Procter & Gamble (P&G), the owner of consumer brands like Tide, Pampers and Swiffer, has announced plans to layoff up to 7,000 workers over the next two years. The plans are part of a larger restructuring announced by the company’s CFO, Andre Schulten, at a Deutsche Bank consumer conference in Paris on Thursday. The company announced plans to possibly exit some of its lower-performing brands, citing slow growth in the U.S. as part of the reason for the restructuring. MarketWatch reports that Schulten said, “The point of volatility impacting our business [has]
only increased as the current year has progressed,” adding that category growth rates in the U.S. have slowed from around 4% last calendar year to about 2%.
Workers at P&G Impacted by Layoffs, Restructuring
P&G employs over 30,000 workers in the U.S., with a global workforce of approximately 108,000. The company earns 48% of its total revenues from the domestic American market, which is its largest, according to reports in the Cincinnati Enquirer. The company says the the job cuts will affect “nonmanufacturing” workers (so, white collar jobs). The company’s 52,000 employees in factories (including 24 manufacturing plants in the U.S. and 78 plants in 33 other countries) won’t be targeted. CNBC reports that North American organic sales for the consumer giant rose just 1%, in the company’s fiscal third quarter. Last month, the company proclaimed that the U.S. consumer had “hit pause”, due to economic uncertainty.
The company’s plan will cut approximately 6.5% of its total workforce over the next 24 months. As mentioned previously, white collar workers will be targeted disproportionately, and will be cut by 15%.
P&G Layoffs Due in Part to Consumer Slowdown in USA
In previous remarks, reported by Marketwatch, Schulen shared that, “The consumer has been hit with a lot, and that’s a lot to process. So what we’re seeing, I think, is a logical response from the consumer, to pause.” Schulten noted that consumer consumption has slowed to about 1% in February and March, from about 3% over the past 12 months. “This restructuring program is an important step toward ensuring our ability to deliver our long-term algorithm over the coming two to three years,” Schulten told CNBC, who reports that the restructuring program will include layoffs and brand exits. The total price tag is estimated to be $1-1.6 billion for the company’s plans. “It does not, however, remove the near-term challenges that we currently face.”
Leadership Implications of P&G Layoffs: Adjustment, not Alarm
For leaders today, especially those focused on consumer brands, the message from P&G follows the announcement of other brands like Microsoft, IBM, the Walt Disney Company and Walmart – just a few of the companies announcing layoffs recently. However, the P&G announcement is an adjustment, not an alarm.
The company’s CFO told investors in Paris that the company is taking an even-handed approach to the layoffs, over the next two years, with an eye on adjusting the company’s portfolio of brands to meet consumer demand – something that P&G has been doing since its inception in 1837. That’s right: the company is almost 200 years old. With a portfolio of 300 brands, including Dawn, Downy, Crest, Head & Shoulders and lots of other things in your pantry, kitchen and bathroom, the company’s portfolio is broad – and adjustment for under-performing brands is just a part of business. As a multi-billion dollar international conglomerate, P&G is responding to market forces, including tariffs, and as-expected reductions in consumer spending in the U.S. However, that preparation is not a hard shift or massive course-correction for the consumer giant. What’s often missing from the headlines is the understanding of just how resilient large companies can be, under wise leadership and guidance. Nevertheless, these layoffs are an important trend to watch, as consumer spending contracts in the USA.