Earlier this week P&G cut the prices of liquid laundry detergents such as Tide, Cheer and Dreft by up to 15 per cent. It had already cut prices of disposable nappies, such as its popular Pampers brand, three times during the past year.
The company is facing severe competition from discounted own-label goods and powerful rivals such as Unilever and Colgate-Palmolive. As part of its strategy, P&G has cut down on one-off promotions such as coupon offers.
'Our competitors are getting leaner and quicker,' Edwin Artzt, chairman, said yesterday. 'Our objective is to improve our rate of profit growth either through improved margins or lower pricing to build volume and share.' The company aims to deliver lower prices in the shops by streamlining manufacturing operations and closing factories.
P&G is establishing a dollars 1.5bn after-tax reserve for plant consolidations and organisational restructurings. These include a reduction of 13,000 positions from its worldwide workforce of 106,000. Half the lay-offs will come from the elimination of 30 of its 147 manufacturing plants over the next three to four years.
The other 6,500 staff reductions will stem from an efficiency drive. These lay-offs should be achieved through a combination of voluntary early retirements, natural wastage and reduced recruiting levels. The company gave no details of which plants around the world would close but said it would make announcements at the affected sites as final decisions were made.
Excluding the dollars 1.5bn special charge and a separate dollars 925m charge related to accounting for retiree health benefits, P&G said it should produce record numbers for its underlying operating profits in the financial year that ended last month. Profit margins in 1993 were its highest in a decade, Mr Artzt said.
P&G expects to report double-digit earnings growth and earnings that will top dollars 2bn after tax for the first time, before the write-downs. The company also plans to raise its dividends.
Hamish McRae, page 25