Saturday, June 17, 2000

   Pepper narrows his focus at P&G

By Randy Tucker
The Cincinnati Enquirer

        After a 17-month hiatus, Procter & Gamble's John Pepper has returned as chairman of the nation's largest packaged-goods company.

        But the Pennsylvania-born executive said he will approach his new assignment with a narrower focus than when he last held the reins.

        In an interview with The Cincinnati Enquirer Friday, Mr. Pepper said he will act primarily as a consultant and mentor to new president and chief executive A.G. Lafley, who will run the company's day-to-day operations.

        Here are excerpts of the interview:

        Question: What convinced you to come back as P&G's chairman?

        Answer: My decision to come back as chairman entirely grew out of Durk's decision to retire. When Durk made his decision to retire, obviously, then we had the ques tion of succession in the company. And I felt very good about what we could do in that respect, meaning, obviously, with A.G., whom I've known since the day he interviewed with the company. I hired A.G. I was the senior person on the panel that interviewed him. We've worked together for more than half of his career. I've long known that he would be the CEO of the company. But there's more to be done here than one person can do. And my coming back in as chairman — knowing the company as I do — kind of clears the deck for him so he can focus on the operations and getting the business issues in front of us addressed. It was really clear as a bell that it was the right thing to do for me to come back and play that role.

        Q: Are you here for a specific period of time?

        A: I'm here as long as this proves to be the right thing to do. ... So there aren't any dates on this.

        Q: Because there was no indication Mr. Jager planned to retire, there has been widespread speculation that he was forced out. Is there any truth to that?

        A: He told me he was resigning from the company. This was not a question of the board asking him to resign. This was not a question of him being pushed out.

        Q: How would you describe your role at P&G today?

        A: What I want to do is be an integral part of this team that's going to reaffirm our position as the pre-eminent consumer goods company in the world. The simple way to look at it is I want to take on those things that I'm good at ... that will be most helpful in achieving our overall goals and enabling A.G. to focus on the business operations. There's no question A.G. is the senior line officer in this company. I will certainly focus heavily on external affairs. It will mean working with the government where that needs to be done. ... When it comes to working with the (financial) analysts, we'll probably both do that. But A.G. will present a very important face to the investment community.

        Q: What can investors expect in terms of their relationship with Mr. Lafley?

        A: A.G. ... is a quick take. He's right out front, very direct, very friendly, engaging. As he meets the investment community ... I think they will come to see him very quickly as just an outstanding business person and individual. Q: During your conference call with analysts last week, you said several times that the company was in transition. In what way are you in transition, and how long will that last?

        A: What I was referring to ... was having people in place on new reporting lines long enough to know each other and know the business. In many ways, that's the biggest part of the change we've needed to make. People have now been in place varying lengths of time (in new jobs). Some as short as one or two months. Some now as long as a year. But I think we're talking another year (for the transition to be complete). It will obviously vary by parts of the world.

        Q: After focusing on new products and acquisitions, you now say you're going to reallocate resources back toward core brands. How quickly will that happen? What's the extent of the damage to your established brands?

        A: Our established business has not been damaged. The fact is that our (dollar and market) shares on most of our brands are flat. Or in a couple cases, growing modestly. And in a couple cases, declining modestly. Even though we brought in all kinds of new brands, and that's been very good, the condition of that (core) busi ness is flat. You might ask what's all the fuss about? Well, it's not good enough to be flat. These businesses have to be growing. Those are core profitable parts of our business. But more important than that, they're the ones that are reaching out to the most consumers and they're our bread and butter. We'll be bringing some additional effort over (to core brands). You'll see it starting right as we go into next year. This is not a shift that will take a long time to make. It's not as if we don't have good pipelines of product initiatives in these categories. And it isn't as if we don't have excellent people working in these categories.

        Q: Many Wall Street analysts are taking the company's new profit estimates for fiscal 2001 with a grain of salt, saying that profits are more likely to grow by about 10 percent rather than the predicted 11 percent to 13 percent. What do you see in P&G's future that gives you confidence you can reach the 11 percent to 13 percent range?

        A: I can understand why people on (Wall Street) would raise a question based on results this year in the fourth quarter. But we'll just have to prove with our results as we go through the year that we're right and deliver on these commitments. They're talking 10, we're talking 11 to 13 (percent earnings growth). These are very small differences. But we reached 11 to 13 with a lot of deliberation. We think we can do it with a level of volume and sales growth that we believe is achievable. We've got a lot of plans under way in the area of cost savings. And there were some things that happened last year, in terms of spending and marketing support, that we know was not well spent, and it won't happen again.

'Nice guy' Pepper begins to right P&G ship
   P&G president takes spotlight at reunion
   P&G revival hinges on goals
-    Pepper narrows his focus at P&G

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