CINCINNATI (AP) — Procter & Gamble Co., its sales down and growth below targets during the global recession, faces its biggest challenges since A.G. Lafley took over as CEO nine years ago.
Consumers around the world are buying less and trading down to lower-priced brands, trends that led P&G executives to tell analysts last month they expect business conditions to remain rough through next year.
P&G veteran Bob McDonald, the chief operating officer expected to soon be named Lafley's successor, has said P&G's best option for growth is expanding sales in emerging markets such as China and India.
"There's no question that the basic demographics are going to take the center of gravity of our business to Asia, to Africa — where the people are, where the babies are being born," McDonald said in an interview last year.
McDonald has deep experience in Asia and with operational changes such as consolidating management duties and streamlining supply logistics meant to make the world's largest consumer products company more efficient.
P&G's board met in a regularly scheduled meeting Tuesday at P&G headquarters as speculation mounted about a long-anticipated CEO succession plan, but the company didn't immediately release any information.
"It is a very deliberate and well-planned process, years in the formation, and we're not expecting to be making any announcements," P&G spokesman Paul Fox said before the meeting.
Analysts have been speculating for months that Lafley, who turns 62 on Saturday, would step aside for McDonald but continue as chairman.
The two have collaborated on P&G strategy, and P&G watchers don't expect any dramatic shifts. But Matt McCormick, portfolio manager for Cincinnati-based Bahl & Gaynor investments, said McDonald has shown ability to improve productivity and cut costs in his current role.
"McDonald is an operations expert and also spent a lot of time in Asia," McCormick said. "That shows me Procter & Gamble is going to put emphasis on those areas, which are in his wheelhouse."
P&G has said its household penetration is small but growing in much of the developing world. Lafley said recently that annual per capita spending on P&G products is $3 in China and less than $1 in India.
A trademark of Lafley, who took over in June 2000 amid profit warnings and tumbling stock prices, has been product innovation, and he told analysts May 28 that P&G's "innovation pipeline is full of new and improved products."
To reach belt-tightening households, he said, P&G will continue to add to such lower-tier products as "basic" versions of Charmin toilet paper and Bounty paper towels. But it will also add to margin-boosting, premium products such as Tide Total Care and Olay Pro X anti-aging cream, giving consumers more choices to fit their budgets, he said.
Lafley swelled the company in size in 2005 with the $57 billion acquisition of the Gillette Co., and has been unloading slower-growth businesses, including last year's sale of Folgers coffee. Last week, P&G said it would phase out Max Factor cosmetics in the U.S., where the 100-year-old brand's sales had been stagnating, while they were growing overseas.
The company also has been adding upscale businesses, acquiring the Miami-based grooming chain The Art of Shaving, which sells razors for $300 and up, and the Frederic Fekkai luxury hair care brand.
Deutsche Bank analyst Bill Schmitz Jr. wrote in a note to investors Tuesday that sales growth is "likely anemic over the next few quarters, short-term catalysts outside valuation are few, and ability to expand share and drive category growth with reinvestment remains uncertain."
Shares of the company that makes Gillette shavers, Tide detergent and Pantene shampoo fell 73 cents, or 1.4 percent, to close Tuesday at $52.41. They traded as high as $73.57 as recently as last September before falling as low as $43.93 earlier this year.
by the associated press
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