Procter & Gamble says Trian is short-sighted, to further cut digital spend


The Procter & Gamble Company said it will not yield to Trian and its demands for a new member of its board of directors.

The company said it will further cut digital advertising spend while focusing on to drive 2% to 3% organic sales growth in fiscal 2018 – a level at or above market growth – with core earnings per share growth of 5% to 7%.

Procter & Gamble said it will invest for the long-term, by focusing on innovation, brand building, and go-to market execution to win with consumers and deliver for P&G shareholders.

While referring to Trian’s remarks that it is long-term oriented, Procter a& Gamble said it is apparently focusing on short-term, quarterly metrics.

The company Trian confuses P&G’s reduced digital spend as short-term cost savings when, in fact, it was a strategic choice to avoid fraud and waste in the digital advertising marketplace. P&G has been at the forefront of identifying this fraud and waste and has been a leading voice for industry reform for nearly a year.

P&G said it has since cut ineffective spending by more than $100 million and still delivered solid growth and shareholder value. P&G remains one of the largest purchasers of online advertising in the United States and around the world.

See the company’s strategy going forward:

P&G strives to be the best. We are determined to win. We know we must continue to accelerate our efforts to execute and deliver on the plan we have put into action.

Raising the Bar to a New Standard of Excellence: Our focus starts with the consumer. We are building advantage with our products and packages, improving the execution of our brand communication and on-shelf and online presence, and ensuring our brands offer a superior value.

Superior Products. We are striving for products that are so good, consumers don’t want to part with them, to the point where they consider competing products meaningfully inferior. We have many examples that are delivering strong growth, such as Tide and Ariel Pods, Gain Flings, Always Radiant, Pampers Pants, Bounty, Charmin, Dawn, Fairy, SK-II, and Oral-B Genius.

Superior Packaging. Superior packaging attracts consumers at the shelf, helps consumers select the best product for their needs, conveys the equity of the brand, and closes the sale. Downy Unstopables Scent Beads and SK-II are two great examples.

Superior Brand Communications. P&G’s advertising opens hearts and minds and communicates the brand’s superiority to create awareness and trial. For example, Always “Like A Girl” has increased brand awareness and built nearly two share points since the campaign began. Other examples achieving this standard of quality include Tide, Ariel, Dawn, Fairy, Cascade, Febreze, Bounty, Head & Shoulders, SK-II and Vicks.

Excellent In-store and Online Execution. In stores, this means having the right store coverage, product forms, sizes and price points, shelving and merchandising execution. Online, it means having the right content, assortment, ratings, reviews, search and subscription offerings. We have many examples, like the Pantene “Golden River” throughout Latin America and China, and the Oral-B Power Stations around the world. Online, we have outstanding brand execution on Amazon,, Alibaba and Tencent.

Winning Consumer and Retailer Value Equation. We are nimble and are taking action with pricing when necessary to improve the consumer value equation, like we’re doing with Gillette in North America. For retailers, we are making the changes needed to improve margin, trip generation, basket size and category growth.

Raising the bar on product, packaging, communications, retail execution and value superiority represents a significant opportunity to further accelerate top-line growth. When we achieve these high standards of performance on all five of these elements, our brands drive market growth, market share, sales and profit and ultimately shareholder value.

Driving Productivity and Cost Savings to Fuel Growth: Achieving higher standards of performance more consistently and over the long-term requires investment. Productivity is the fuel to enable us to make these critical investments, while also delivering on our profit and cash flow objectives. We over-delivered on our first $10 billion productivity goal. We are on our way to deliver an additional $10 billion in savings. This progress has enabled us to:

Overcome $7 billion in negative foreign exchange impacts as well as significant geopolitical uncertainty while building margins and improving operating free cash flow.

Deliver significant margin improvement over the last four fiscal years. Core gross margin increased 200 basis points, 450 basis points excluding currency impacts. Core operating margin increased 270 basis points, 610 basis points excluding currency impacts.

Deliver constant currency core earnings per share growth of 11% on average over the past five fiscal years.

Achieve current core after-tax margins of 16.5%, second highest in our industry, which we will improve going forward.
Improve profit per employee by 45%.

Strengthening our Organization, Culture and Accountability: All of the work to accelerate business performance is underpinned by significant initiatives to strengthen our organization design and drive a culture of innovation and accountability. We are enabling greater efficiency, speed, and agility by moving resources closer to consumers and retailers, and driving deeper mastery and accountability to serve consumers and deliver results.

We continue to move people out of global and corporate roles into regions and countries. Today, only a small percentage of general management, sales, and finance employees occupy global roles. The vast majority are focused on local markets to execute innovation, advertising and retail programs – leveraging unique local knowledge of consumers, retailers and competitors.

We are implementing what we call an “end-to-end” ownership and accountability approach in larger markets representing 70% of sales. This approach gives category leaders full accountability from the front-end of innovation all the way through to the store. We started in the U.S. in 2016, added four more markets last fiscal year and will add five more markets in fiscal 2018.
We are implementing a new “freedom within a framework” approach in smaller markets. This model enables the markets to be faster and more agile by executing within predefined strategies, but with freedom to make real-time changes without the need for engagement with regional or global resources.
We are changing incentive systems to create a culture of appropriate risk-taking and to better reward specific contributions of local category and country teams. We are creating more aligned and granular incentives that better match responsibilities and increase accountability.
We are supplementing internal development with hiring from the outside to add the skills and experiences needed to win and field the best teams. Our external hiring has quadrupled across five different levels of management.

We are also investing in building our digital capabilities to enable P&G people to accelerate growth and productivity improvement. We are leveraging digital tools to improve the consumer experiences with our brands, such as the SK-II Beauty Imaging System and Olay Skin Advisor. We are using machine learning and artificial intelligence to better understand consumer trends and reach consumers more precisely and efficiently.

We are using digital tools to synchronize our supply network and automate our manufacturing and distribution operations. We are also using digital tools to make our office work more efficient through data analytics. Overall, we are empowering P&G people with the mastery, flexibility and speed needed to drive strong business results while ensuring the right accountability and incentives are in place.

As we close fiscal 2017 and enter fiscal 2018, we are where we expected to be. We will continue to make the needed investments in innovation, brand building, and go-to-market execution to position P&G for success in the short-, mid- and long-term. We are raising the bar to a higher standard of performance – superior products and packaging with superior execution, fueled by productivity and cost savings, and continuing to strengthen our organization and culture. This will lead to balanced growth and value creation, winning with consumers, and delivering for you, our shareholders.


P&G has a diverse, experienced, best-in-class Board of Directors that is actively engaged in overseeing the Company’s transformation, and is holding management accountable for delivering continued growth and success. Your Board works closely with management and has been – and will continue to be – significant agents of change to improve P&G’s performance. The Board has overseen the most significant transformation in the Company’s history, and is committed to continuing to evolve and adapt to the changing environment and deliver on commitments to shareholders.

We have rigorous selection criteria, which has produced a highly diverse Board, with each member bringing a specific set of skills that is aligned with the Company’s long-term strategic priorities, and ideal for overseeing a consumer products company with the global scale, reach and complexities of P&G. The P&G Board includes 11 highly qualified individuals, ten who are independent and four who were added in the past five years. This includes digital founders and CEOs, retail leaders, and individuals with proven track records who have led or transformed large multinational enterprises. Your Board is a powerful advocate for all shareholders and is driving change and delivering significant shareholder value.


Your P&G Board and management team have maintained an open dialogue and held numerous discussions with members of Trian, and Nelson Peltz in particular, over the several months since Trian made its investment in P&G. Your Board and management are always receptive to ideas from shareholders that may help drive profitable growth and enhance shareholder value. We actively seek outside input and expertise to improve P&G’s performance.

We will continue to engage with and listen to Mr. Peltz’s ideas, as we welcome input from all of our shareholders. However, we do not recommend adding Mr. Peltz to the Board for the following reasons:

Nothing incremental has been offered by Trian or Mr. Peltz. During numerous direct interactions with P&G Board members and management, and in its proxy materials, no new actionable ideas have been offered by Mr. Peltz, in our opinion, to drive additional value for P&G shareholders beyond the continued successful execution of the Company’s ongoing strategies and plan. To the contrary, Mr. Peltz has been supportive of P&G and its ongoing transformation and plan.

Mr. Peltz’s views are based on outdated information, including sources far removed from the current Company. In particular, Trian has retained Clayton Daley as an advisor, who retired as CFO of P&G nearly a decade ago. This decision appears to be compounding Trian’s fundamental misunderstanding of P&G today and the operating environment the Company faces.

“Why not?” is not a compelling rationale to add Mr. Peltz to the P&G Board. “Why not?” appears to be the extent of Mr. Peltz’s reason for board membership. This is simply not a sufficient standard. Joining P&G’s Board is not an entitlement. Instead, it is the result of a very rigorous process determined by the right mix of skill sets, experience, diversity and balance between short-term and long-term vision and objectives.
Now is the time to focus on accelerating results, and prevent anything from derailing the work that is delivering improvement. We met or exceeded our fiscal 2017 commitments. P&G results are improving. The plan is working. We need to continue to focus the entire organization on better meeting the needs of consumers, and delivering value to shareholders.

While we will continue to listen to Mr. Peltz as we do other shareholders, we strongly recommend that you vote the Blue Proxy Card for all 11 of P&G’s highly qualified and diverse director nominees.

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