldman Sachs Group Inc.

On tax rate for next year, you guys are saying it'll be in the normal 27%, 28% range. And then quickly, on levels of spending into next year, I think in the prepared remarks, you said that you expect promo spending to be relatively stable. With the ad spending back up towards 11% of sales range, should we also expect pretty stable levels of spending? And if so, I guess the point being that this is a -- you've now returned spending levels to a point where you're comfortable that, that will continue to drive the volume momentum?

Jon Moeller

In terms of tax rate, first, yes, we would expect next year's tax rate to be the same as this year's, which is somewhere between 27% and 28%, excluding any big onetime items. On advertising, you're right, we'll be holding promotion relatively steady year-to-year. We'll be increasing advertising, doing that in line with sales, so the percentage should stay about the same.

Robert McDonald

I want to also remind everyone that the quality of the advertising is also important. And as you look at, for example, Smell Like a Man, Man, which won a Grand Prix Lion at Cannes, when you look at, for example, creating shows like "Secrets of the Mountain" or "The Jensen Project" where we know that advertising that airs in family-friendly programming is more effective than that, that doesn't. When you look at our shift from TV and traditional forms of media to other forms of media, we're not only talking about the spending level, but we're talking about a significantly increased effectiveness of the advertising. All you have to do is look, for example, at our ad called "You'll Never Walk Alone" which supported the 2010 Winter Olympics in Vancouver and generated 6 billion impressions that we didn't pay for to see how effective that money is being spent.

Jon Moeller

And I'll just add one more thing. We continue to work to coordinate activities, innovation and marketing, as was the case with the Olympic campaign across our businesses. And that yields both gains in efficiency, and as Bob said, gains in effectiveness. So we're very comfortable headed into next year in terms of both the level and the quality of the support that we have against the business.

Operator

Your next question comes from the line of Ed Kelly from Credit Suisse.

Edward Kelly - Crédit Suisse AG

Could you discuss what you're seeing out of Wal-Mart recently? It doesn't sound like their relationship with vendors have been all that great recently, but there's been plenty of speculation about them pulling back on the aggressive rollbacks or SKUs going back in the stores, or even less of a push to private label? So how has Wal-Mart impacted your business more recently, and do you see any change coming?

Robert McDonald

I'm very excited about the changes that Wal-Mart, Ed. We see Wal-Mart under the leadership of Bill Simon in the U.S. getting back to the traditional way that Wal-Mart has grown their business. We have, as you can imagine, a very strong partnership with Wal-Mart like we want to have with all of our retail customers as evidenced by our coproduction of the movies, The Jensen Project and Secrets of the Mountain. We know that Bill Simon has the complete trust of the leadership of the Walton family and of the leadership of Wal-Mart. And we see him doing things to make changes to things like Project Impact and the Clean Aisles to make sure that Wal-Mart gets its top line growth growing and attracts more shoppers. And we have a very strong partnership, we're working hard against aggressive growth targets, and we're very excited about -- and see the changes as very positive. One thing I want to add, just to clear up any misconception is some of the historically low prices that you have seen from Wal-Mart in Tabs and elsewhere have not necessarily been supported by spending by Procter & Gamble. Oftentimes, our retail partners decide to invest their own money in merchandising our brands in order to attract traffic. It's a very common procedure in the industry to use leadership brands like ours to attract traffic. But we're very excited about Bill Simon's leadership of U.S. Wal-Mart. International Wal-Mart is doing extremely well under Doug McMillan, and we're partnering with Doug and his team. And Sam's Club is also doing well under Brian Cornell, and we're partnering very well with Brian and his team.

Operator

Our next question comes from the line of Bill Chappell with SunTrust Robinson Humphrey.

William Chappell - SunTrust Robinson Humphrey Capital Markets

One housekeeping and then one question. On the housekeeping, just a little more color on the other income line in the quarter. And then on the main question, can you talk a little bit about where the advertising is spent, which you stepped up in the quarter? I mean it seems like the Men's Shaving was the biggest area where we saw a lot of TV support, and I didn't know if there were changes or more reactionary to the success of Hydro year-to-date.

Jon Moeller

On the other income, really the year-to-year changes is just a reflection of a difference in the presence of small divestiture gains. We had none of those this quarter, and that's really all of the difference.

Robert McDonald

On the advertising, Bill, basically, any of the new brands we launch, we raise the level of marketing spending in order to achieve certain awareness and trial objectives. I think perhaps the reason you saw a disproportionate increase in ProGlide is that you're the target audience. So I hope you went out and bought the razor and are using it.

Operator

Our next question comes from the line of Jason Gere with RBC Capital Markets.

Jason Gere - RBC Capital Markets Corporation

I guess in context of your outlook for kind of that 1% to 2% category growth in developed markets and the 5% volume. I guess one -- the first question, I guess, is really as you look at that breakdown to 5%, can you talk about how much of it was really innovation driven, whether that was pipeline fill? And then how much is the consumer really getting attracted to lower pricing right now? And just kind of thinking about the consumer, it just feels like maybe we're not hitting a double-dip recession, but consumers really are kind of fighting back and they want to shop more in deals. So I guess if you can kind of just break out between those two kind of aspects and kind of how you see that building over the next couple of quarters.

Robert McDonald

Jason, as we said in our remarks, we've had successful growth both on the high end of our portfolio and in the middle and lower tiers of our portfolio. So we kind of see in developed markets, we see a bifurcation where our new initiatives like ProGlide and others that are premium priced continue to do very well, and I would say, they appeal to the people with jobs. At the same time, we also see, and we talked about this and the reduction from our volume growth rate to our sales growth rate, we see a mixed effect as consumers without jobs or in challenging positions trade down. And they may trade channels. They may go to a channel where they think they can find a more competitive offer. And so that trading down is an impact. I, frankly, expect that to continue, and that's why it's important for us to innovate all along our vertical portfolio, both at the high end, the middle end and the low end. And that's why we talked about it so thoroughly in my comments is that we've got to appeal to all consumers. I think the economic recovery in the United States will be uneven. I think we're seeing that already. We don't expect a double-dip recession like you don't, but we've got to keep innovating and keep growing at all areas of our vertical portfolio.

Operator

Our next question comes from the line of Doug Lane with Jefferies & Company.

Douglas Lane - Jefferies & Company, Inc.

Just real quickly, not to read too much in the four-week Nielsen's but back in June, the Pampers market has dropped about four points versus May, and Huggies bumped up about four or five points as well. It doesn't seem like that category bounces around that much, so I wondered if your all China data showed the same thing, and if you could just sort of give us some color on what was going on there.

Jon Moeller

Well, not to focus on four-week Nielsen data but you'll see a lot of choppiness in that data that's really driven by promotion cycle as much as it is anything. If you look at the last three months and what we're seeing in July, we continue to be very happy with our progress, both on the sales and a share basis for Pampers.

Douglas Lane - Jefferies & Company, Inc.

It just seems like a four-point sequential change was just bigger than you'd usually see.

Jon Moeller

All outlet was much less than that.

Robert McDonald

I'm very excited about our Pampers business, Doug. If you look, Pampers Dry Max is the biggest innovation since we launched Pampers. It's now only a very small part of the brand. We're going to be expanding it across the whole brand, and I think some of the changes we've talked about on this call in the retail environment, you'll see playing out in the marketplace that will strengthen the Pampers brand.

Operator

And our next question comes from the line of Connie Maneaty of BMO Capital Markets.

Constance Maneaty - BMO Capital Markets U.S.

Could you talk a little bit about the compaction of powder detergent, what's driving that? What's the impetus for -- it's easy to decompaction in liquids where you take out a lot of water, but what do you take out in the powder? How big is that category? I assume you're leading it. And then finally, when will we get Excel Gels in the U.S.?

Robert McDonald

I've been working on the compaction of powder Laundry detergents in the United States since I joined the company in 1980. Basically, in the beginning, we started by taking out fillers. There are certain things in a powder laundry detergent that are required in order to process the product through the manufacturing cycle. And as we've invented newer and better technologies, we've been able to compact. And as I said in my prepared remarks, we're planning a 33% compaction, which is well will be a formula upgrade. Meaning, we've been able to improve the ingredients in the detergent, which has allowed us to remove some of the process fillers and other things. This compaction, like other compactions, benefits everybody because it means the product requires less shelf space per load, less transportation cost per load. And of course, everyone in the supply chain saves money, and the consumer saves based on the space they save at home, and of course, they get a better product. And so there's going to be 33% less corrugate, 6,000 fewer trucks, and we're going to save about 900,000 gallons of diesel fuel. So compaction is always a good thing and something that we want to do because it improves life for everyone. In terms of Excel Gel, Excel Gel is designed for the kinds of washing machines that exist in Europe, which are horizontal-axis washing machines. We always are working on improving our technology for U.S. machines, but it would require a different formulation in the U.S. And you can rest assured we're working on that. Similarly, gel, as a form, is a form of compaction. So it's also good for consumers, good for retailers and good for us. So stay tuned, please.

Operator

Our next question comes from the line of Caroline Levy with Calyon Securities.

Caroline Levy - Credit Agricole Securities (USA) Inc.

Could you address accounts payable in the cash flow statement? It just looks like that was a huge positive. And also just given how the stock's trading, this was clearly a disappointment, but you sound very bullish on your business that I would like you, please, just to address where you did feel any disappointment in terms of the margin trends. Not brand by brand or anything, but on those big businesses. Was it, in any way, disappointing that margins were down over 700 basis points in one area?

Jon Moeller

First on the payables, as we mentioned, we significantly accelerated our advertising spending as we went through the year, which resulted in a higher payables balance at the end of the year. You'll recall that some of our big innovations were launched in the month of June, which is driving that.

Robert McDonald

Relative, Caroline, to optimism or pessimism, I'm very optimistic on our business. Our results in fiscal 2010, we're ahead of our original expectations, and I'm really happy with the trend of the business. Our fourth quarter unit volume grew 8%, the highest growth rate in nearly six years. Volume grew in every business segment, every region, every key country. We also built market share. We're growing market share now in about 60% of our business versus half of that a year ago. All regions held or grew share, which is the first time in 11 quarters that happened. We overdelivered our going-in fiscal year core EPS growth objectives, and we generated $14 billion in free cash flow. And the payables line as one of the reasons why. We increased our dividends for the 54th consecutive year and repurchased $6 billion in P&G stock, returning more than 100% of our earnings to shareholders. So I can't be anything but optimistic realizing that these growth trends will continue.

Jon Moeller

Our operating margins by definition are lumpy or choppy by quarter. We expect to have continued operating margin expansion. We expanded operating margins on the full fiscal year basis; we'll do that again next year. So we don't really look at it, frankly, on a quarter-by-quarter basis.

Operator

Our next question comes from the line of Jon Andersen with William Blair.

Jon Andersen - William Blair & Company L.L.C.

I just have a quick question on cost-savings. Jon, you said earlier, you've invested about $1.2 billion in restructuring the last two years, that started to deliver in the neighborhood of 200 basis points of savings the last couple of quarters. Looking ahead, do you have investment plans and kind of expected benefits at those same levels? And can you just provide some color around some of the most important areas of focus within the organization?

Jon Moeller

Well, we will continue to continually restructure our business. We feel it's a part of how to do business in this industry. So next year, we'll continue to invest in restructuring. We're planning about $400 million of investment again next year. Much of that is focused on productivity and simplification initiatives with the objective, as Bob described in his remarks, of creating a faster, more agile operation and we'll continue doing that.

Operator

Our next question comes from the line of Ali Dibadj with Bernstein.

Ali Dibadj - Bernstein Research

I guess I'm still hearing a lot from investors about a little bit of a lack of confidence in your guidance, particularly on the context that this is kind of the second quarter in a row. You've been very optimistic. You've said things are getting better. You've said most things are better than expectation. They're actually showing stacked deceleration in top-line growth and actually barely at the low end of your top-line guidance, especially in this quarter where you just spent so much back in advertising. So when you get down to it, I guess there's two pieces of it. One is trying to understand more about top line, you're guiding to acceleration of organic sales even though you're going to face tougher organic sales compares. The consumer clearly isn't getting any better. Competition is really starting to push back, which may stifle a little bit of your share growth. You're lapping, at least in the back half of the year, the best innovations in something like 20 years. And then on your bottom line, you're talking about 2% to 4% net sales growth translating to 7% to 9% EPS growth. I guess how do you build confidence in the investor base that you're actually kind of far guiding appropriately or are in control, to put it bluntly, given some of what we've seen over the past couple of quarters?

Jon Moeller

The first point I would offer is in terms of confidence for next year, it goes back to what Bob was just describing. It's just an incredible momentum that exists across the business that we fully expect to continue. And that's what gives us confidence in the top-line guidance. From the bottom-line standpoint, I mean, first of all, we overdelivered on a fiscal year basis, our core earnings per share growth last year, so the notion that we're somehow providing irresponsible guidance certainly doesn't resonate here. We delivered the quarter right in line with our anticipated guidance range. We wouldn't be providing guidance of 7% to 9% next year if we weren't comfortable in it. We are. One way to think about it simply is organic sales growth of 4% to 6%, take a midpoint of 5%, bring that down to the bottom line, add two to three points of benefit from share repurchase, which we're talking about at $6 billion to $8 billion and you're home. I think it should be deliverable.

Robert McDonald

The hardest thing to do, Ali, I think,, is to run a business where you're delivering balanced top-line and bottom-line growth and growing market share at the same time. I think the fact that we're growing market share in 60% of our business, and that growth rate is accelerating, is proof positive that this business is strong and growing. At the same time, we have the strongest innovation program we ever had, and we're operating more as one company than ever before. And I think you can see the impact of our program in the marketplace.

Operator

Our next question comes from the line of Alice Longley with Buckingham Research.

Alice Longley - Buckingham Research

My question is about negative mix in the quarter in the developed markets. That's what was surprising to me given that shipments, I thought, were heavily weighted to these innovations which are mainly premium priced. And I heard you say, well, a lot of consumers to be without jobs are trading down. Can you tell us which of your value products, which products that created the negative mix shift in developed markets drove that?

Jon Moeller

There are two things going. First of all, it's price mix. We made several price corrections in North America on things like batteries, on things like detergents, on things like paper towels, earlier in the fiscal year and those continued to impact until they annualized the price mix line. We also continue to see significant growth on our, for instance, our Basics offering, our Bounty Basics, Charmin Basic and some of the other items that we've tried to make available for consumers who are seeking a better price.

Teri List

And Alice, I'd just point out also the, like for example, Retail Hair and Skin grew faster than Salon Professional or Prestige. That has an effect as well.

Operator

Our next question comes from the line of Linda Bolton-Weiser with Caris & Company.

Linda Bolton-Weiser - Oppenheimer & Co.

I was wondering if you could just talk about innovation a little bit more. In terms of -- you've talked about expanding into adjacent categories and representing that's like white space opportunity for you guys. In FY '10, it seems like Tide Stain Release was one of the main launches that got you into kind of a new category. Am I forgetting others, and do you expect more of that kind of white space opportunity growth in FY '11? And did you also say the number of innovations would actually be greater in FY '11 than FY '10?

Robert McDonald

Linda, Bob. It depends how you count innovation as to whether or not they're greater. As Jon said, remember that we launched the big innovations this past fiscal year in the fourth quarter. As a result, we only have a few weeks, frankly, of impact so far of things like the new Pantene, Fusion ProGlide and so forth. So the full year effect will be next year. So if you measure in terms of full year effect, certainly, next year's program will be stronger than this year's because of the carryover impact, if nothing else, in addition to the new items we're launching. The biggest opportunity we have is to get all of our categories into all of our countries around the world. We have about 36 product categories, and we're in all of those categories in the United States where we've been for 172 years. But in countries like China, where we lead, we're in just over a dozen, probably about 16 categories in China. So we have work to do to adapt those categories for the Chinese market, but that's a huge part of our white space activity. That's why you see us rolling out things like Oral Care around the world. That's why we did the Ambi Pur acquisition. That's why we've rolled out Olay, our leading skin moisturizer, to about 15 new countries in the last year. So we've got a lot of work to do to simply get the categories we're currently in into all markets. At the same time, we're working to develop new categories such as Swiffer, such as the ones you've mentioned. And I can't give you too much perspective on those since we would rather surprise the competition rather than let you know about them in advance.

Jon Moeller

I would just add to your list of horizontal portfolio expansions and adjacencies last year. You mentioned Stain Release, there was also the Bounce Dryer Bar, Gillette ProSeries; in several countries Olay Skin Care for Men in China. I talked next year about expanding gain into the Dish Care segment, and we talked about Crest 3D White, which is really a horizontal expansion into the scene between Beauty and Health. So I don't want you to get the impression that it's a one-trick pony here.

Robert McDonald

Crest 3D White is an interesting one because we are in the Beauty business, unlike some of our competitors. And to the degree that our Oral Care consumers, who are beauty conscious, we have an opportunity to take our knowledge from Beauty Care and use it in Health Care in order to meet that increasing need.

Operator

Our next question comes from the line Victoria Collin with Atlantic Equities.

Victoria Collin - Atlantic Equities LLP

I wonder if you could talk a little bit about the advertising spend. I know you spent a lot on new product support. But with some of the additional spend you put through in the quarter, sort of repositioning yourself in categories where you've lost share previously, maybe if you could split that out for me. And I wondered also if, at the start of the quarter, it was clear that you are getting a tax benefit, which kind of enabled you to ramp up the advertising spend higher than you would otherwise. Because the way I'm thinking about it in terms of the operating margin, I wonder if you could steer me a little bit into -- Jon, you said that the operating margin is going to be up year-over-year in full year '11, but what are the main drivers of that? Are we going to see a negative mix, or will higher advertising mix be a larger sort of pushdown on the operating margin as we look forward?

Robert McDonald

Victoria, as we compare year-on-year, you would see a higher level of advertising in Q4. If you remember, Q4 a year ago, our top line actually declined. We lost market share, and we said we weren't proud of that. In fact, when we announced the earnings, that was where we said we're drawing the line or we're going to stop losing market share. We're going to grow market share profitably. So if you index our advertising in Q4 versus a year ago, you would see dramatic increase since we cut advertising in Q4 a year ago in order to deliver the profit results we delivered. So you would see higher levels of advertising on established brands, and that's the reason we're growing market share on 60% of our business today as we're supporting it with advertising versus year ago.

Jon Moeller

Vic, your question on the tax rate as the quarter progressed, I think you have it almost exactly right. We started to see these benefits as we went through the quarter, both as a result of favorable audit settlements, as a result of geography mix. And we reinvested that money in support of growth behind our big initiatives. So that's exactly what occurred.

Operator

Our next question comes from the line of Mark Astrachan with Stifel, Nicolaus.

Mark Astrachan - Stifel, Nicolaus & Co., Inc.

Building on a previous question about cost savings, curious, does the level of reinvestment make you reconsider the thought process behind increasing your cost-savings initiatives? And then relatedly, could you just give us a refresher on how you make those decisions on what to fund?

Jon Moeller

As Bob said towards the close of his remarks, we need to take more cost out, because there's more investment we want to put in to further our purpose or strategy and our financial objectives. So if anything, the level of intentionality on cost savings continues to increase as we go forward. We don't constrain funding for cost savings to any level. If we have a good project, we'll fund it. That's why our restructuring spending varies from year-to-year, and it's a very fluid process and we're constantly identifying new opportunities, evaluating them, and if they're smart, funding them.

Robert McDonald

I would say, Mark, we have our strongest cost savings program that we've ever had during my career with Procter & Gamble, last 30 years. I talked about it in my prepared remarks. We're trying to simplify our operation. We're reducing levels from seven to five to the CEO. We're reducing the number of ineffective product initiatives. We're reducing the number of SKUs. We're making the ideas that we have larger, so that we're spending behind larger ideas. Simplifying the operation, all the way down to simplifying the raw materials, is a big idea. The other big idea that we're working on is the digitization of the company, and I talked about the potential productivity improvement of that. Many of our new products today, we designed using simulation and modeling versus bench scale kind of prototyping that we did years ago. That gives us a much faster cycle and innovation. It also leads to a much more productive spend. I mean, I know we talked about the fact that we spent about $2 billion a year on R&D. But we didn't talk about the fact that, that $2 billion is much more productive because of our open-innovation system with outside partners and also because we're using modeling and simulation and digitization a lot more than ever before.

Operator

Our last question comes from the line of John San Marco with Janney Montgomery Scott.

John San Marco - Janney Montgomery Scott LLC

I guess the 50 basis points of market share gains implied in the 4% to 6% organic growth. I guess first question is do you think that's a sustainable rate of market share gain over the long term? And then in the more immediate term, in fiscal '11, can you characterize the possibility that your planned positive pricing as the year progresses would be at risk if the competition starts to play catch up and expand some of the price gaps that you've invested hard to close in the last couple of years?

Robert McDonald

I think the market share progress that we're on is sustainable. I think it is sustainable because of our strong innovation program and our strong go-to-market activity. Remember as we bring these innovations to market, at the same time, we're working to increase the distribution of our product. For example, right now, we're working with the Chinese government in something called Ten Thousand Villages where we expand the distribution of our products in the rural areas of China to reach more Chinese consumers and to create economies where economies never existed. And as we do that, that obviously creates more people to use our products and helps us get to the 5 billion consumers that we've targeted over the next five years, four years now that we have remaining. That's how we reached the 200 million extra more consumers this fiscal year. So we're going to continue that. And I do think the market share gains are sustainable.

Jon Moeller

Thanks, everybody, for participating in our call this morning. We're available the balance of the day and any other time you need us to provide additional perspective. And I hope you have a good day.

Operator

Thank you for your participation in today's conference. This concludes the presentation. Everyone, have a great day.

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