Where next for P&G?

Former CEO AG Lafley's unexpected return to Procter & Gamble signals change, and a glimpse of its former stability; but how will it affect the company's brand marketing strategies, asks Ben Bold.

When Procter & Gamble announced a month ago that its former chief executive, AG Lafley, was returning after four years' retirement to retake the helm from chief executive Bob McDonald, Wall Street reacted with surprise. However, it received a warm response, which differed markedly from the litany of analysts' complaints that have blighted McDonald's troubled tenure at the FMCG company.

A P&G spokesman insisted that McDonald has simply chosen to step back after 33 years of service, having made "substantial progress" in the top job; others are far more scathing. So what went wrong for the business, home to brands from Max Factor to Ariel, under his stewardship?

"Bob didn't move the game on from the AG days and brought nothing new to the party," says Simon Michaelides, marketing director at UKTV and a former P&G marketer under Lafley's previous regime, which lasted from 2000 to 2009. "In terms of personality, he lacked dynamism by comparison and had no rallying cry for the organisation."

Such damning sentiments echo the criticisms of many commentators, who have attacked McDonald for focusing too much on high-end innovation. "He also decided to go after low-return investments in emerging markets (where there was already strong competition from other more established players)," adds Ali Dibadj, an analyst at US research firm Sanford C Bernstein.

Under McDonald, P&G last year embarked on an unsuccessful bid to cut $1bn from its $10bn global marketing spend by shifting focus onto social sites and earned media. Reports subsequently emerged that P&G had been hit by Facebook's algorithm change, meaning its brands were unable to reach their entire audience via the network.

Since Lafley rejoined P&G on 23 May, he has already announced a restructure that will split the company's two business units into four, a move he claims will "help (P&G) get closer to the consumer and become more agile with customers".

Each of the global divisions - baby, feminine and family care; beauty; health and grooming; and fabric and home care - will be led by a senior P&G executive, one of whom, it is widely expected, will eventually succeed Lafley as chief executive.

Although credited as Lafley's initiative, observers contend that the restructure was planned before he had even discussed a return to the P&G hot seat. They also argue that, while the selection of potential successors makes sense, the structure itself is unhelpful to "accountability" within the business.

Nevertheless, Lafley's return has been met with a positive response in many quarters.

Jenny Ashmore, a marketing and strategy consultant at consultancy OxfordSM, spent more than a decade at P&G, in roles such as Pampers global marketing director. She describes Lafley as "incredibly thoughtful and insightful", and predicts that he will make a series of "sequenced interventions" to restore P&G's momentum.

Will this insightfulness lead him to ditch the new media-based approach to marketing and go back to basics?

I think AG's mantra will be: let's not get lost in the 'buzzword bingo' of digital and technology.

Michaelides thinks not, insisting that the days of the 30-second TV spot are "long gone". He adds: "I think AG's mantra will be: let's not get lost in the 'buzzword bingo' of digital and technology; let's look at how consumers are using Facebook and Twitter and act accordingly."

But this will not necessarily translate as further cuts to marketing spend, according to Dibadj. "The problem with cutting spend is that you still have to compete with rivals," he adds.

Speculation continues as to the precise nature of Lafley's remit - is it merely to oversee a succession plan for one of the four division heads, or to put the ship back on course for calmer waters? "A little bit of both," contends Dibadj. "He is CEO and is going to make tough decisions, but I think he knows it's one of the four (who will succeed him)."

Lafley's "second coming" may well end as suddenly as it began. Yet one can be sure P&G will make doubly certain that he hands the reins to the right candidate after its recent troubles.


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