Procter & Gamble’s Push for Productivity

One year after laying out plans to cut $10 billion in costs by fiscal 2016, the company said it is moving full steam ahead.

One year after laying out plans to cut $10 billion in costs by fiscal 2016, the Procter & Gamble Co. said it is moving full steam ahead to improve productivity.

This story first appeared in the February 22, 2013 issue of WWD.  Subscribe Today.

At the Consumer Analyst Group of New York Conference held in Boca Raton, Fla., on Thursday, the company’s chief financial officer, Jon Moeller, reiterated that the plan consists of trimming $6 billion from costs of goods sold, $3 billion in nonmanufacturing overhead and $1 million in marketing.

Change is well under way at P&G, said Moeller. The $84 billion company has surpassed plans to reduce head count by 5,700 by the end of fiscal 2013 by eliminating 5,850 roles by the end of January 2013. A number of those posts, or roughly 1,000, have come from streamlining its marketing organization from five tiers, “or five hand-offs of work” to three tiers — namely global concept, regional tailoring and local execution. The change gives the company “a better line of sights from design to execution,” said Moeller. He added that P&G, which spent $13.7 billion on advertising and marketing last year, is focusing its efforts on “fewer, bigger ideas that can travel around the world.”

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The company also aims to stretch its dollars by shifting its spending from TV advertising toward digital media, which Moeller called a “higher return on investment.”

P&G’s hope is that the host of new products across hair care, makeup and skin care will give a jolt to its beauty sales, which, for the quarter ended Dec. 31, inched up 1 percent to $5.4 billion while unit volume was flat.

Moeller said the new Pantene Expert Collection, introduced in the U.S. last November, will expand to Latin America this quarter. Items in the collection are priced between 200 and 250 percent above Pantene’s base line. P&G’s introduction of Illumina Color by Wella has added 7,000 salons and will roll out to Latin America, and Australia and New Zealand in March. Other new products include Vidal Sassoon hair care, the reformulated Olay Regenerist, and a line tailored for young women called Olay Fresh Effects.

The company continues to train its sights on developing markets, which accounted for 38 percent of sales in 2012, or $32 billion. Moeller noted that in 2012, the company’s sales in Asia were $15 billion, up from $1.5 billion in 1991; in Latin America, sales were $8.3 billion, up from $1 billion in 1991, and in Central and Eastern Europe, Middle East and Africa, sales were $12.1 billion, up from less than $1 billion in 1991.

Moeller said, “We know there is significant more upside for trade up as the wealth across developing markets increases and as we continue to globalize premium innovation.”