330 SECTION THREE DEVELOPING STRATEGIC MARKETING PROGRAMS Exhibit 12.9 PROCTER & GAMBLE AND THE CHINESE GOVERNMENT WORK TO IMPROVE RURAL RETAILERS Since Procter & Gamble, the consumer package to expand its distribution network to reach them. The goods giant, first introduced Head & Shoulders, firm relies on a group of wholesale subdistributors and Pampers, and many other brands to mainland China in their vans to deliver a variety of P&G products as well 1988, it has enjoyed steady growth. The firm racked up as sales aids like posters, display racks, and the like to $2.5 billion in revenues in fiscal 2006, and its wholly hundreds of small shops. And the firm signed an agree- owned China business unit employs 6,300 people, ment with China's Commerce Ministry in 2007 whereby many of whom work in the firm's extensive sales and P&G promises to help renovate existing retail outlets, wholesale distribution network. design and build new ones, and train local shopkeep- While much of P&G's past growth came from large ers in some 10,000 small villages in the art of retailing. retailers in China's biggest cities, company managers The government supports the program as a means of expect that future growth will come from the rural reducing the flow of counterfeit goods and spurring countryside where there are more than 700 million economic development in the countryside, while P&G potential first-time buyers for many of P&G's prod- hopes that improving the effectiveness and efficiency ucts. Since family incomes in the countryside average of China's rural retailers will lower its distribution costs less than one-third of those in the cities, however, and gain increased local promotion of its many brands. P&G has been developing new brand extensions and packaging to lower costs and prices, and to appeal to rural cultural preferences. Sources: Dexter Roberts, "Scrambling to Bring Crest to the Since retail stores in rural China tend to be small, Masses," BusinessWeek, June 25, 2007, pp. 72-73; and Jennifer numerous, and unsophisticated, the firm has also had Reingald, "Can P&G Make Money in Places Where People Earn $2 a Day?" Fortune, January 17, 2011, pp. 86-91