David S. Taylor
Chairman of the Board,
President and Chief Executive Officer
P&G is a profoundly different, much stronger, and more profitable Company than it was just a few years ago. P&G people are transforming the Company, and working with passion, ownership and commitment to create value for consumers and shareholders. The Company is successfully executing a strategy that is working. To avoid the risk of derailing this progress, the P&G Board of Directors strongly recommends that you elect ALL of P&G’s Directors by voting on the enclosed BLUE Proxy Card today.P&G people are transforming the Company, and working with passion, ownership and commitment to create value for consumers and shareholders. The Company is successfully executing a strategy that is working. To avoid the risk of derailing this progress, the P&G Board of Directors strongly recommends that you elect ALL of P&G’s Directors by voting on the enclosed BLUE Proxy Card today.
P&G has transformed its portfolio into 65 brands and 10 core categories where products solve problems and performance drives purchase. The new portfolio is focused on daily-use household and personal care categories that leverage P&G’s core strengths in consumer understanding, branding, product and package innovation, and go-to- market execution. They are faster-growth, higher-margin businesses than those we exited over the past four years.
P&G is the innovation leader in these categories with leadership market share positions.
|P&G Brand||Rank||Market Share1||P&G Share vs. #2 Competitor|
|P&G Brand||Rank||Market Share1||P&G Share vs. #2 Competitor|
In its largest market, P&G has led the industry with more top 25 innovations over the last 20 years than the next six competitors combined. 2 Recent innovation winners include Always Discreet, Always Radiant, Tide PODS, Ariel PODS, Gain FLINGS, Downy Unstopables, Fairy Platinum, Cascade Action Pacs, Pampers Swaddlers, Pampers Pants, Venus Swirl, and Oral B Genius… just to name a dozen.
P&G benefits from category-dedicated innovation teams that are supplemented with a small complement of corporate R&D resources. Corporate R&D contributes to breakthrough product innovations across multiple categories, delivers substantial cost savings, drives advantages in e- commerce, and supports our sustainability initiatives. Examples Include:
P&G brands are consistently ranked #1 in market share because they are the best. In the categories in which we compete, consumers seek trusted, familiar brands that solve problems and perform better than others.
Large, leading brands grow when they deliver noticeable superiority. P&G’s largest brands are the fastest growing. P&G’s top 10 brands grew organic sales two percentage points faster than the Company in fiscal 2017. Nearly half of P&G’s top 25 brands grew organic sales by 4% or more, with four of those brands growing 10% or more. For example, Head & Shoulders is the largest shampoo brand in the world and is one of the fastest growing (up 5% last year and each year for the past decade). Tide is the largest laundry detergent brand in the U.S. and is growing market share and sales (up 5% last year and the year before).
This is as true today as it has always been. Among millennials, numerous top-selling P&G brands such as Always, Tide, Downy, Dawn, Bounty, Charmin, Gillette, and Crest hold the #1 market share position.
Channel trends across household and personal care categories favor the big, leading brands. Among the fastest-growing formats are limited assortment channels such as discount clubs, small convenience stores, and e-commerce. Retailers need leading brands because they drive category growth. According to data from Nielsen, a leading market research company, big brands (over 20% share) have grown at an average rate of 2.2% annually for the past 3 years, while small brands have declined 2.6% annually. In the household and personal care categories in which we compete, it is not brand size that matters; it is performance that drives purchase.
Today’s P&G is well positioned with the right plan, the right structure and the right Board in place to deliver results and shareholder value for the short-, mid- and long-term. P&G met or exceeded each of its going-in fiscal 2017 objectives: balanced top- and bottom-line growth, cash productivity and cash delivered to shareholders. Since November 2015, P&G has delivered Total Shareholder Return above peer companies.
P&G is successfully executing a winning strategy and has strong momentum. We firmly believe we should not risk derailing our progress by adding Nelson Peltz of Trian to the P&G Board.
A question often asked is: ‘What’s the harm of adding one person to a board?’ “What’s the harm?” is a horribly low and irresponsible standard for board governance.
Nelson Peltz lacks specific qualities P&G is looking for in Board members, including experience from being digitally “native”; experience in driving innovation; health care experience; online, offline and “omni-channel” retail experience and innovation; international experience, particularly in developing markets; and gender and ethnic diversity. Mr. Peltz also has a history of behavior and hidden agendas that result in derailing companies.
The P&G Board and management team have talked to numerous directors, CEOs and senior executives who have worked with Mr. Peltz, and positive recommendations were not forthcoming. People would only speak candidly about their experiences with Mr. Peltz if those discussions were kept confidential, for fear of retribution. However, one CEO whose board includes Mr. Peltz has publicly disclosed what it’s like to deal with activists such as Mr. Peltz: "I think the single biggest disconnect that I found is that many activists simply sit in conference rooms and do calculations and analysis, independent of the reality of the fact that we are dealing with human beings and people’s lives.”4 With an army of analysts accompanying Mr. Peltz, it’s not surprising that CEOs report spending up to 25% of their time answering his questions or debating misinformed ideas.4
Mr. Peltz recently suggested that growing earnings per share is unimportant.5,6 Leading shareholder return in the household and personal care categories in which P&G competes requires balanced top- and bottom-line growth and high cash efficiency. Ideas like these can derail companies by getting them out of balance, eroding shareholder value.
The consequences of derailment can be quite damaging. The weighted average shareholder return of companies on which Mr. Peltz serves as a board member is 4%.3 One company has NEGATIVE 9% returns. That company has had negative volume growth every year since Mr. Peltz joined the board, and current year-to-date organic sales growth is NEGATIVE 1.0%, versus POSITIVE 3.9% the year before Mr. Peltz joined.
So what’s the harm of one person on P&G’s Board? It can be substantial, if it’s the wrong person. We have done our homework. Mr. Peltz is a smart investor. He is welcome as an engaged shareholder, and we will continue to listen to him. We fully expect shareholders to hold P&G accountable to deliver returns, but putting the wrong person like Mr. Peltz on the P&G Board of Directors represents a risk of derailment and damage that should be prevented.
“In light of the vast array of actions the firm is undertaking, we fail to see a major impetus behind Peltz’s approach and little to suggest that his oversight would accelerate change.”
- Erin Lash, Analyst7
P&G people are working with passion, ownership and commitment to create value for consumers and for you— P&G shareholders. We are transforming P&G with a strategy that is working. We never quit. We intend to win with consumers and win in the marketplace. We would have it no other way. This is why the P&G Board, management team, and I continue to strongly believe it is in the best interest of our Company—and all of us who care about P&G—to VOTE BLUE.
On behalf of your Board of Directors, we thank you for your continued support.
David S. Taylor
Chairman of the Board, President and Chief Executive OfficerSeptember 20, 2017
1U.S. market share as of July 2017.
2Based on IRI New Product Pacesetters Reports: Non-Food Innovations.
3TSR calculations since November 1, 2015. Market data as of September 6, 2017. The peers selected by Trian in its September 6, 2017 White Paper are as follows: Beiersdorf, Church & Dwight, Clorox, Colgate-Palmolive, Edgewell Personal Care, Henkel, Kimberly-Clark, L’Oreal, Reckitt Benckiser and Unilever. The TSR for “Peltz Serving on Board” is a weighted average based on the market capitalization of Madison Square Garden, Mondelez, Sysco and Wendy’s. The TSR for “P&G Peers” is a simple average, which follows the same methodology utilized by Trian in its measurement of the same peer constituency in its presentation filed with the SEC on September 6, 2017.
4Source: Business Insider, “The CEO of Mondelēz explains what it's like to be targeted by Bill Ackman and Nelson Peltz”, 7.7.17. Permission to use the quotation neither sought nor obtained.
5Source: Bernstein Conference Call with Ali Dibadj, 9.11.17.
6Source: CNBC, "Squawk on the Street”, 9.8.17. Permission to use the quotation neither sought nor obtained.
7Source: Erin Lash, Analyst, Morningstar, “Peltz Vies for Board Seat at P&G in Effort to Accelerate Change; Shares a Bit Undervalued”, 7.17.17. Permission to use the quotation neither sought nor obtained.