By Molly Prior
with contributions from Faye Brookman, Pete Born
 on July 28, 2015

In a long-expected move, Procter & Gamble Co. elevated David Taylor to the top leadership post in the company, succeeding A.G. Lafley as the next president and chief executive officer.

Taylor, whose appointment by the board was disclosed Tuesday, will take the reins, effective Nov. 1. Lafley will become P&G’s executive chairman.

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“David is a proven leader who has the experience and a track record of delivering results,” said Jim McNerney, lead director of the board, referring to Taylor, who is now  president of global beauty, grooming and health care. “He has a broad understanding of P&G’s business, having worked on several categories in multiple regions around the world. He has helped build many of the company’s most successful brands and businesses.”

McNerney also singled out the contribution of Lafley, who came out of retirement to put the company’s growth trajectory back on track. “We thank A.G. for returning as ceo to lead P&G’s transformation. The company is now organized into four industry-based sectors with a focused portfolio of 10 categories and 65 brands that play to P&G’s strengths. Productivity results are strong and sustainable. Stronger category business and product innovation plans are in place. Now is the time to transition to David as ceo, while continuing to benefit from A.G’s strategic counsel as executive chairman.”

Taylor joined P&G in 1980 and has worked on many core businesses, including baby care, family care. hair care and home care. Family care and home care both generated consistent double-digit profit and mid single-digit sales gain during his watch. He has lived and worked in North America, Europe and Asia.

Taylor will be taking the helm at a time when the company is undergoing a major transition after striking a $12.5 billion in divesting 43 of its beauty brands to Coty Inc.  But there’s a catch. The deal won’t close for another year, creating a holding pattern for P&G’s turnaround, and for the beauty business.

“The beauty business is in a little bit of limbo,” said Ali Dibadj, an analyst at Sanford Bernstein, who said top talent may feel jittery and potentially depart.

The Coty deal, which is expected to close in the second half of 2016, signals the end of A.G. Lafley’s strategy to cut P&G’s portfolio in half — dismantling much of the beauty business that he built over the years through acquisition — to 65 brands by fiscal 2016 in a bid to reignite growth.

With this project nearly complete, several Wall Street analysts had maintained that this was the time for Lafley to step aside, and he followed their advice onTuesday.

Taylor had been viewed as the front runner  since he took over the global beauty business in February.

Lafley, who is serving his second tour as ceo at P&G, returned to the consumer products giant in May 2013, and set out to restore growth with a string of initiatives, including cost cutting, organizational changes and increased accountability within the ranks.

Lafley told analysts that P&G’s missteps came after the company took its eye off of the consumer. Barclays Capital analyst Lauren Lieberman wrote in a recent research note that a recent meeting with P&G’s management team, which included Taylor, suggested the company is moving toward a different approach to its business. “As we understood it, going forward P&G is likely to treat individual business units in some ways like individual companies.…Employees would make careers in a category with rotations being across functions — from sales to marketing to supply chain — rather than across categories and should create far greater expertise and continuity, competitor intelligence and patience around new product development and market share growth.”

“[Taylor] is inheriting a company that is going through change,” said Dibadj of Bernstein. “A.G. Lafley has put a lot of the wheels in motion,” he said. “The question is are those changes enough?”

Stifel Nicolaus analyst Mark Astrachan said, “He’s coming into a situation that’s largely been determined for him. He has to figure out what he is going to do to reinvigorate sales growth.”

One tactic, Astrachan said, could be to reallocate a portion of marketing spending to reinvest it back into the business. “It’s not as simple as coming in and spending.”

Carrie Mellage, vice president of consumer products at Kline Group said the remaining portfolio “should be easier to manage since they share synergies of being mass-market and mostly commoditized categories, where winning is largely dictated by advertising budgets, price and added value.”

But restoring growth and reputation is no small feat. Industry consultant Allan Mottus said, “An engineer can tighten manufacturing and distribution making the company more profitable, but his competitors now are not in awe and can compete with what was once considered an untouchable marketer.”

Taylor’s appointment, should it happen on Thursday, could come on the heels of a tough quarter. In a research note released on Tuesday, J.P. Morgan analyst John Faucher forecasted 1.5 to 2 percent organic top-line growth. He wrote, “U.S. market shares are up, but European performance remains particularly weak, and we think China is continuing to perform poorly from a market perspective.”

ConsumerEdge Research analyst Javier Escalante wrote in a research note on Tuesday, “Having a new ceo is clearly needed. The question is whether Mr. Taylor can gain the perspective to outline a new strategy.…We don’t know for sure whether there is consensus among P&G executives that a new strategy and, perhaps more importantly, a new executive team is needed. But we do know that investors to whom we have talked think of these two factors as necessary steps to restore confidence.”

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