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P&G Faces Investor Activism, Unrest

|Includes:The Procter & Gamble Company (PG)

P&G's got problems; that's clear from the latest reports. OTC Product News provided opinion in a recent editorial "The Tide Washes Out at P&G"--- now activist investor Bill Ackman atPershing Square has jumped with a $2 billion investment smelling blood in the water. His target CEO McDonald has had a tough time at unruly earnings calls posting less than encouraging numbers. Competitors in the space like Clorox, Colgate, among others seem not to suffer the same disorder. We propose that this failure is endemic to the P&G culture…

The investor community and the stock analysts following P&G have it right: something is wrong and the symptoms are visible: a P&L that looks like the wheels are coming off, a strategy that at times verges on the incoherent, costs and prices that are inflated. It is easy to forget the history of P&G as a starting point to explain the self-inflicted harm.

First, P&G's evolution from a largely domestic enterprise to a global one dates from the late 1940's - 1950's under CEO Lingle who expanded manufacturing and sales of detergents into Europe, Mexico, and elsewhere. By the 1960's much of the expansion of core businesses outside the US had taken place, and by the 1980's reached a peak with the acquisition of Richardson-Vicks' international health and beauty care businesses in 1985. Other companies like Colgate operated differently focused on ex-US categories like toothpaste "first most" while Crest migrated centrifugally from the US late in the game.

Second, although widely touted as a premier marketing company P&G is actually comprised of two components: marketing and engineering, and has blended these into a staunchly conservative mix in which caution reigns supreme. The chemical engineering, and promote from within culture, known to all P&G'ers worked well to create a fluid work force capable of migrating from one business to another, albeit with a steep learning curve and vulnerable to mistakes. But this culture breeds a shortness of corporate memory and can quickly turn incestuous and turgid. Fungibility has a price...

Read more at OTC Product News...

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: PG