Procter & Gamble (NYSE:PG) CFO Andre Schulten said the consumer products company does not need to overhaul its long-standing strategy, but is making broad operational changes intended to improve execution, accelerate growth and strengthen productivity.
Speaking at an investor conference, Schulten said P&G’s strategy remains centered on understanding consumers, delivering superior products in everyday-use categories and using productivity gains to fund innovation. The company’s focus is instead on changing “every piece of wiring under the hood” to diagnose performance issues faster and respond with greater agility.
“The art in the strategy is not the articulation,” Schulten said. “The art in the strategy is the consistent execution.”
Growth target remains 12 to 18 months away
Schulten said P&G still expects to return the business to stronger growth within a 12-to-18-month period, despite continued headwinds including slower category growth, commodity costs and higher transportation costs.
He described enterprise markets as consistently growing in a 4% to 6% range. In China, P&G has gained share and posted five consecutive quarters of growth, with growth moving from low-single digits toward mid-single digits, he said. Europe’s market growth is about 1%, though P&G is gaining share there, according to Schulten.
In the U.S., he said category growth has stabilized at roughly 2%, while P&G is growing consumption at around 2.5%. He expects the current and next quarters to further solidify the company’s base before more consistent U.S. growth begins in the second half.
Schulten said P&G’s central U.S. objective is to return to 3% to 4% growth. He attributed recent volatility partly to a mismatch between retail inventory flows and slower underlying category growth. The company saw a three-point gap between sell-in and sell-out in the fourth quarter, but he said he was not seeing the same issue in the current quarter.
Technology investments target speed and productivity
The CFO highlighted P&G’s use of data, automation and artificial intelligence to improve decision-making, innovation and operations. The company is making more data available across key performance indicators and using AI to analyze consumer data more quickly, he said.
Schulten said the company’s Supply Chain 3.0 initiative is in execution and includes automated quality measurement, inventory management, warehouse operations and unattended shifts. P&G expects the program to provide productivity benefits over the next five to 10 years, with additional global scaling over the next 24 months.
In research and development, he pointed to the company’s Molecular Discovery Suite, which uses AI to identify potential technologies more quickly. Schulten said P&G discovered two new molecules for its fabric-care business over the last decade, compared with six or seven over the past six months using the newer capabilities.
He also said P&G has brought content creation fully in-house and is using AI to create and deploy marketing content across platforms. The company expects its evolving media capabilities to become more visible over the next 12 to 18 months.
Customer-by-customer plans and pricing actions
P&G has expanded its internal focus beyond category-country combinations to category-customer combinations in North America, where some individual retail customers are larger than markets in other regions. Schulten said the percentage of North American customer-brand combinations with plans to grow users and share increased from 7% at the beginning of the year to 50%, and he expects it to exceed 80% by the end of the calendar year.
The company has also taken targeted pricing and promotional actions. Schulten said P&G became more competitive in diapers and regained share, adjusted oral-care pricing and addressed pack-size-related price issues in the club channel for some family-care products.
“If you have a superiority issue and it is a value issue that is grounded in price or promotion, we will be competitive,” he said, while adding that pricing is not the company’s primary growth driver.
John Chevalier, P&G’s senior vice president of investor relations, said businesses are also reassessing media spending. In some cases, the company is shifting spending from longer-term awareness advertising toward more activation-oriented social media efforts after identifying areas where prior spending did not produce expected results.
China turnaround and Thorne acquisition
Schulten cited China as an example of P&G’s turnaround approach. About two years ago, the company reduced its number of distributors, selected higher-capability partners, adjusted channel priorities, increased social and digital marketing, and made innovation and research more locally relevant.
Those actions helped P&G gain share both online and offline, he said, though the company still sees opportunities in oral care, OLAY mass skin care and fabric care.
Schulten also discussed P&G’s acquisition of Thorne, describing it as a bolt-on investment consistent with the company’s strategy of pursuing value-accretive beauty and health care acquisitions. He said Thorne has strong brand equity, doctor endorsement, ingredient quality and growth potential in the vitamins, minerals and supplements market.
According to Schulten, Thorne is growing 30% and has an EBITDA margin above 30%. He said P&G has not lowered its financial return requirements for acquisitions and sees opportunities to apply its supply chain capabilities, expand internationally and build the brand beyond its core health care supplements business.
About Procter & Gamble (NYSE:PG)
Procter & Gamble Company is a global consumer products company that develops, manufactures and markets branded products used in households and personal care. Its portfolio spans beauty, grooming, health care, fabric and home care, and family care products.
The company’s brands include Tide, Ariel, Downy, Dawn, Febreze, Bounty, Charmin, Pampers, Gillette, Oral-B, Crest, Head & Shoulders, Olay and Pantene. These products are sold through retailers, e-commerce platforms and other distribution channels.
Procter & Gamble was founded in Cincinnati in 1837 by William Procter and James Gamble.
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