Do you love your Tide PODS? How about Crest White Strips? What about Gain, and Febreeze? And, Swiffer?
If you swaddle your kids in Pampers, or use Charmin, Dawn, Bounty, Head & Shoulders, Old Spice, and Vicks, something is on the horizon that has the potential to jeopardize your brand experiences.
If you love these brands, know that very soon everything may change, and not for the better. And, we know whom to blame.
Once again, an activist investor is coming around to make sure that all shareholders receive as much profit as possible from Procter & Gamble at the expense of the established brands that are part of our lives.
Nelson Peltz, the activist head of Trian Fund Management said, “Nelson Peltz's only agenda is to improve performance so that P&G can increase returns to all shareholders and create sustainable long-term value.”
However, when he says long-term he means as long as we can. As the CEO of P&G stated, “Trian often points to its past investments as a measure of strong performance and investment prowess. However, a review of Trian investments within the consumer sector highlights tactics that can harm long-term objectives.”
The content of Mr. Peltz’s “white paper” to P&G shareholders lists numerous changes and cuts that will effectively stall innovation, and milk the energy out of the brands you know and love. Eventually these brands will be mere shadows of themselves.
For example, he wants to reduce P&G’s R&D to the point of eliminating any internal ideas. P&G rebuffed the claim that R&D is no longer viable by saying, “P&G's noticeably superior innovation is meeting consumer needs and driving growth. We do more than simply study innovation, as suggested by Mr. Peltz. P&G's innovation machine has delivered new brands such as Always Discreet and Unstopables; delivered blockbuster new sub-brands such as Tide PODS, Ariel PODS, Gain FLINGS, Pampers Pants, Always Radiant, and Oral-B Genius; and upgraded the superiority of entire brands such as Dawn, Fairy, Charmin, Bounty, Head & Shoulders, SK-II, Old Spice, and Vicks to sustain their market-leading growth. To suggest that P&G's innovation machine is broken is ludicrous. P&G consistently dominates the IRI New Product Pacesetter rankings as the #1 company for successful new product innovations.”
Mr. Peltz does not see these new products as adding any value. He sees varieties of a big brand promise as detrimental not profitable. But he is wrong. He does not understand branding.
Many of these products are what we call “brand extensions.” Superior brand extensions are a great way to build brand loyalty. And brand loyalty generates profits. A superior brand extension gives current customers an additional reason and way to interact with the parent brand. A superior brand extension gives new customers a new entryway into a brand experience. Tide is a bigger, more profitable, more exciting, modern brand because of all its extensions: Tide PODS® with Downy™! Tide PODS® Odor Defense™! Tide PODS® plus Febreeze™! And, there is Tide Liquid, Tide Powder, Tide Liquid HE. Crest brand has toothpaste with Scope, toothbrushes, whitening products.
P&G understands brand management better than any company. Brand management was born and nurtured at P&G. Activists, like Peltz, look for ways to leverage brands for short-term financial gain. By innovating and renovating and extending their big brands, P&G has kept brands like Tide, Gain, Ivory, Pampers and others current. If you are an athlete, a weekend warrior or just a devotee of the gym, there is a Tide for sports clothes. To compete with Huggies Pull-Ups, there is a Pampers Pants. For people who cannot afford prices on some P&G brands, there are “Basics” versions. P&G has created new and interesting ways in which you and I can experience their brands.
Has P&G made errors? Yes, of course. Have they been complacent in certain areas? Yes, true. But, overall, the firm has made innovation and renovation a priority and has been humble enough to use outside sources as it did with Swiffer.
On October 10, the die will be cast. If Nelson Peltz gets what he wants, a Board seat and the ability to bog down the company with analysts (as he has promised), the brands you love will be in serious trouble. You may never have the same brand experience again. And, most of this is because of greed and a colossal knowledge gap about brand management.
Larry Light, a global brand revitalization expert, is co-author with Joan Kiddon of Six Rules for Brand Revitalization. He also is the Chief Executive Officer of Arcature, a marketing consulting company that has advised a variety of marketers in packaged goods, technology, retail, hospitality, automotive, corporate and business-to-business, as well as not-for-profit organizations.
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