Procter & Gamble Co. (PG:US) plans to re-organize its overseas business units as Chief Executive Officer A.G. Lafley works to cut costs at the world’s largest consumer-products maker, said three people briefed on the matter.
The maker of Pampers diapers and Crest toothpaste is weighing a merger of its Western European unit with Eastern and Central Europe to create one group for the continent, said the people, who requested anonymity because the plan won’t be unveiled until 2014. P&G’s Indian business will combine with the Middle East and Africa to form another group, the people said.
The streamlining, which follows similar moves by other consumer-product companies, is an attempt to accelerate sales growth and reduce costs. Some senior management staff in Europe could lose their jobs, according to two of the people.
Currently, Cincinnati-based P&G has five geographic units (PG:US): North America, Latin America, Asia, Western Europe, and CEEMEA, which includes Central and Eastern Europe, the Middle East and Africa. Western Europe accounted for 18 percent of P&G’s $84 billion in sales (PG:US) in its most recent fiscal year, according to its annual report (PG:US), while CEEMEA comprised 15 percent of revenue and Asia 18 percent.
The move represents Lafley’s second major shakeup since he returned to run the company in May. The following month, P&G streamlined its businesses into four industry-based groups “to facilitate faster global expansion of brand and product innovations,” the company said at the time.
The stock has advanced (PG:US) about 4 percent since Lafley replaced Bob McDonald as CEO.
“We’ve openly discussed our focus on productivity and growth, and this includes reviewing our geographic operations,” Paul Fox, a spokesman for P&G, said in an interview. “Studies are underway to explore the best ways to scale and simplify our global market operations, but no final decisions have been made.”
At an investor conference in September, Lafley hinted at the coming changes when he said “we’ll look to scale operations across all of Europe” as part of its plan “to accelerate and strengthen our productivity and cost savings.”
P&G is not the first consumer-goods company to redraw its map of the world in the wake of the global recession. Last year, Reckitt Benckiser Group Plc (RB/), the maker of Lysol disinfectants, combined Europe and North America into one business unit to shed costs and speed up decision making. The maker of Nurofen painkillers also placed Latin America and Asia together into the same reporting unit.
Lafley, who had served as president and CEO from 2000 to 2009, returned this year as the company struggled to rekindle growth. The 66-year-old Lafley has said he will continue a turnaround plan that McDonald embarked on that aims to cut $10 billion in costs through 2016 and renews focus on the company’s leading businesses, such as hair care.
The maker of Gillette razors and blades entered Europe in 1930 by acquiring a soap company in Newcastle-upon-Tyne, England. Today, more than 40,000 of P&G’s 121,000 employees work in Europe, according to company documents.
Mary Lynn Ferguson-McHugh is group president for Western Europe, while Laurent Philippe runs the CEEMEA division. Both units are headquartered in Geneva.
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