All eyes will be on Wolfgang Berndt this autumn when he takes over as Procter & Gamble’s head of European operations. No one will be scanning his every move more anxiously than Lever Bros, P&G’s main rival in the detergents market, as it rolls out its most important new product development since Persil Power. Equally assiduous will be the attention of P&G’s advertising agencies, eager for change after years of dreary cost-cutting.
Personally, Berndt differs greatly from his predecessor of 14 years, Harald Einsmann. Where Einsmann is seen as cautious and relatively self-effacing, Berndt is brash and overtly aggressive – a fully paid-up member of the Jager circle (based around Durk Jager, chief operating officer), now in the ascendant at P&G.
But far more important than any change of management style is the altered strategy likely to accompany it. As president of P&G’s North American business, Berndt has been closely associated with a major piece of corporate iconoclasm whose repercussions are soon likely to be felt in Europe.
For over three years, the reigning strategic orthodoxy at P&G has been something called Marketing Breakthrough 2000. Its aim, bluntly stated, was to cut marketing costs from 25 per cent to 20 per cent of sales. Although some emphasis was placed on achieving a tauter relationship with retailers through ‘efficient consumer response’, P&G made itself pretty unpopular with its marketing services suppliers by implementing swingeing cuts in promotional, media and production spend.
The result was $1bn of savings last year. Yet despite this creditable result, the ultimate success of the programme must be doubted. It has been dropped in the US well before achieving its avowed aim (and well before the year 2000). The reason? P&G has rediscovered the old axiom that marketing is an investment, not an overhead. Companies operating in mature markets require constant product rejuvenation if they are to keep their edge. And sure enough, P&G has now found itself engaged in what one analyst calls ‘the most aggressive new product cycle in its history’. The cost of effective product innovation is very high.
Already some of this new product, for example the spray-on clothes freshener Febreze, is trickling over to Europe. There is every reason to suppose that Berndt will accelerate the process. He will in any case need all the resources he can lay his hands on to fight Lever Bros’ detergent pill offensive to a standstill.
Effectively, Marketing Breakthrough 2000 is dead. P&G’s advertising agencies, for one, must be breathing a huge sigh of collective relief.
News Analysis, page 22