P&G told it must modernize, digitize as Peltz escalates fight
The world’s biggest consumerproducts maker is being pressured by one of its largest shareholders to set aside “suffocating bureaucracy” and pursue new brands and online sales.
Procter & Gamble Co. needs to reorganize its business units, invest in smaller, high-growth brands and prioritize its digital strategy, billionaire Nelson Peltz said in a 93page plan for modernizing the company.
Those recommendations Wednesday come amid an escalating battle over his push for a seat on the board of P&G, the owner of high-recognition brands including Bounty, Gillette and Tide. The previous day, former Chief Executive Officer John Pepper emerged from retirement to oppose Peltz’s bid, warning it risks “putting a serious brake on our momentum” and setting the company on the wrong course.
Peltz’s Trian Fund Management owns about $3.5 billion of P&G stock, making the shareholder activist the company’s sixth-largest investor, according to data compiled by Bloomberg.
Peltz is calling for P&G to reorganize into three largely autonomous units: A beauty, grooming and health-care business; a fabric and home-care division; and baby, feminine and family-care products. Each unit would have regional leaders with full control over operations in their areas.
The move would break up P&G’s “matrix” organizational structure, which Trian said slows decisionmaking and the company’s ability to respond to market changes.
“P&G has resorted to short-term measures, such as selling brands instead of fixing them, that did not address the root cause of its underperformance,” the New York hedge fund said in a statement accompanying the paper on Wednesday. Despite numerous turnaround plans, portfolio changes and chief executive officers, the company continues to suffer from eroding market share, aging brands, high costs and executive compensation and a “suffocating bureaucracy,” Trian said.
P&G said Trian has an “outdated view” of the company and its board and management will review the white paper in more detail.