Beware Small Brands: P&G's Axman Cometh

VP Steve Bishop to Head Reorganization of Entire North American Business

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CINCINNATI ( -- Steve Bishop may not have been the most popular Procter & Gamble Co. general manager, but he surely was one of the most successful.

The North American fabric-care business he led during the past five years delivered $900 million in added sales, 3.5 points of market-share gains and the most active new-product effort in decades for flagship Tide- all while trimming ad spending as percent of sales by more than two percentage points.

Now, Mr. Bishop is turning his sights to reorganizing P&G's entire North American business. And that has some people buzzing.

In something of a replay from the 1990s, P&G is looking to cut staff and spending on some of its smaller brands (and possibly shed more of them altogether) as it looks to tweak its organizational structure. Mr. Bishop has been assigned to plan the North American piece of the revamp as VP-North America Region Organization Breakthrough Initiative, starting Jan. 15.

One big difference this time: P&G is operating much more from a position of strength. The vast majority of its 22 billion-dollar brands are gaining share globally, and even many of the smaller ones, such as Swiffer and Febreze, continue to grow and gain share.

P&G executives are billing the impending revamp as relatively minor tweaks to an "Organization 2005" structure that has helped drive the company's growth from $40 billion in sales in 2002 to more than $70 billion in the current year.

Growth aside, P&G still has plenty of smaller brands with flat-to-declining sales and/or shares. Many of them were acquired or launched after the company's last restructuring; those brands include Clairol, Thermacare, Pur and Eukanuba. Older brands in the same boat include Max Factor, Noxzema, Millstone, Puffs and Luvs.

Collectively, P&G's sub-billion-dollar-brands spent more than $1.1 billion on U.S. measured media in 2005, nearly a third of the $3.4 billion P&G spent overall, and were on pace to spend more than $1 billion again in 2006 through the third quarter, according to TNS Media Intelligence.

Like past restructurings, P&G's overhaul has a brand name: "Deliver the Decade." But a spokesman said, "This is not a companywide downsizing program," and P&G has vowed not to take any more restructuring charges like the two waves from the 1990s. Any staff shifted from smaller brands could be reassigned, and other job reductions could come through attrition, he said.

Overseeing the global revamp is President-Global Strategy Marc Pritchard, shifted this spring from heading P&G's struggling cosmetics and hair-colorants businesses.

"We want to derive faster growth and higher productivity from our smaller brands," Mr. Pritchard said during a taped segment of P&G's analyst conference last month. "The first step is to take a hard look at each small brand's growth potential and role in our portfolio, the resources required to grow it, and ultimately each brand's potential for value creation.

"In some cases, we may streamline resources dedicated to the brands," he continued. "In other cases, we may look for unique solutions with external partners who may help us create more value. We know there are some jewels hidden in our portfolio."

Some jewels may be getting their last chance to shine. Aussie and Infusium, two of the smaller brands acquired in the Clairol deal, will be restaged with new packaging and advertising this month. Pur will get a boost this year with Pur Flavor Options, which adds sugar-free flavors to filtered tap water. Eukanuba's revamped line hits stores in March.

Mr. Bishop's appointment has drawn considerable interest from some close to P&G. He's seen as a tough guy and unpopular with some of the company's agency and marketing executives, having given a thumbs down at one point to a 2004 ad campaign that contributed to two key people at Publicis Groupe's Saatchi & Saatchi leaving the Tide team.

But his success is well-documented, and he achieved it while cutting ad spending. TNS data indicate P&G's fabric-care business held measured spending on the biggest brands-Tide, Downy and Gain-roughly flat over five years while cutting or eliminating media support for most other brands.

But budget-cutting acumen wasn't the reason for Mr. Bishop's appointment, according to the spokesman. "Steve was selected for the position because of his ability to lead, collaborate and innovate, and because of his familiarity with the North America market," he said.
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