In September 2009, Procter & Gamble’s new CEO Bob McDonald went on the road promoting a “purpose-inspired growth” strategy of “touching and improving more consumers’ lives in more parts of the world… more completely.”
Harvard Business School’s Rosabeth Moss Kanter celebrated the message, urging other businesses to be more like P&G in the wake of the financial crisis.
The stock rebounded initially—but soon it lagged the market recovery, up 22 per cent compared to the Dow recovery of 40 per cent since September 2009.
On Friday after disappointing earnings, several analysts gave up on the new strategy.
“Based on poor financial results and feedback from the PG community, it is clear to us that CEO Bob McDonald’s purpose inspired growth strategy is not working,” writes UBS’s Nik Modi in a note today. “we believe McDonald could learn from Sun-Tzu who wrote – a great general should “advance without coveting fame and retreat without fearing disgrace.” In our view P&G should drop the purpose inspired growth message, slowdown its pace of whitespace expansion, re-focus on fixing the US market, lower its mid-term EPS growth goals and figure out if it has the right set of c.ompetencies to win in the beauty category. Consistency is what PG needs.
Oppenheimer’s Joseph Altobellow gave a similar opinion when downgrading the stock to “perform”: “Simply put, we have run out of patience waiting for the company to deliver healthy and profitable growth, and while we recognise P&G has made modest incremental improvement in some areas despite a number of headwinds, the pace of this improvement in management’s own words has been disappointing.
P&G is one of the 10 corporations that control almost everything you buy.
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