One year on: Has P&G CEO David Taylor been a success?

It has been a year since Procter & Gamble appointed David Taylor as its CEO, but it still faces pricing challenges and a consumer appetite for constant innovation.

Procter & Gamble (P&G) hired David Taylor as its new CEO just over a year ago, who was tasked with getting the business to grow again. When P&G announced his appointment in July the business was facing falling sales, with net sales dropping 5% in 2015 to $76.3bn. It was also in the midst of a streamlining process.

That process included plans to cut its agency roster and reinvest some of the $500m (£375m in savings in marketing activity. At the time, chief financial officer Jon Moeller said the fees and production costs paid to advertising, media and PR agencies offered “significant” cost-cutting opportunities.

Yet fast-forward a year and Taylor has admitted it took those cuts too far. Speaking on an analyst call recently, he said that in order to “restart” revenue growth the company needs to “get back to making consumers aware of its products and communicating their benefits”.

“We want to increase sampling and trial generation,” he added. “We need to be more relevant in-store and online.”

“It is all part of an activity system we believe will help us restore market share growth that is necessary going forward.”

David Taylor, CEO, P&G

To boost revenue growth, P&G has also been cutting its brand portfolio. It has offloaded almost 100 brands, including selling battery brand Duracell to Warren Buffet’s Berkshire Hathaway and a huge chunk of its beauty brand business including Max Factor, Covergirl and Wella, to Coty as part of a $12.5bn (£9.4bn) deal.

Yet the latest results show the company is still struggling to find that growth. Net sales came in at $65.3bn (£49bn) for its fiscal year ending June, an 8% year-on-year decline. And the outlook for 2017 is for net sales growth of just 1%.

Taylor described 2016 as a “period of progress” as it looks to balance “top-line and bottom-line growth” and that 2017 will mark a “significant step” toward achieving that balance. Yet what is clear is that Taylor still needs more time to get P&G growing again after a period of unprecedented change.

The problem with pricing

One problem Taylor needed to address when he started his tenure was pricing. According to the Wall Street Journal, P&G has run into problems in its home market of the US after clashing with major retailer Walmart over the premium prices on its more mature brands.

Twelve months on, pricing still seems to be a stumbling block – particularly in developing markets. The latest results show a drop in organic volumes across emerging markets, in part due to price increases. As a result, P&G will have to consider the population with lower incomes when it comes to its pricing and advertising if Taylor wants to unlock future growth.

Svetlana Uduslivaia, head of tissue and hygiene industry at Euromonitor, explains: “Marketing products at the same price level as in the developed markets could present a continuous challenge.”

“While the premium segment is important, P&G should consider who can afford these products and where the future volumes are coming from. Wealthier urban centre and middle or upper class consumers are reaching saturation in terms of use.”

Battling Unilever and improving its online presence

P&G has also faced questions over whether it is is doing enough to innovate, despite spending up to $2bn (£1.5bn) a year on research and development (R&D). Competitor Unilever has increasingly talked up its focus on innovations and has not been afraid to acquire when necessary, as seen in its purchase of online subscription service Dollar Shave Club.

Unilever has also started teaming up with startups that align with its brands to reach more potential customers. In August, Unilever’s Persil brand launched a three-month partnership with mobile dry cleaning and laundry startup ZipJet, offering consumers a new ‘Persil Wash & Fold’ service that will see clothes washed with Persil washing powder.

Dollar Shave Club is increasingly seen as a thorn in P&G’s side. It holds 54% of the online shaving marketing in the US, according to Euromonitor, and 5% of the total shaving market. By comparison, Gillette’s share of the online market is 21% while its overall share has dropped from 71% in 2010 to 59% last year. Translation: P&G needs to up its ecommerce game.

Gillette Joe Hart
Gillette launched the Gillette Shave Club in March this year to win back market share.

P&G knows this, as evidenced by the launch of its own subscription service for Gillette. It also introduced a subscription service for its Tide Pods laundry brand in July, as it looks to try to ensure other markets are not disrupted by online startups.

With more digital disruptors entering the market, it seems the company’s strategy to improve its presence and performance online is well-judged. However, Ian Bell, head of homecare research at Euromonitor, believes Taylor still has a lot more to do.

“The company is set to embark on a period where it is looking to invest significantly more into research and development, which is incredibly important to the business if it wants to keep cutting through with consumers,” he says. “In core markets like North America, they are facing a period where they continually need to do something new to really stimulate consumers.

“Particularly when it comes to its laundry business, most consumers see it as a task. They need to make it quicker and easier while focusing on sustainability – which is something Unilever has really honed in on.”

More inclusive marketing

P&G has seen huge success with some of its marketing. Its ‘Like a girl’ campaign for its Always brand has won plaudits for tackling gender inequality, while ‘Thank you mum’ continues to be a key pillar of its brand success, most recently for the Rio Olympics. The campaigns show P&G moving away from outdated perceptions of women and family to show a brand that is more in-tune with consumers today.

like a girl
P&G’s ‘Like a Girl’ campaign was a big hit.

Bell explains: “P&G has stepped away from the 1950s orientation, which focuses solely on the brand and its benefits. It is now more willing to include men in its advertising, too. It’s no longer focused on targeting ‘the consumer’ – it’s about him and her.”

Yet there is still a job to do at P&G to understand local cultures. That can be difficult for a global brand that works across multiple markets. Uduslivaia explains: “While it has put a bigger emphasis on having an online presence, there is still some way to go for it to better speak to local tastes and preferences.”

P&G under Taylor certainly seems to have made some steps in the right direction, focusing on innovation and increasing its online presence. It is also clearly willing to reverse mistakes – as evidenced by Taylor’s comments that cuts to its marketing budget had gone too far and that it needed to get back to growth.

It has also been hit by factors outside its control – difficult economic conditions in South America, a strong US currency. Yet if P&G is to see sales accelerate he will need to remember that key to any FMCG company is its brand and the strength of the brands it owns. Investment in them, whether through R&D, online innovations or marketing, is key to getting consumers to pick one of its products, not a rivals’, despite ever-increasing competition on the aisle.

Festival

Find out more about digital transformation and driving innovation at the Festival of Marketing, which is running on the 5 and 6 October at Tobacco Dock, London. For more information about the event, including how to book tickets, click here.

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