Procter & Gamble Co. Chairman-CEO Durk Jager shocked Wall Street and the marketing world June 8 by stepping down, as P&G announced it would again fail to meet previously announced sales and earnings numbers. A.G. Lafley, president-global beauty care, will take the reins as president-CEO. Former Chairman-CEO John Pepper comes out of retirement to resume his role as chairman.
"The magnitude and pace of change we undertook this fiscal year is a major factor in our results," said Mr. Lafley in a statement to analysts. "In hindsight, it's clear we changed too much too fast."
The departure of Mr. Jager, 57, was termed a retirement but comes less than a year after he fully assumed the top post and in the midst of an Organization 2005 restructuring he spearheaded. P&G's stock price has been cut in half--trading around $59 a share at midday, down from highs of $118 in January--following Mr. Jager's abortive talks to acquire Warner-Lambert Co. and American Home Products Corp. and P&G's pre-announcement of an earnings shortfall in March.
Mr. Jager also had clearly clashed with many in the organization, including Messrs. Pepper and Lafley. Asked by an analyst to name two decisions in the past he had openly disagreed with, Mr. Lafley laughed and asked, "Only two?" before going on to instead detail how he had dealt with running P&G's global beauty care and North American businesses, both of which have seen sales and earnings growth in recent quarters even as P&G's overall business has foundered.
Gone will be the "stretch goals" favored by Mr. Jager for jump-starting P&G's top-line growth--sales growth goals that Mr. Lafley and P&G Treasurer-Chief Financial Officer Clayton Daley blamed for unrealistic levels of marketing support for many brands. Mr. Lafley said P&G would work to contain costs in all areas, including marketing, achieving the latter with more targeted advertising and promotion.
Mr. Lafley also said he would review all of P&G's businesses with an eye toward what may need to be divested and may delay or cancel some of P&G's ambitious plans for new brand and product launches. He also promised to focus more keenly on the company's core fabric and home-care and paper businesses, some of which have lost market share as P&G concentrated on rollouts of new brands.
(Pick up the June 12 issue of Advertising Age for a detailed analysis.)
Copyright June 2000, Crain Communications Inc.