Getting things growing again
P&G has gone through a well publicised streamlining process of its brands over the last year, with almost 100 brands being divested in the process. In the most recent deal, a good chunk of comestics brands are being sold to Coty.
As a result of the changes, Jim McNerney, lead director of P&G’s board, says the business is now “in the right place” with its “focused portfolio” of 10 categories and 65 brands “playing to P&G’s strengths.”
However that doesn’t change the numbers. When P&G releases its latest results tomorrow (July 30) it is expected to announce an 8% decline in annual sales to levels of around $76bn, according to Bloomberg. Taylor will need to prove that the new streamlined approach can deliver for P&G’s shareholders and fast.
Ian Bell, head of homecare research at Euromonitor International, says questions remain over its brand proposition and whether it is doing enough to innovate despite spending up to $2bn a year in R&D.
Although praising Tide Pods, a product P&G has invested in heavily and claims will “revolutionise laundry”, he says P&G “just aren’t innovating as often” as their competitors.
“The company is going through so much white water right now, that Taylor may be the right force to calm things down,” adds Ali Dibadj, an analyst with Sanford C. Bernstein & Company.
“However, this doesn’t mean it’ll be easy as P&G faces many challenges battling irrelevancy in the eyes of consumers. Do big premium brands in commodotised categories really work?”
More compelling marketing
P&G’s decision to continue to command premium prices isn’t winning fans in its home market of the US.
Bell explains: “They have a big spat with Walmart who have not been impressed that P&G is continuing to maintain premium prices on quite mature brands. Sorting that out has to be a priority as they won’t want to damage their relationship with such a big, price-focused, retailer.”
And although P&G has seen success with the “Like A Girl” campaign for Always, Bell says its marketing is “inconsistent” and failing to justify the high prices of its products.
He says one way it can drive value is by emulating rival Unilever and its approach to driving the sustainability debate.
“They’re quite a bit behind Unilever still when it comes to making sustainability a key marketing message. They are doing a lot of positive things but not communicating them creatively – that will help them justify their pricing.”
It could be a case of doing more with less with Procter & Gamble looking to cull the number of agencies it works with worldwide and cut its marketing costs by up to $500m.
Growing overseas and addressing Gillette
While cutting down its portfolio to focus on homecare will make it a “more efficient business overseas”, Bell says P&G is still playing catch up with Unilever.
The strengthening currency exchange rates in the US have created issues for P&G, with previously emerging markets such as China cooling off. In comparison, Unilever thinks it has the answer for the falling Chinese market through its ecommerce tie-up with Alibaba.
Bell explains: “ You could say that Unilever has a head start due to historical reasons but they need to narrow that gap to be a truly international player in the future of homecare. Engaging with consumers more consistently could be key.”
Gillette also remains a problem for P&G with the brand not hitting the heights expected upon its purchase for a whopping $55bn in 2005. The shaving brand is failing to win over new generations and has already admitted that “hipster beards” are resulting in less people shaving in the UK.
It will need to come through with its promises to innovate and prove that the current trend away from shaving products really is – in the words of P&G’s grooming commercial director Ian Morley – “temporary.”
Despite these various challenges, Dibadji believes there will be a safe theme to P&G’s new boss. He concludes: “David Taylor will signal more continuity than change at P&G.
“Nonetheless, we continue to see lots of opportunity for P&G to improve its cost-structure, portfolio, organisational structure, and culture of accountability.”
Over to you, Mr. Taylor.