P&G priority: Build brands

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For procter & gamble co., a marketer whose identity is tied to brand building, it's a humbling time. There are hard decisions to make on how to rebuild investor confidence and profit growth. But one priority is clear: Continued marketing investment in brands is a P&G "cost" that must be borne in the months ahead -- no matter what.

The Wall Street massacre that hit P&G stock March 7, when its price plunged 31% in a single day on surprise adverse quarterly earnings news, will no doubt preoccupy top P&G managers for some time. Rather than grow an expected 7% this quarter, P&G said operating earnings per share will probably be down 10% to 11% from last year. (For the year ending June 30, it revised its forecast earnings growth to a 7% increase from a 13% increase.) Management must now make the case for an "old-economy" package-goods marketer to investors singularly focused on the Internet.

It's one thing to seek to repair tattered Wall Street relations. It's another to even momentarily overlook the fact that P&G's long-term vitality depends on the relationship of its brands to consumers, and on its ability to introduce the new products that build sales and profit margins. This takes a steady flow of marketing and R&D dollars.

Chairman-CEO Durk Jaeger has big and commendable ambitions for making P&G a faster moving, quicker-to-market and more nimble competitor. With P&G stock at loftier levels, big acquisitions (Gillette Co., Warner-Lambert Co., American Home Products) were even contemplated. The company's "black Tuesday" on Wall Street will probably turn P&G inwards now, and new-product momentum may suffer as the pace of costly rollouts is slowed.

Whatever tonic Mr. Jaeger administers, the core strength of P&G remains the brands it has today, and those it will build tomorrow. Marketing and advertising will build that tomorrow, as generations of P&G leaders have proven.

It's old wisdom, and true as ever even in today's economy.

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