Polman, a Former P&G Star, Is Set to Lead Nestlé

Exec Couldn't Get to Top of Cincinnati Marketer; Now He's CEO at One of Its Biggest Rivals

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This story has been updated. See below for details.

NEW YORK (AdAge.com) -- Paul Polman couldn't rise to the top of Procter & Gamble Co., but he may have risen above it.
A classic rivalry is brewing between P&G and Nestlé, not only along business lines, but possibly along personal ones as Nestlé puts 25-year P&G veteran Paul Polman at the helm. Credit: Nestle

The man expected today to be named to succeed Peter Brabeck as CEO of Nestlé will lead a package-goods marketer that's already grown bigger than P&G and, with the addition of L'Oreal, could soon grow bigger still.

Crucial decision
Only a few years ago, Mr. Polman was leading the turnaround of P&G's Western European business. But that didn't earn him a shot at the CEO post at P&G. Instead, he left in 2005 in a move that surprised many in and outside the company. Now, he'll be leading what may be P&G's most formidable rival ever. Mr. Polman, 51, could, within the next few years, face the crucial decision of whether Nestlé should take full control of L'Oreal.

Nestlé already owns 29% of L'Oreal, the world's biggest beauty company (just ahead of P&G), and has right of first refusal on another 30% owned by French billionaire Liliane Bettencourt, 84, either upon her death or decision to sell.

Thanks to strong sales growth and a weak dollar, Nestlé has already pulled ahead of P&G in the past year as the world's biggest package-goods marketer, with annual sales of $83 billion to P&G's $76.5 billion. Adding L'Oreal's $24 billion in sales would put Nestlé well over $100 billion. Both Nestlé and L'Oreal have been growing organic sales by 7% to 8% the past year, compared to 5% for P&G.

A combined Nestlé and L'Oreal also would likely leapfrog Unilever as the No. 2 global advertiser to P&G's No. 1.

"I'd have to think [Mr. Polman] having competed against [L'Oreal] all those years and admiring them all those years" would want Nestlé to take full control, said Deutsche Bank analyst William Schmitz.

A personal rivalry
It would also set up a classic rivalry not only along business lines, but possibly along personal ones as Nestlé puts the 25-year P&G veteran at the helm. Mr. Polman, who led a dramatic turnaround for P&G in Western Europe after he took over as president of the region in 2001, seemed to have the credentials to contend for leadership of P&G.

He's younger than the top remaining contenders to succeed current CEO A.G. Lafley, 60, including Bob McDonald, 54, chief operating officer, and President-Global Business Units Susan Arnold, 53. And he once was promoted ahead of Ms. Arnold as president-global fabric care when Ms. Arnold was VP over the U.S. business. At that point, he also ranked ahead of Mr. McDonald.

That was when his mentor and fellow Dutch national Durk Jager was still on P&G's executive floor (then as chief operating officer, a year later as chairman-CEO). When Mr. Jager stepped down as CEO in 2000, however, Mr. Polman's career fortunes took a turn for the worse, at least relatively. By contrast, Mr. McDonald and Ms. Arnold, both of whom had worked with Mr. Lafley in the North American laundry business in the 1980s, began steep upward career trajectories.

Mr. Polman did get a promotion, heading from P&G's Cincinnati headquarters to Geneva, Switzerland, as president-Western Europe in 2001. But his progress stalled. He got a one-rank bump to group president with the same duties in 2004, but Mr. McDonald and Ms. Arnold at the same time were promoted ahead of Mr. Polman and were given vice chairman roles.

Admired by Lafley?
Some close to P&G believe Mr. Polman was hurt by being seen as a protégé of Mr. Jager, who had left after P&G missed its earnings targets for two quarters, though others said Mr. Lafley seemed to admire Mr. Polman's work.

"I was shocked and surprised when I walked in one day and heard that Paul was on special assignment and was going to be leaving the company," said one former P&G executive. "It all seemed so abrupt. ... To this day, I don't know what happened or why. It was not one of those subjects you really pried into."

P&G's statement in February 2005 said Mr. Polman "has announced his intention to retire ... for personal reasons and to pursue other interests." He stayed on in a special assignment, reporting to Mr. Lafley through June and helped on the integration of Gillette, whose acquisition P&G had announced weeks earlier. But Mr. Polman was replaced immediately atop the Western Europe business, even as Mr. Lafley in the statement praised him for leading the region's turnaround and called him "an inspirational leader for his organization."

The following September, Nestlé named Mr. Polman chief financial officer, a position in which he was groomed to take over for Chairman-CEO Peter Brabeck, who was under pressure from European investors to split the chairman and CEO duties. Mr. Brabeck will stay on as chairman after Mr. Polman takes over.

'Big picture man'
Views of Mr. Polman among his former colleagues vary. Mr. Polman is "a big picture man," Mr. Jager said in an e-mail. "He is a future- and results-oriented manager who cuts through the [bureaucracy], the politics. He is a good marketer with interest in innovation."

Another former colleague said Mr. Polman was very much like Mr. Jager -- with a tough, take-no-prisoners style -- and said he was not a good listener.

But Jeffrey Ansell, former P&G president-global pet health and nutrition and now CEO of Pinnacle Foods, said Mr. Polman was "exactly what [Western Europe] needed at the right time. There were a lot of morale issues. He was a very strong, inspirational and engaging leader."

And, he maintains, a good listener. Mr. Ansell was a neighbor of Mr. Polman's in the posh Cincinnati suburb of Indian Hill before the latter's assignment to Western Europe. And when he invited Mr. Polman to spend a day at Iams' Dayton headquarters to learn more about the business before leaving for Europe, he not only did so, but took considerable time delving into the details.

Now Mr. Polman leads one of Iams' chief rivals -- the global Purina business. As CFO, he has also been implementing some of Mr. Jager's P&G playbook from the 1990s at Nestlé, which, despite fairly consistent and strong top-line growth has lagged many of its global competitors in profit margin. Mr. Polman found the Nestlé stock-keeping units were growing faster than its sales, so he had managers slash 20% of them in 2006 and another 10% this year, with more yet to go.

Ambitious goals
He's also publicly stated some of the ambitious growth goals for some of of the marketer's businesses -- such as nutrition -- and put other more troubled units, such as U.S. ice cream, under closer scrutiny with monthly updates required. "Stretch" goals and close senior scrutiny of struggling businesses may be old hat for P&G, but less so for Nestlé, traditionally run with much greater country and business-unit autonomy.

As CEO, Mr. Polman will also likely take a tough, analytic look at Nestlé advertising. In a 2004 interview with Advertising Age, he recounted how Western Europe had gone from having about 30% to 40% of its ad copy rated effective (via copy tests) to about 80% in only three years on his watch. "That's a simple example of superior execution," he said.

But Nestlé is far from needing a turnaround in the manner that P&G's Western European business did, even if the Swiss company has lacked some of P&G's operational discipline. Nestlé has been one of the strongest top-line performers in the global food industry for more than a decade. Adding L'Oreal would mean adding the beauty business with the strongest track record of performance over the past decade, too.

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UPDATE: After this story was posted, Advertising Age learned Paul Bulcke, and not Paul Polman, was tapped to succeed Peter Brabeck as Nestle CEO. This is the original story.
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