On Friday, the headlines on Procter & Gamble (
) announced a change in CEO, going back to the future with a
reappointment of AG Lafley, replacing his replacement, Bob
The headlines were about unhappy activist shareholders and U.S.
margin declines, slower revenues, and brand loyalty. What
the headlines failed to address is that P&G is an emerging
market company and this is where their future is tied.
Right now they are losing the battle to local producers and
). Procter & Gamble is an emerging markets company whether
they want to be or not. The changes that are were (are)
demanded from shareholders logically tell you that.
They need to grow the top line by delivering in Asia, Latin
America and the Middle East. The problem here is that
despite having the right strategy, Bob McDonald did not execute
successfully in emerging markets.
A quick look to the top line tells you that Procter &
Gamble has actually done a great job moving overseas. In
the last decade, North American sales have shrunk from 54% to
38%, while Asia has moved from 11% to 19% and Middle East
Africa/Latin America has moved from barely registering to now
People have pointed to the change in CEOs as something that is
similar to JC Penny (
), bringing back the old trusted hand and replacing the guy who a
bold new strategy.
This is not JCP scenario; this is more complicated as a
company with 126k people globally must deal with local labor,
regulations, and cultural elements.
Procter & Gamble has not failed here but it has not gotten
this right. Unilever is eating their lunch as they have done a
better job of marrying higher margin products to the emerging
markets consumers who are not able or willing to pay more.
Lafley knows the U.S. consumer and is a brand genius, but has
not understood the global consumer. For Procter &
Gamble the future is Africa and South East Asia. Procter
& Gamble needs to get the Brazilian consumer down, and
understand how to better navigate Russia.
Focusing on premium products and the U.S. consumer is not the
way home for Procter & Gamble. Does the emerging markets
consumer need Tide and Bounty?
They need paper towels and laundry soap. PG must
continue to grow in emerging markets but needs to understand its