P&G crisis forces agency cutbacks

Procter & Gamble is freezing capital investment and new marketing initiatives in what could be one of its worst crises of the past 20 years, according to a confidential memo from head of European operations Wolfgang Berndt.

The company has asked ad agencies for their urgent assistance in cutting advertising and marketing costs by at least five per cent, though it suggests cuts of up to ten per cent could be made.

P&G wants cuts in business travel of one third, and has called for training, the use of consultancies and conferences to be postponed.

The memo says: “Unless we fix our fundamental growth issue, we have no way to hit our forecasts…We must operate in a crisis mode.”

Net sales volume in one country where P&G operates “will be close to zero”, according to the memo. The memo says the “major business crisis” will be overcome through “prudence and stretch”.

“Stretch” is P&G’s term for globalising brands.

The comments express in dramatic terms the problems that P&G faces in meeting its sales and growth targets.

In September, the company replaced chief executive John

Pepper with his deputy Durk Jager with a brief to shake up the company and pave the way for world- wide brand launches (MW September 17).

But the prospect of cuts in marketing costs could undermine the aim of doubling its $37bn (22.4bn) worldwide sales over ten years.

No one at P&G was available for comment as Marketing Week went to press.