P&G plans to eliminate more than 4,000 jobs and cut costs—including its marketing budget where the company will shift to more digital advertising—in an effort to save $10 billion by 2016. The Wall Street Journal reports that the company's history of heavy spending on hiring, retaining and training managers to run its huge portfolio of brands has left P&G with a higher cost base than many rivals.
As it trims in the U.S., however, P&G continues to expand in emerging markets where it is seeing much of its sales growth. The company will add approximately 20 plants over the next five years in countries such as Brazil, China and South Africa—as well as Eastern Europe. Financial Times reported that it has become clear that P&G “can no longer achieve strong sales growth in the U.S. and Europe.”
On February 24 at the Consumer Analyst Group of New York Conference in Boca Raton, Florida, P&G CEO Bob McDonald outlined the cuts and noted "Even though we're already reducing enrollment, we're hiring people in China where our business is growing mid-double digits, because that's where the growth is."
Other cost savings include $6 billion by using less expensive packaging materials, such as a shampoo bottle made out of sugar cane, reports The Wall Street Journal, and finding efficiencies in the supply chain.
The last time P&G made such extensive cost cuts was under a reorganization in 2005. The current cuts are expected to cost P&G $3.5 billion in restructuring costs over the next four years.
"What we're doing here is a structuring element and also a repositioning element," Jon Moeller, CFO, P&G, told The Wall Street Journal. "There's a footprint disadvantage that we have today, which is one of the reasons our costs are higher."