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In a courthouse corridor last summer, as he prepared to testify against them, John Pepper apologized to two former Procter & Gamble Co. researchers named in a trade secrets suit against their new employer, Johnson & Johnson.

That's the kind of guy P&G's new chairman-CEO is: nice. But he's no soft touch either.

He can't afford to be. The company last week announced Mr. Pepper, 56, who bided his time as president after being passed over for the top job five years ago, on July 1 will succeed Edwin L. Artzt, who next month reaches P&G's customary retirement age of 65. Mr. Pepper's successor-with the additional, new title of chief operating officer-is Artzt protege Durk Jager, 51, who has been exec VP in charge of the U.S. business.

Mr. Artzt will become chairman of the board's executive committee, succeeding John Smale, who's keeping busy these days as chairman of General Motors Corp.

P&G also announced it will move from managing its business under two entities, the U.S. and international operations, to four: North America; Europe, the Middle East and Africa; Asia; and Latin America. The exec VP heading each region will report to Mr. Jager.

The P&G succession plan has been nine months in the making. The broad outline was presented to the board last June by Mr. Artzt. Some close to P&G maintain Mr. Artzt championed Mr. Jager.

"The message of the management committee [to Mr. Jager] was you're next in line, but you and John have to work together. And it is incumbent upon you to make it work," said one outside executive who works with P&G. "But they gave him a very important title, and that is a big vote of confidence."

While some wonder whether Mr. Jager will wait for his turn on top or if he'll gel with Mr. Pepper, the odd couple themselves publicly, at least, dismiss such talk.

"We're hugging each other right now," the Yale-schooled Mr. Pepper joked at a news conference last week. "The proof will be in the doing. We will have an outstanding collaborative relationship, and it won't be new." Quipped Mr. Jager, a native of the Netherlands: "I have only one complaint. I wish I could get Mr. Pepper in a Dutch language course."

In some P&G quarters Mr. Jager has earned the nickname of "Durk the Dagger" because he served as Mr. Artzt's hard-line point man on everyday low pricing and on P&G's prodigious litigation against copycat store brands. But those who have worked with Mr. Jager say he's far more than a junior Artzt.

"He is extremely bright and grasps things quickly. He's also the kind of guy you can have a few drinks with and hash things out," said one P&G U.S. executive.

And from a former P&G executive who worked under Mr. Jager: "Because of his language, he sometimes comes across a bit abrupt. But inside he has a huge heart and cares about people and understands that people have lives. He is much more toward John Pepper than people think."

Much more an Artzt in training, people say, is Wolfgang Berndt, 52, who will oversee the new North America region. Nicknamed "Wolf," Mr. Berndt is an avid sportsman and is said to act "like a tough Prussian." He moves up from group VP-president, health and beauty-care products, and president, Eastern Europe, P&G Europe, to exec VP-president, North America. Though said to be a strong strategic thinker, Mr. Berndt scores low on team building.

A more probable future top team is said to include A.G. Lafley, 47, who has been elected exec VP-president, Asia, from group VP-president, Asia-Pacific-Japan. Rated both bright and personable by financial analysts and P&G insiders, he has two huge allies in both Messrs. Pepper and Jager.

Jorge Montoya, 48, exec VP-president, Latin America, also gets high marks on all fronts, as does Harald Einsmann, now exec VP-Europe, Middle East and Africa. But at 60, he's probably too old to stay in the running.

Those running overseas businesses may have an edge-and the burden of proof. While international accounts for 53% of P&G's sales today, Mr. Pepper said last week, "Our global shares even in our most developed categories rarely exceed 20% and yet in our better countries are 50%. In the development of our categories in countries that account for the overwhelming majority of the population-80%-share is still only a fraction of what it is in the developed countries."

Beyond building international, particularly in oral care and haircare, Mr. Pepper is committed to building "whole new categories of profitable businesses." Said Paul Kelly, a principal in Silvermine Consulting, Wilton, Conn.: "Pepper wants to concentrate on healthcare and pharmaceuticals."

But while P&G is already in the business with its Vicks and Aleve products, it will require a major acquisition to become a serious player, industry analysts believe. It's widely thought P&G will aggressively move on joint ventures and acquisitions both here and overseas.

The original advocate of P&G's entry into the beauty business, Mr. Pepper is expected to make more acquisitions in that category. And though Mr. Jager seemingly wasn't an early believer in beauty, he's now a convert.

During the news conference, Mr. Jager also waved the flag for P&G's habitually rumored for-sale food-and-beverage business, but not everyone was convinced.

"P&G wins by outflanking the competition on multiple fronts. Head on and through the side door," said Jeff Hill, managing director of Meridian Consulting Group, Westport, Conn. "... Their growth areas are healthcare, pharmaceuticals and beauty care. Their maintenance areas are bar soaps, household and paper. Harvest is food. My gut is they will be out of the food business."

Contributing to this story: Jack Neff, Laurie Freeman, Jeanne Whalen, Ivy Silverman and Dagmar Mussey.

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