P&G at 175

P&G Turnaround Effort Aims to Create 'Culture of Productivity'

Digging Out After Tough Year, Company Sets Plan to Cut Costs and Go Back to Basics in Marketing

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Procter & Gamble Co. could have picked a better time to turn 175, given controversy over its recent performance as it loses market share to rivals large and small. Now the big question is whether P&G will ultimately celebrate in style -- by turning things around.

Chairman-CEO Bob McDonald
Chairman-CEO Bob McDonald

Embattled Chairman-CEO Bob McDonald has had a lot to say about the company's culture during his three-plus years in charge, from its purpose in touching and improving lives to the "culture of productivity" that he wants to instill.

He has made some progress. Fiscal-first-quarter earnings released Oct. 25 easily beat P&G estimates and showed progress on the market-share front. P&G had flat to slightly down market share in the U.S. and lost share globally across 55% of its business. But that was a big improvement from the prior quarter, when P&G lost share across 85% of its business. Now, the company is hunkering down on its proven business model, cutting costs and promising to by next year roll out "discontinuous innovation" that creates new categories and makes old products obsolete.

"It's no secret that we had kind of a tough year last year," said Global Brand-Building Officer Marc Pritchard. "Part of even the 175th anniversary is just to step back and say "What do we do best?' So we did that . And it's a really good model."

It's not all just a back-to-basics movement focused on the old problem-solution formula and boatloads of TV gross rating points. "It still takes incredible creativity and agility to be meaningful and relevant and modern today," Mr. Pritchard said.

He acknowledged that P&G hasn't had enough "superiority messaging" in ads of late, and one reason for that is having fewer big-bang innovations to talk about. "That's one of the reasons we're pushing on" discontinuous innovation, he said. This quarter's results at least bought some more time. Deutsche Bank analyst Bill Schmitz cited "great early progress" on the turnaround. "But it is the top of the first and the other teams still have some pretty good squads." "I think it's too early to claim victory at all," said Sanford C. Bernstein analyst Ali Dibadj. He likes the new focus on cost cutting but added, "We're not seeing great results on the top line even with the [marketing] reinvestment."

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