Saturday 1 October 2016

P&G's CEO vows to boost quality after dumping brands

Lyubov Pronina

Published 21/02/2016 | 02:30

Procter & Gamble's corporate headquarters in Cincinnati Photo: Getty
Procter & Gamble's corporate headquarters in Cincinnati Photo: Getty

Procter & Gamble, which has spent the past few years offloading weak-performing brands and businesses, is now focused on improving the quality of products that remain, chief executive David Taylor has said.

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The company is looking to set a "much higher standard" for its brands, the 57-year-old Taylor said in an interview this weekend.

The idea is make its products noticeably better than competitors the first time consumers use them, he said. That means if a consumer tries, say, a Gillette ProShield razor, they won't want to go back.

"The real standard that we're going to try to stretch to," Taylor said, "is to have a 'wow' first-use difference."

Distinguishing its products is key at a time when Procter & Gamble faces mounting competition from low-price rivals, as well as a crop of upstart brands that have built loyalty with millennials.

The company also is more closely studying how its products are used in consumers' homes. That includes "deprivation" testing - when products are taken away and replaced with other versions.

"It's a really powerful way to see how much they really liked it - take it away from them," Taylor said.

Taylor has a tall order after replacing AG Lafley in November. Lafley, who returned for a second tenure as CEO in 2013, took dramatic steps to revive Procter & Gamble, including shedding 100 brands and selling off pet food, battery and beauty businesses.

Yet Procter & Gamble's growth has remained sluggish, and some analysts argue that it's still too big, complex and risk-averse.

Not true, Taylor said. "When we finish the portfolio transformation, we'll be a more focused company," he said. "The willingness of the leaders in the broader organisation at Procter & Gamble to evolve, adapt and change is very high."

Procter & Gamble's organic sales, which exclude currency effects and acquisitions and divestments, grew an average of about 2.8pc in the last five fiscal years. That compares with 4.4pc in the previous five-year period, which included the recession.

In working to reignite growth, P&G is emphasizing four top categories - fabric, baby, hair care and grooming - and its two biggest markets, the US and China.

The company has made missteps in China in the past, Taylor said last week at a conference in Florida - his first major appearance since becoming chief executive.

Procter & Gamble was slow to catch on to consumers' appetite for higher-priced goods, what he calls the "premiumisation'' of the market. It's now more attuned to that trend.

Procter & Gamble also is continuing to cut expenses. After embarking on a $10bn (€8.9bn) cost-cutting programme four years ago, the company is seeking to eliminate another $10bn over the next five years.

And it is trimming $7bn from its cost of goods sold this year, chief financial officer Jon Moeller said.

The company is also setting out to change the way it develops leaders. Procter & Gamble, long known for an insular culture, will be more open to hiring from outside. It also will give executives more time gain expertise, instead of shuffling them along, he said at the conference.

©Bloomberg

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