Corporate Close-up: Scott (chart) DUNLAP FUELS CHANGE AS SCOTT BATTLES BACK JOB CUTS, SUBSIDIARY SALE ARE ONLY THE BEGINNING

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Scott Paper Co. is moving with lightning speed to focus on its core tissue business with a major brand marketing push expected next year.

Since Albert Dunlap took command as chairman-CEO last April, change has been the order of the day: new leadership, new strategic focus, new corporate culture.

He told shareholders in June: "Scott has had its problems. Over the last four years, Scott's average annual shareholder returns have been dismal. Scott has suffered from a lack of overall leadership, a lack of mental toughness to come to grips with those decisions a corporation must make, and a lack of focus. That will change."

Mr. Dunlap, a well-regarded turnaround specialist who doesn't mind being called Rambo in pinstripes, intends to change Scott from a paper company into a consumer products company.

For starters, that has meant cutting 10,500 jobs-one-third of the total work force-by yearend and selling off the S.D. Warren printing and publishing papers subsidiary for $1.6 billion to help grow Scott's global tissue business.

Now, the company is turning to marketing issues.

Spearheading Scott's worldwide marketing effort is Richard Nicolosi, named in September to the new position of senior VP-worldwide consumer products. He brings with him 23 years of experience at Procter & Gamble Co., Scott's chief rival, where he most recently was group VP-paper products. He left P&G in 1992.

To begin its marketing makeover, Scott last week appointed three worldwide agencies in a realignment that excludes incumbents Publicis/Bloom, New York, and the Weightman Group, Philadelphia.

The new agency set-up has McCann-Erickson Worldwide getting global responsibility for Scott's towel brands, including ScotTowels and Viva in the U.S., and Scottex in Europe and Asia.

J. Walter Thompson Co. will be responsible for mainstream bathroom tissue brands worldwide and the global facial tissue brands, while Bozell Worldwide gets wet wipes products and the Cottonelle tissue line.

Before the consolidation, Scott's advertising had been divided among a number of agencies throughout the world-though McCann and JWT had assignments in Asia and Europe, respectively. Bozell is new to the roster.

"This move is in line with our drive to develop and implement a new, stronger and more effective marketing strategy for Scott's core consumer products," Mr. Dunlap said last week. "That strategy represents the final element of my four-part plan to revitalize Scott."

Now the work begins.

"Our marketing strategy obviously will be focusing on brand power and leveraging our brands on a worldwide basis," said Neil Palmer, Scott VP-marketing for consumer products in the U.S. "The appointment of three highly reputable creative global agencies is clearly a key part of getting to our strategic objective to be No. 1 in sanitary tissue business in all the markets where we compete."

To accomplish that objective, No. 2 Scott will challenge P&G, the leader in the U.S. bathroom tissue and paper towel categories. Scott places a distant No. 3 in the facial tissue business in the U.S., behind leader Kimberly-Clark Corp. and No. 2 P&G.

Scott last year lost share in all its categories and spent a mere $9.4 million on measured media. That of course is about to change, but specific budgets are under development.

"This is the work that lies ahead," Mr. Palmer said.

Still, given the company's fast-moving pace under Mr. Dunlap, it won't be long before plans emerge to re-energize Scott's brand line-up.

"Our intention is to be a global consumer products company and that means we will be pursuing a differentiated strategy," Mr. Palmer said. "It's pretty clear that we have moved quickly in appointing the agencies, and as you can judge, we are moving rapidly."

Thanks to Mr. Dunlap leading the charge, the company is beginning to see results in a relatively short time.

Net income for the quarter ended Sept. 24 was $60.6 million, up 73% from the year-ago quarter. Dollar sales for both quarters were even at $1.17 billion.

"Our third-quarter results represent the best quarterly performance in four years and confirm the soundness of my program to revitalize Scott," Mr. Dunlap said last month. "We are in the midst of a major turnaround, and I am encouraged that the initial benefits of our restructuring efforts are beginning to show up on the bottom line."

Mr. Dunlap noted that the third-quarter earnings improvement was driven by a 48% increase in income from operations by Scott's global tissue business.

"Scott has a reasonably strong position," said Lawrence Ross, first VP at PaineWebber, New York. "On the outlook for the company, the earnings are going to get substantially better because of cost reduction, the balance sheet is going to get substantially better because of asset sales and the company is going to get substantially better because it's doing fewer things and doing them better.

"Will the business get better under Dunlap than it would have? You bet. He's a no-nonsense person."

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