A Brief History of Procter & Gamble


In 1837 James Gamble, a soap maker, and William Procter, a candle maker, joined forces at the suggestion of their mutual father-in-law, Alexander Norris, who was also a candle maker. It was a logical union since both soaps and candles used the same raw materials, fats and oils. The partners agreed on $7,192.24 as the new firm's starting capital, creating a 50/50 partnership to last fifteen years. They were a good team, with Gamble running the factory, Procter the office or "store." Their backgrounds were similar with both men emigrating from the British Isles. Gamble's family came from Ireland to America in 1819 while Procter arrived in 1832 from England.

Procter & Gamble was formed at an opportune time. Economic expansion in the United States was beginning to alter the manufacture and distribution of commodities such as soaps and candles. While the economy remained overwhelmingly rural and agrarian, small areas of urbanization and industrialization existed. Cincinnati — Procter & Gamble's base — was strategically located on the Ohio River, giving the city access to the key port of New Orleans. In 1840 the completion of the Miami Canal linked Cincinnati into the Great Lakes system and ultimately, through the Erie Canal, to New York City.

Cincinnati, known as "Porkopolis," was the largest meatpacking center in the United States in the years when James Gamble and William Procter went into business. This put P&G close to the animal by-products — lard and tallow — critical to the manufacture of soap and candles. With a ready supply of raw materials, the two entrepreneurs built up their business by shipping candles and soap on steamboats down the Ohio River to the Mississippi and to New Orleans. By the 1850s, as the second generation of Procters and Gambles entered the business, the firm expanded production, relying by this time on railroads to move its products to markets. Railroads had many advantages over rivers and canals: the tracks did not freeze in winter and trains were faster, more regular, and less expensive than steamboats. Railroads also expanded the distribution possibilities.

Procter & Gamble grew into a million-dollar enterprise during the Civil War as the firm obtained huge contracts to supply some of the Union armies with soap and candles. The procurements strained the company, forcing factories to run around the clock. But Procter & Gamble was considered so important to the war effort that when martial law was declared in Cincinnati (across the river from slave-holding Kentucky and itself a hotbed of Copperhead, or pro-Southern, sentiment), the company was permitted to remain in business.

By the 1870s Procter & Gamble had grown into a company capable of producing and distributing on a national level. But the company was facing a crisis brought on by a decline in one of its core sectors - candle making. The discovery of oil in 1859 in Pennsylvania made kerosene readily available. After the Civil War, consumers began to switch from candles to oil lamps, and by 1876 P&G's candle production sank below soap production for the first time in the company's history, forcing it to expand the soap side of the business to stay competitive.

Ivory soap was P&G's response to the crisis. Ivory represented a departure for the company because, for the first time, P&G sought to specifically develop a product separate from its traditional goods. This new soap was made from vegetable oils, not the tallow, grease, or lard the company had used for all its soaps in the past. Ivory resulted from experimentation aimed at developing a castile-like soap, long considered the hallmark of fine soap. Ivory was comparable in quality to expensive castile soaps but inexpensive enough to be mass marketed. Cost was kept low because Ivory was made not from olive oil but from a blend of cheaper coconut and palm oils. Ivory was white, it lathered easily but remained solid, and it lasted longer than other soaps. It was pure soap — 99 and 44/100% pure. And, of course, it floated.

Not only was Ivory a new product for Procter & Gamble, but the company marketed the soap for more aggressively than it had pushed its earlier soaps and candles. Newspaper and advertising revenue expanded and a bevy of marketing initiatives were deployed: mass distribution of samples, premiums, inserts, and advertising on wall signs, streetcars, steamers, and the like. The success of Ivory made Procter & Gamble a multi-million dollar industrial giant.

But Ivory was still a traditional soap using readily available raw materials. As such, P&G during its first century remained essentially a soap company. A dramatic change in the company would come only with the development of synthetic detergents in the 1930s and 40s. The introduction of first Dreft® and then Tide® changed Procter & Gamble into a company that utilized technology and chemical experimentation to produce new products which in turn were marketed globally. As one researcher involved in the development of Tide later recalled, "P&G would no longer be a soap company… it would become an industrial corporation with its future based on technology. We had done some things up until then… but we were still a soap company with these extras. With Tide, we were no longer a soap company."1

1 G. Thomas Halberstadt, Interview, April 7, 1984, P&G Archives. On the history of Procter & Gamble, see the following: Davis Dyer, Frederick Dalzell, and Rowena Olegario, Rising Tide: Lessons from 165 Years of Brand Building at Procter & Gamble (Boston: Harvard Business School Press, 2004); Oscar Schisgall, Eyes on Tomorrow: The Evolution of Procter & Gamble (Chicago: J.G. Ferguson Publishing Co., 1981); Alfred Lief, "It Floats": The Story of Procter & Gamble (NY: Rinehart & Company, 1958). See also, Memorable Years in P&G History, in-house booklet that is not dated. For a discussion of the history of soap, see The Story of Soap, a Procter & Gamble in-house booklet dated 1956.


 

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