Procter & Gamble Company (PG - Free Report) is focused on improving its product portfolio alongside increasing productivity and saving costs to boost margins. This has helped the company boost results, including solid top-line growth, enhanced consumption, and market share growth.
In sync with its strategy, the company has accelerated the pace of change and improved execution to cater to the challenging environment. In order to streamline its business, the company has revamped its organizational structure, which will be effective starting July 2019. This will not only simplify the structure but also improve focus and accountability.
Under the plan, the company will reorganize its operating segments into six sector business units (SBUs) based on industry, for the largest geographic markets — which is the largest structural change in the last 20 years. These SBUs will each be headed by a unit chief executive officer (CEO), who will directly report to the company’s CEO, David Taylor. The unit heads will be responsible for all key decisions, like consumer understanding; product and package innovation; brand communications; selling and retail execution; and supply chain.
The company’s largest markets include the United States, Canada, China, Japan, U.K., Germany, France, Spain, Italy, Russia and smaller adjacent countries. These regions account for nearly 80% of the company’s sales and 90% of after-tax profit. By this, the company targets complete independence of execution for these markets to drive growth.
However, the company will retain control over core set of corporate resources that include back-office operations, governance and stewardship, and some areas requiring skills. Particularly, the company has held control over its Corporate Research & Development wing, responsible for inventing upstream platform technologies that aids multiple businesses and provides opportunities to enter newer businesses.
Furthermore, the company has expanded the role of chief financial officer (CFO), Jon Moeller. The new responsibilities will include the company’s operations for those markets outside the ones managed by SBUs, scaled market operations and functional support. Additionally, he will assume the roles of Vice Chairman and chief operating officer, directly reporting to Taylor.
Procter & Gamble stock did not reflect much impetus following the news. However, this Zacks Rank #3 (Hold) stock has risen 12.2%, outperforming the industry’s growth of 5%.
We believe these actions replenish the company’s structure and position it for long-term growth. Procter & Gamble's focus on product innovation and marketing along with productivity improvement and cost-saving has been enhancing performance over the last several quarters. Notably, earnings surpassed estimates for 14 straight quarters in first-quarter fiscal 2019, while it delivered positive sales surprise in eight of the preceding 10 quarters.
Better-Ranked Stocks in the Consumer Staples Space
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