by Andy
May 11, 2012
In August 2009 I posted my first entry to the Relevancy Blog with little fanfare. Partly because I had no idea whether folks would read it or if I could really keep up with it. Thankfully readers seem to like it as it forces them to think differently about the role marketing communications plays in building brand depth. Thanks for all your support.
Back to my inaugural post. A quick re-cap discussed the recent retirement of AG Lafley as President/CEO of Procter and Gamble, and the coronation of Bob McDonald as his successor. AG Lafley was one of the most highly regarded CEOs in P&G’s history and widely credited with pulling it out of some very choppy water. Too many products, too many categories, pricing pressures from store brands, and cornerstone brands were adrift — all conspired to create poor market results. Nine years later, when Lafley stepped down, P&G was enjoying record revenues and profits – even as the recession was starting to really bare its teeth.
In the June 22, 2009 issue of Business Week, Bob was said to be “known as a skilled executor but doesn’t have Lafley’s reputation as a visionary.” While I have not keenly watched Mr. McDonald over the last three years, I can review some key financials and see how things are going.
P/E comparison over last three years
(source: YCharts.com – PE ratios for PG and CL)
Numbers can be deceiving and misleading. That said, unless P&G has announced extremely positive outlooks and a rosy picture for ’12 to confound these data (which has not occurred otherwise a good bump in their stock price would have occurred), their PE is troubling when compared to one of it’s primary competitors.
EPS comparison over last three years
(source: YCharts.com – EPS ratios for PG and CL)
Earnings per Share is also showing some difficulty. Colgate-Palmolive is showing improved earnings while P&G is trending down.
The one concern I mentioned in 2009 was that Mr McDonald was an operations guy — a very good operations guy — but without the charisma and vision attributed to his predecessor. To compound matters, the economy tanked and no one could have predicted how long it would last. The only saving grace is that grocery channels typically do well during recessionary periods. But even that tenet was put to the test and P&G did not fare that well.
Now I’m not privy to all the inner workings, strategic decisions, marketing investments and everything else involved with running the world’s largest consumer goods company, but either leadership was basing its future on looking backward (hoping old tricks would work in a new reality) or unexpected pricing pressures, miscalculations on ROMI (return on marketing investment), or something else was pushing P&G off it’s pedestal.
Or it’s leadership.
If relying on the same old tricks always led to the same positive results, then we would not need leadership. A simple computer program could analyze past actions and push the corrective buttons that worked before. But it’s not that easy. The past is not a clear indicator of future performance, especially in today’s globally-expanding, highly volatile world. In fact, it can be very misleading. To stay on top, you must continue to lead as if you’re not #1.
And leadership starts with communications. Unless leadership can explain what’s going on and where the company is headed, they will be subject to the winds of the market and forced to work even harder. To see the rewards of an envisioned future, you must communicate and instill that vision into the minds of employees, analysts, investors, retailers — everyone. Only then can you execute against it.
Downward performance of P&G could be a sign of stagnant leadership.
Downward performance of P&G could be a sign of stagnant leadership.
Leadership is a key– as is staying close to your customers and consumers. Does an Ops guy have the same appreciation for dealing with the trade and understanding the nuances of consumer trends? Are packaged goods companies properly positioned for a – potentially – extended period of high unemployment and overall wage pressure? The migration to the dollar channel and low opening price point SKUs is really throwing the old “playbook” out the window. Bottom line: one must stay close to the market and be ready to make changes. Holding firm at all costs is generally a losing hand.
Leadership is a key– as is staying close to your customers and consumers. Does an Ops guy have the same appreciation for dealing with the trade and understanding the nuances of consumer trends? Are packaged goods companies properly positioned for a – potentially – extended period of high unemployment and overall wage pressure? The migration to the dollar channel and low opening price point SKUs is really throwing the old “playbook” out the window. Bottom line: one must stay close to the market and be ready to make changes. Holding firm at all costs is generally a losing hand.
Taking a quote from Simon Sinek’s book “Start with Why.”….
“There are leaders and those that lead.
Leaders hold a position of power or influence.
Those that lead inspire us.”
Taking a quote from Simon Sinek’s book “Start with Why.”….
“There are leaders and those that lead.
Leaders hold a position of power or influence.
Those that lead inspire us.”
Hmmm . . . do the results represent structural changes in the marketplace and thus a strategy issue, or is it the result of failed brand management. Given the major restructuring of the marketing function that is underway we will likely know the answer in a few months.
Hmmm . . . do the results represent structural changes in the marketplace and thus a strategy issue, or is it the result of failed brand management. Given the major restructuring of the marketing function that is underway we will likely know the answer in a few months.
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