Cincinnati, OH
513.983.1100
www.pg.com

Sales: $68.9 billion (estimated) for personal care, household care and oral care products. Corporate sales: $83 billion, for the year ended June 30, 2014.

Key Personnel: AG Lafley, chairman, president and chief executive officer; Stassi Anastassov, president, special assignment; Mark Biegger chief human resources officer; Steven D. Bishop group president, global oral care; Giovanni Ciserani, global president, P&G global fabric and home care; Linda W. Clement-Holmes, chief information officer; Gary Coombe, president, Europe selling and market operations; Philip J. Duncan, global design officer; Tarek Farahat, president, Latin America, selling and market operations; Mary Lynn Ferguson-McHugh, group president, global family care; Thomas M. Finn, president, global health care; Kathleen B. Fish, chief technology officer; William P. Gipson, senior vice president, global diversity and research and development, Asia Innovation Centers; Melanie L. Healey, group president and advisor to the chairman and chief executive; Deborah A. Henretta, group president, global e-business; Colleen E. Jay, president, global retail hair care and color; Shailesh G. Jejurkar, president, fabric care, North America, brand building organization, global fabric and home care, and global new business creation; Henry Karamanoukian, senior vice president, customer business development, North America; R. Alexandre Keith, president, global skin and personal care; Hatsunori Kiriyama, president, Asia Pacific selling & market operations; Patrice Louvet, group president, global beauty; Deborah P. Majoras, chief legal officer and secretary; Jon P. Moeller, chief financial officer; Julio Nemeth, global business services; Filippo Passerini, officer on special assignment.

Major Products: Household Care—Tide, Ariel, Cheer, Gain, Bold, Dreft, Era detergents; Joy and Cascade dish detergents; Febreze and Downy laundry additives; Mr. Clean, Comet and Swiffer household cleaners. Personal Care—Head & Shoulders, Nioxin, Pantene, Herbal Essences, Pert, Sebastian, Vidal Sassoon and Aussie hair care; DDF, Olay and SK-II skin care; Nice ‘n Easy hair color; Cover Girl, Dolce & Gabanna cosmetics; 007, Hugo Boss, Lacoste, Puma, Dunhill, Escada, Dulce & Gabbana, Fekkai and Gucci fragrances; Oral Care—Crest, Scope.

New Products: Laundry and home care—Downy Fresh Protect, Tide HE Turbo Clean, Bounty with Dawn, Unstopables Collection, Dreft Stage 1, Dreft Stage 2 and Dreft Blissfuls; Beauty—Head & Shoulders Instant Relief Collection, Vidal Sassoon Salonist, Olay Regenerist Luminous Collection, Wella Professionals Elements, Gillette ProGlide Sensitive 2-in-1 shave gel plus skin care; Oral Care—Crest Pro-Health.

Comments: When you’re on top, everyone, it seems, is gunning for you. Procter & Gamble has always faced challenges from the likes of Unilever, Henkel, Colgate and Kao, but these days some of its biggest headaches come from Wall Street types who question the company’s size (too unwieldy), turnaround plan (not aggressive enough) and restructuring strategy (too slow to boost earnings). In fact, earlier this year, during a Q3 conference call, several analysts urged CFO Jon Moeller to do more; i.e., break up the company into more manageable units. Moeller, however, would have none of it, blaming the company’s lousy Q3 performance on FX.

That’s not exactly what analysts wanted to hear, however, and some made their dissatisfaction public: CLSA knocked P&G’s rating from Outperform to Underperform and Morgan Stanley added P&G to its list of 10 stocks selling at substantial premiums—that’s tough sledding, especially when you realize that P&G’s stock price has fallen 13% in 2015.

In Q3 of fiscal 2015, the company reported that net sales fell 8% versus the prior year to $18.1 billion in the January-March quarter, including a negative eight percentage point impact from foreign exchange and a negative one percentage point impact from minor brand divestitures. Organic sales grew 1%. Organic sales were at or above year ago levels in four of five reporting segments. Volume declined 2%. Pricing increased sales by 2%with higher pricing in four of five business segments. Favorable product mix across most segments increased sales by 1%.

This isn’t the first time that analysts have soured on the world’s largest FMCG company. And like so many other market timers, just when investors head for the exit, a rally ensues.

But past performance, as they say, is no guarantee of future results. And through the third quarter of fiscal 2015, things appear rather grim in Cincinnati. For the nine months, sales slipped 4% to $58.4 billion, while net earnings fell 28% to $6.6 billion. Every segment reported a decline in sales, with the exception of health care, where sales were flat.

Critics may be displeased with the pace of brand selloffs. P&G unveiled the strategy nearly a year, but since the August 2014 announcement, it had made only minor moves, such as the disposal of Rochas perfume (June 2015) and Camay and Zest (December 2014). Outside Happi’s scope, P&G sold the European pet care business (September 2014), as well as its Duracell battery unit (November 2014) to Berkshire Hathaway in deal that analysts rated as a steal for that Oracle of Omaha, Warren Buffet.
All that changed last month when rumors circulated that Coty would acquire several beauty business from P&G in a deal that could be worth $12 billion. Coty executives are said to have huddled with bankers in recent days to discuss buying P&G’s divisions through a Reverse Morris Trust, a source said. Such a move would save P&G from paying capital gains taxes on the deal. Under such a move, P&G would sell just under a majority stake to Coty and let Coty run the combined operations. P&G tried a similar, tax-free sale of its Pringles brand recently but the deal with Diamond Foods collapsed. For Coty chairman Bart Becht, winning the P&G auction is a homecoming of sorts. Becht held a variety of marketing, sales and finance positions at P&G before becoming CEO of RB (then Reckitt Benckiser) from 1995 to 2011.

The divestitures began nearly a year ago, when P&G announced plans to sell about 100 “underperforming” brands. At the time, Lafley planned to focus more on 70 to 80 of its biggest brands including the billion dollar brands like Tide, Pampers and Oral-B. At the time, P&G did not specify the brands it plans to keep or divest, it stated that these 70 to 80 brands have accounted for 90% of company sales and over 95% of profits.

In fiscal 2014, corporate sales rose by less than 1%. Net earnings increased 4%. By category, fabric and home care accounted for 32% of sales; baby, feminine and family care (25%), beauty (24%), grooming (10%) and health care (9%). Emerging markets accounted for 39% of sales.

Looking at key category performance, beauty sales fell 2% to $19.5 billion, and global market share declined 0.4%, according to P&G. Hair care and color volume was flat, with increases in developing regions offsetting declines in developed regions. Volume in salon professional fell mid-single digits due to competition and difficult conditions in Europe, according to P&G.

Fabric and home care increased 1% to $26.1 million on 5% increase in volume. Organic sales were up 4%. P&G said volume increased in high single digits in developing regions and low single digits in developed regions.