Procter and Gamble (NYSE: PG) Downsizing
Procter & Gamble (NYSE: PG) is aggressively re-shaping the company, restructuring units to better align with changing consumer tastes. In doing so though, the firm is facing significant change costs. Pressure from generic substitutes are threatening the firm’s position in customer shopping carts, and the fall in revenue is threatening the firms success.
It was recently reported that Procter & Gamble Co. spent $1.6 billion on restructuring initiatives since November 2011. This spend is part of a firm wide initiative to right size the business as the firm continues to evolve. Of that spending, $918 million was spent on employee separation packages. P&G (NYSE: PG) disclosed the figures in its quarterly report. The packages average out to about $159,650 to the 5,750 employees who left the consumer goods giant through the end of 2012. P&G officials said it likely will complete the restructuring four or five months ahead of schedule.
P&G also recently announced that the firm is cutting about 150 jobs in Spain and Portugal. The cuts come on the heels of P&G’s decision to integrate Arbora & Ausonia, a hygiene company, into its existing operations. As of the end of October, P&G already was more than 70 percent of the way to its goal of reducing the firm’s headcount by 5,700 positions, as part of a $10 billion restructuring program announced in February 2012. The Cincinnati-based consumer products giant acquired Arbora & Ausonia, which makes diapers, Tampax tampons and adult incontinence products, last year.
The products from P&G are firmly entrenched as consumer staples for customers around the globe, but global economic pressures are limiting the firm’s ability to raise prices, while rising costs of doing business are detracting from its profitability. Restructuring the firm is a necessary strategic decision at this point, to return the firm to its importance place for investors. Once a solid source of revenue streams and dividends, the firm has struggled in recent years to adapt to the changing economic conditions.
Despite the cost cutting measures underway, the firm also has an eye towards the future and investing accordingly. P&G and Israel-based Teva Pharmaceuticals broke ground on a $90 million joint venture facility in the Indian state of Gujarat. The plant will make consumer health and over-the-counter products, including inhalers, throat drops and cough syrups under the Vicks brand, in the city of Sanand. The JV company, with headquarters in Geneva, is called PGT Healthcare. The plant is expected to be completed in two years.