arrangements. The loss or disruption of such manufacturing and supply arrangements, including for issues such as labor
disputes or controversies, loss or impairment of key manufacturing sites, discontinuity or disruptions in our internal information
and data systems or those of our suppliers, cybersecurity incidents, inability to procure sufficient raw or input materials
(including water, recycled materials and materials that meet our labor standards), significant changes in trade policy, natural
disasters, increasing severity or frequency of extreme weather events due to climate change or otherwise, acts of war or
terrorism, disease outbreaks or other external factors over which we have no control, have at times interrupted and could, in the
future, interrupt product supply and, if not effectively managed and remedied, could have an adverse impact on our business,
financial condition, results of operations or cash flows.
Our businesses face cost fluctuations and pressures that could affect our business results.
Our costs are subject to fluctuations, particularly due to changes in the prices of commodities (including certain petroleum-
derived materials like resins and paper-based materials like pulp) and raw and packaging materials and the costs of labor,
transportation (including trucks and containers), energy, pension and healthcare. Inflation pressures could also result in
increases in these input costs. Therefore, our business results depend, in part, on our continued ability to manage these
fluctuations through pricing actions, cost saving projects and sourcing decisions, while maintaining and improving margins and
market share. Failure to manage these fluctuations and to anticipate consumer reaction to our management of these fluctuations
could adversely impact our results of operations or cash flows.
The ability to achieve our business objectives depends on how well we can compete with our local and global
competitors in new and existing markets and channels.
The consumer products industry is highly competitive. Across all of our categories, we compete against a wide variety of global
and local competitors. As a result, we experience ongoing competitive pressures in the environments in which we operate,
which may result in challenges in maintaining sales and profit margins. To address these challenges, we must be able to
successfully respond to competitive factors and emerging retail trends, including pricing, promotional incentives, product
delivery windows and trade terms. In addition, evolving sales channels and business models may affect customer and consumer
preferences as well as market dynamics, which, for example, may be seen in the growing consumer preference for shopping
online, ease of competitive entry into certain categories and growth in hard discounter channels. Failure to successfully respond
to competitive factors and emerging retail trends and effectively compete in growing sales channels and business models,
particularly e-commerce and mobile or social commerce applications, could negatively impact our results of operations or cash
flows.
A significant change in customer relationships or in customer demand for our products could have a significant impact
on our business.
We sell most of our products via retail customers, which include mass merchandisers, e-commerce (including social commerce)
channels, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, specialty beauty
stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and professional channels. Our
success depends on our ability to successfully manage relationships with our retail trade customers, which includes our ability
to offer trade terms that are mutually acceptable and are aligned with our pricing and profitability targets. Continued
concentration among our retail customers could create significant cost and margin pressure on our business, and our business
performance could suffer if we cannot reach agreement with a key customer on trade terms and principles. Our business could
also be negatively impacted if a key customer were to significantly reduce the inventory level of or shelf space allocated to our
products as a result of increased offerings of other branded manufacturers, private label brands and generic non-branded
products or for other reasons, significantly tighten product delivery windows or experience a significant business disruption.
If the reputation of the Company or one or more of our brands erodes significantly, it could have a material impact on
our financial results.
The Company's reputation, and the reputation of our brands, form the foundation of our relationships with key stakeholders and
other constituencies, including consumers, customers and suppliers. The quality and safety of our products are critical to our
business. Many of our brands have worldwide recognition and our financial success directly depends on the success of our
brands. The success of our brands can suffer if our marketing plans or product initiatives do not have the desired impact on a
brand's image or its ability to attract consumers. Our results of operations or cash flows could also be negatively impacted if the
Company or one of our brands suffers substantial harm to its reputation due to a significant product recall, product-related
litigation, defects or impurities in our products, product misuse, changing consumer perceptions of certain ingredients, negative
perceptions of packaging (such as plastic and other petroleum-based materials), lack of recyclability or other environmental
impacts, concerns about actual or alleged labor or equality and inclusion practices, privacy lapses or data breaches, allegations
of product tampering or the distribution and sale of counterfeit products. Additionally, negative or inaccurate postings or
comments on social media or networking websites about the Company or one of its brands could generate adverse publicity that
could damage the reputation of our brands or the Company. If we are unable to effectively manage real or perceived issues,
including concerns about safety, quality, ingredients, efficacy, environmental or social impacts or similar matters, sentiments
toward the Company or our products could be negatively impacted, and our results of operations or cash flows could suffer. Our
Company also devotes time and resources to citizenship efforts that are consistent with our corporate values and are designed to
strengthen our business and protect and preserve our reputation, including programs driving ethics and corporate responsibility,
strong communities, equality and inclusion and environmental sustainability. While the Company has many programs and
The Procter & Gamble Company 5