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Procter & Gamble Legacy on the Rise
Procter & Gamble is an Emerging Market Play
by Robb Hoff
October 26, 2012
Imagine if you will............no.....don't. Rod Serling's "Twilight Zone" intros are about as dead to this world as Procter & Gamble's defunct soap opera "As the World Turns" or the company's moribund logo.
And yet here remains P&G, its stock experiencing an unexpected bump in the wake of revenues and profits that weren't as bad as expected.
In fact, P&G stock hit its highest level over $70 per share since the financial markets collapse of late 2008. Combined with a dividend of $2.25, things may look as bright on the P&G horizon as a white sheet washed with a Tide Pod of laundry detergent in the River Ganges.
Or maybe not.
The P&G dividend has been a nice ride, even more so when the yield was higher due to lower stock price. But the looming fiscal cliff continues to hang the dividend guillotine over the heads of investors with the scepter of a tax slaughter that would raise the dividend tax rate from 15% up to 43%.
That combined with another bad omen -- inflationary increases in the cost of basic necessities and simple luxuries like those branded by P&G.
The question facing P&G -- at least in the U.S. -- is whether or not those branded basics from diapers and tampons to toothpaste, shampoo and laundry detergent will continue to command their marketplace among consumers who are quite frankly most likely to be the real victims of the fiscal cliff and the continued fallout of an economy that remains on a dead-cat bounce along the bottom of an economy that is still too lifeless overall.
Victims like those P&G employees who found themselves in the guillotine of a P&G restructuring that features 7,500 fewer jobs. I would expect that the generic versions of P&G brand names will be their shopping choice regardless of how many cellphone coupons are made available.
Now, the company restructuring and trimming of proverbial fat from the corporate gut might not work out so well for the recently P&G unemployed, but you can bet your last dollar that it's going to work out real well for P&G investors.
Why? Because the execution of the plan (and the careers of those P&G employees) is exactly what the P&G-invested activists have demanded -- a commitment to the 21st Century American calling card that "Less is More".
Savings like the $10 billion estimated by the restructuring plan won't alone make the bottom-line difference, but it will keep the activists at bay until P&G's current leadership proves it can really do the next thing on the list -- innovate.
In the case of P&G, innovate may be more akin to integrate, whereby one single product -- the Tide Pod single-dose of detergent -- may be asked to spark a worldwide cultural revolution unlike any seen in human history. Well, sort of.
The idea is simple enough -- the individual-use pods realize a much higher total revenue number than the same amount of detergent produces by the scoop or pour.
And it is already working. Will it work worldwide? Will the River Ganges be filled with Bhagavad Gita rejoicings whilst individual doses of Tide Pod detergent clean all manner of garb like it has never been cleaned before even as carcasses float by?
Perhaps. But there is no question that P&G's integration into the consumer product consciousness throughout the emerging market world will bring some measure of Nirvana to stockholders as annual revenues continue their climb toward $100 billion -- enough for about $14 worth of product spent by every human on the planet every year.