Procter & Gamble Proves to Be Nimble Profit Maker

Article excerpt

Consumer products colossus Procter & Gamble Co. is proving it can be a nimble profit maker, not just a diligent defender of market share.

The company has been beating earnings estimates by outside analysts. A push to enhance profitability partly by changing management structure has provided reassurance that Procter & Gamble is among the bluest of blue-chip stocks.

During its evolution since 1837 when candlemaker William Procter went into business with soapmaker James Gamble, the company has devoted enormous attention to research and development.

The big R&D budget paid off over the years in the birth of world-beating products. But, as creation of megabrands like Ivory soap, Crest toothpaste, Tide detergent, Crisco cooking oil and Pampers disposable diapers slowed with the aging of the consumer products market, some stock pickers got impatient with the research obsession.

Plus, they objected to the company's approach to making money.

Research remains critically important but things have changed; from the Cincinnati headquarters to the numerous points dotting the globe from which P&G directs its empire, operations are run differently.

Jay H. Freedman, of Kidder, Peabody & Co. Inc., says a new way of thinking has been cultivated among senior P&G managers. Formerly, the company seemed to put unit volume sales and protection of market share ahead of profit growth.

The attitude, Freedman said, was ``as long as we protect our market positions, profits will eventually come through.''

A realignment of priorities, brought about by changing the chain of command and tying the pay of managers in the field to profits of brand-name products they're responsible for, has helped bolster P&G's financial prospects.

Meanwhile, the marketing climate has shifted in favor of manufacturers. Competitors on the consumer products battlefield are hoisting prices rather than waging promotions and providing give-aways to win market share.

``The price increases are sticking,'' says Joseph H. Kozloff of Drexel Burnham Lambert Inc. …

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