The company is proving the skeptics wrong: A giant $30 billion, bureaucratic bastion of slow-moving MBAs can change into a 1990s-style competitor.
While P&G brands like Tide laundry detergent, Crest toothpaste, Pampers diapers and Pert Plus shampoo among others usually lead or are a close No. 2 in their respective categories, some once said the company wasn't nimble enough to fend off attacks on its premium brands.
But in less than 2 years, P&G has streamlined its brand line-up, cut product costs and reduced red tape. In short, the world's largest advertiser with a $2.4 billion ad budget in the U.S. alone is not fooling around.
In his report to shareholders at the company's annual meeting last week, Chairman-Chief Executive Edwin Artzt said every sector and region of the business grew in volume and share. He cited value pricing, across-the-board product innovation and cost reduction as key contributors to the company's growth.
It hasn't been easy.
A major corporate restructuring begun last year will eliminate 13,000 jobs, or 12% of P&G's worldwide work force. Some 30 manufacturing plants are expected to close. Now nearly two-thirds of the way through the painful process, P&G is beginning to feel positive results financially while becoming a more agile marketer, analysts say.
P&G in fact expects to report Oct. 26 record sales and earnings for the quarter ended Sept. 30, thanks to strong volume performance and cost control.
"We are quite encouraged by the state of our business," Mr. Artzt told shareholders. "The pace of volume growth we reported last year is continuing into the first quarter of the new year." P&G's fiscal yearends June 30.
Though fiscal 1994 sales of $30.3 billion were about even with year-ago sales, after-tax earnings-excluding the derivatives charge-were up 15% to $2.2 billion. Unit volume was up 5%. But P&G wields more than financial clout.
"P&G's strength is a function of global reach, research and development, brand dominance and technological prowess," said Andrew Shore, analyst at PaineWebber, New York. "The company hasn't been stronger in the last decade. What separates P&G are the two most important criteria for success over the next decade in the consumer non-durable goods industry: technology as it relates to product innovation and technology as it relates to information systems to make retailers more efficient."
Mr. Artzt at the annual meeting outlined the company's three-prong strategy to, as he put it, "keep this good thing going." He cited the following plans:
Build core established businesses through continuous product innovation.
Expand core categories into new locations.
Enter new categories with new brands.
Refuting the belief that growth opportunities are limited in categories where the company has a dominant share, Mr. Artzt pointed to the $25 billion global laundry market, where P&G holds about a 23% share. The P&G chief believes that share can grow to 33%, or another $2.5 billion in sales, by the end of the decade-if the company develops new products.
Laundry detergent represents P&G's largest core category. P&G plans next year to expand to the U.S. a cleaning technology found in the new Ariel Futur, rolling out now in the Netherlands, Switzerland and Scandinavia after a September introduction in Germany. People close to the company expect the Tide brand here to get the improved formula but the company would not comment.
Mr. Artzt said P&G now is focusing on expanding its paper towel/tissue business globally. The company plans to apply its technology and marketing expertise to the newly acquired brands from VP Schickedanz in Germany: Tempo, Europe's leading facial tissue, and Bess, the leading bathroom tissue in Germany.
The one soft spot he acknowledged was Pampers, a brand hurt by Kimberly-Clark Corp.'s Huggies and private-label competition. "Pampers' share in the U.S. has been flat and we need to do a first-rate job of introducing our new diaper with stretch elastics to help get the business growing again."
While many Wall Street analysts believe future growth will come from brands in the healthcare and beauty-care sectors where P&G is a relative newcomer, a few caution those categories aren't a piece of cake. For one thing, they are concerned that P&G is not doing well with the Max Factor relaunch.
"I think beauty care is one of the biggest busts for P&G along with Crush [orange soda] and cookies," said Gabe Lowy, analyst at Oppenheimer & Co., New York. "I think they will get out of beauty care and fragrances because they aren't making it."
But Mr. Artzt has other ideas, and Wall Street is generally impressed by P&G's overall strength-at a time when many competitors are getting weaker.