Post-Lafley, Procter & Gamble Is Trying to Turn Challenges Into Opportunities

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Since taking the helm from former CEO A.G. Lafley in November, long-time P&G executive David Taylor has had his hands full with matters big and small. The challenges befit the kind of conglomerate Procter & Gamble is, with dozens of billion-dollar CPG brands in dozens of countries.

Taylor will continue reshaping and slimming down Procter & Gamble so it can fulfill the strategy Lafley put together before he retired and focus more vigorously and efficiently on home-care and personal-care brands that will continue to define the company, such as Tide and Crest. For example, pressures for efficiencies and cost cuts have prompted P&G to consolidate its PR work with five agencies from a larger list.

But he has to deal with at least one fly in the ointment already. Though P&G accepted Coty’s bid of $12.5 billion for 43 P&G specialty beauty brands in July, the debt assumed in the deal now will be adjusted downward because the license holders of two of the perfume brands—Dolce & Gabbana and Christina Aguilera perfumes—didn’t consent to the deal in the time specified, so those brands will not be part of the merger.

Meanwhile, P&G continues to be dogged by the fact that the US dollar has strengthened, and it has more business abroad than in the US, so currency translation really hurts its top and bottom lines. Unfortunately for P&G, the strong dollar trend doesn’t appear to be slowing.

And overall, as P&G has continued to perform disappointingly over the past few years, it is beginning to become the subject of speculation that activist investors and other financial pressures could lead to drastic outcomes such as a split—similar to the recent Dow DuPont merger in which the new company splits into three. One of the most successful activist investors, Bill Ackman, has been pestering P&G for years.

“If fundamentals fail to improve over the next year under new leadership,” Sanford G. Bernstein analyst Ali Dibadj wrote recently,” P&G should break up. “Persistent earnings and stock underperformance relative to peers have created negative sentiment around the name, [so] a breakup may be best for Procter & Gamble.”

To be sure, P&G keeps on ticking in its quest to turn things around. At CES in Las Vegas last week, for instance, the company demonstrated a $49 connected Febreze plug-in that lets consumers release one of two scents in their house by using a smartphone app. In marketing, P&G has decided to throw yet another twist into the evolution of the Old Spice brand by reformulating the product and rebranding with the help of a digital infomercial to get the message out—a tongue-in-cheek effort that features infomercials hosted by “Bob Giovanni, the king of products.”

It may take a lot of Bob Giovannis to turn things around for P&G. But Taylor will give it his best shot.

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