Expert's Opinion

McDonald has Big Shoes to Fill at P&G

By Carrie Mellage, Kline & Company | December 9, 2009

Lafley's tenure was a profitable one that will be tough to top, says Carrie Mellage of Kline.

On January 1, 2010, Robert McDonald will succeed A.G. Lafley as Chairman of the Board of Procter & Gamble after assuming the role of CEO and President earlier this year, and Lafley will officially retire from the company effective February 25, 2010. Though the last year has been rough for P&G (who hasn’t it been rough for?), Lafley’s tenure marks one of the more prosperous periods for the company—an era which will be tough to top.

The numbers alone tell a compelling story: since Lafley took helm in 2000, revenues have roughly doubled from $40 billion to $80 billion while net earnings have nearly quadrupled to $13.4 billion. I don’t know anyone who wouldn’t envy that financial performance.

Perhaps the biggest change at P&G which brought about those results has been the parade of acquisitions. In personal care, most notably Gillette, Wella and Clairol have been added to the mix. This not only had an immediate positive impact on topline revenues, but it also opened new doors for P&G in the male grooming, salon, and hair colorant sectors, respectively. Smaller acquisitions such as DDF, Frederic Fekkai, and Art of Shaving have also been strategic moves, diversifying the company’s channel mix beyond mass.

Another key change that has led to P&G’s success is its focus on core brands. When Lafley took leadership, P&G had ten brands with sales in excess of $1 billion. Today, it has 23 billion-dollar brands, including Olay, Pantene and Tide. Meanwhile it has divested or discontinued numerous non-core brands—Noxzema, Vidal Sassoon and Max Factor to name a few.

Lafley has also managed to expand the company’s geographic reach considerably. In 2000, the United States accounted for more than half of sales. Today, the U.S. accounts for 39% of sales, and developing markets represent nearly one-third of P&G’s total sales.

Like Lafley, who took helm when P&G’s performance was not at its peak (his predecessor Durk Jager had retired after a disappointed earnings announcement), McDonald will face the challenge of taking P&G out of the doldrums and on to the next level. For the time being, P&G, like other companies, will have to focus on emerging from this recession in a strong position.

About the Author
Carrie Mellage is responsible for the Consumer Products practice of Kline’s market research group worldwide. With years of market research and consulting experience, her focus is on the personal care and home care industry segments. Since joining Kline in 1999, she has also participated in several proprietary assignments involving market analysis, business assessment and strategic planning. Carrie earned an MBA from New York University majoring in marketing, management and international business. She also holds a B.S. in marketing from The College of New Jersey, and she speaks conversational Spanish.

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