Procter & Gamble (NYSE: PG) is reshuffling its management line in an effort to simplify its structure, boost growth and provide new business units better “execution freedom.” The company reported the news at its yearly investor gathering last Thursday in Cincinnati. The declaration comes after Nelson Peltz, the dissident investor, joined the board in March following a strenuous proxy fight.
Peltz had earlier called for a disentangled framework, saying it would increase responsibility, skill, and reaction to domestic needs. P&G’s stocks have rallied over 29% after reaching a yearly low of $70.73 a share in May, representing a market capitalization of $227.6 billion. The stock closed at $92.41 a share on Friday.
P&G re-organizing into six business units
Valid from the 1st of July 2019, P&G will streamline its ten product categories into six industry-organized business units: fabric and home care; family care and new ventures; baby and feminine care; health care and beauty care; and grooming. Each business unit is led by its own CEO, who is responsible for all critical decisions such as product and package innovation, marketing, including consumer research, supply chain, selling and retail execution, costs, and reporting to P&G chairman, president, and CEO David Taylor.
Changes will occur in the largest P&G markets, such as the United States, China, Canada, and Japan, which accounts for approximately 80% of their sales. The other markets will have their own operating units.
P&G says that the organization of these units creates innovation plans and framework conditions that are better suited to drive growth in these markets, in part by offering more freedom of execution.
Furthermore, P&G plans to move approximately 60% of the work that’s currently taking place at the corporate level – and the related resources – to these local business divisions and markets. Certain tasks, including back-office operations and administration, will be carried out at the corporate level, as will its “Corporate Research & Development” group, which creates upstream solutions and technologies that can help numerous businesses and generate prospects for P&G to penetrate new sectors. Always, Tide, Gain, Old Spice, Gillette, Oral- B and Pampers are some of the 22 consumer brands of P&G in the Canadian market.
Regarding the reshuffle, CEO David Taylor had the following to say: “This is the most significant organization change we’ve made in the last 20 years. We will have a more engaged, agile and accountable organization focused on winning with consumers through superiority, fueled by productivity, and operating at the speed of the market.”
Similar to all consumer giants, the manufacturer of Gillette razors and Pamper diapers had to battle with small, but agile competitors such as Harry’s razor club, as well as the private label stuff from Amazon. However, the company’s first-quarter last month reflected the most robust growth in sales and market share in five years, partly due to an ongoing five-year strategy to simplify the company’s costs and size.
Taylor stated that in order to hand overgrowth to P&G shareholders, the company is accelerating the pace of change and beefing up the implementation to face the challenges of the vibrant world today.
Keith Johnston, Forrester Vice President, and CMO Research Director explained how this could affect P&G CBO Marc Pritchard’s role. “It’s been stated in several releases that marketing will be run autonomously under the new business units, including brand and consumer communications. In this scenario, Marc Pritchard has either gained six new CEO clients, or he will lead the centralized programmatic media, data and analytics, and marketing technology and operations that have been put in place in the name of efficiency. It would certainly seem counterproductive to unwind all that.”
The Tide manufacturer also stated it was extending the role of its CFO, Jon Moeller, to the position of Chief Operating Officer. In the new role, Moeller will supervise the markets, which are not included within the major six units.
The SBUs and their CEOs are:
- Beauty – Alex Keith
- Baby and feminine care – Fama Francisco
- Fabric and home care – Shailesh Jejurikar
- Family care and ventures – Mary Lynn Ferguson-McHugh
- Grooming – Gary Coombe
- Healthcare – Steve Bishop
The market is expected to react positively to the reshuffling announcement in the week ahead.
The price chart indicates that the stock has broken the resistance at 88 levels. Additionally, the stock is now comfortably trading above its 50-day moving average, and the MACD indicator is ascending in the positive region. As a result, the stock is expected to appreciate further.
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