Artzt may lack popularity on his home turf. But he is winning Artzt, al kudos from Wall Street for attempting to save the $29 billion company from problems like those plaguing Sears and General Motors. P&G still has a raft of topselling, high-profile brands like Tide and Charmin-and its potential for growth overseas remains high. Last week’s announcement, however, reflects how corporate missteps, from a failure to price products wisely to a proclivity for hanging on to outdated brands, can throw a company into turmoil in a hotly competitive market. Says Chris Hoyt, a consultant and former P&G sales manager: “Today, Procter is reacting to situations; 10 years ago, it was planning and controlling them.”
The confusion may be at least partly responsible for the company’s recent decline in performance. Earnings were flat for the nine-month period ended in March, and because of the reductions, the company pests to report a $2.5 billion decrease in fiscal 1993 earnings. While a P&G spokesman says most brand categories have increased market share from a year ago, Wall Street–and even the company itself–worries about drops in crucial categories like disposable diapers and toilet tissues (chart). As Artzt, who declined to comment, told a group of analysts: “We want to take our company apart brick by brick and put it back together again.”
What’s gone wrong? Some experts criticize P&G’s “value pricing” strategy, designed to lure consumers with the offer of everyday low prices. One reason for the plan was to slash the amount of money P&G gave retailers to promote its products. But the idea angered retailers, who depended on P&G to finance their promotions. While they didn’t stop buying, some didn’t push P&G as aggressively. But P&G is betting that lower prices on some key products could restore loyalty to name brands.
To further protect its franchise, the company will have to pay more attention to competitors. Some P&G brands -such as Tide and Pampers-have been hurt by consumers’ fondness for cheaper, private-label merchandise. And the company has failed to jettison sluggish sellers like Gleem toothpaste. Last year Lever Brothers’ Lever 2000 soap edged out P&G’s Ivory and Zest. Even the venerable Crest has come under fire. Church & Dwight’s Arm & Hammer Dental Care toothpaste cut into its market share; later, P&G launched its own baking-soda product. If the company has been losing market share, it has also been losing people. More than a dozen key executives have jumped ship since Artzt took the helm three years ago. P&G recently sued one defector, former vice president Neil DeFeo, to prevent him from working for rival Clorox Go.
Despite all its problems, many Wall Street analysts are applauding the company’s decision to downsize. “Procter is one of the most visionary consumer-products companies in the U.S. if not the world,” gushes PaineWebber analyst Andrew Shore. The company has rid itself of lackluster brands like Citrus Hill, consolidated less profitable products with more lucrative ones (White Cloud is now Charmin Ultra, for example) and lowered its price on laundry products. Moreover, it has been successful in entering untapped overseas markets like China and Eastern Europe. Artzt predicts that in three years, the restructuring will result in “fewer layers of management [and] a simplified approach to running the business.” But to P&G employees, that may sound like CEO-speak for just another strike of the Wrecking Ball.
