Why Did P&G Choose Its New CEO From Finance Instead of Marketing?

Procter & Gamble doesn't hire CEOs who never worked as brand managers. Yet, for the first time, the new P&G CEO is someone who has risen through the company's financial management ranks.

Is it a routine promotion of a corporate veteran, or is there a special task for the new CEO, Jon Moeller?

Lackluster shareholder performance

In the last decade, P&G hasn't given much to the shareholders to cheer for.

If you invested $1 in P&G at the beginning of every decade and sold it at the end of that decade,

1.       Between 1990 to 2000, P&G returned $3.6 while S&P 500 returned $4.

2.       2000 to 2010, P&G $1.6, S&P 500 $1.

3.       2010 to 2020, P&G $2.2, S&P 500 $3.

A CEO needs to do two things well to be successful – run the operations efficiently and deploy the cash generated by the operations.

P&G is a cash machine. Its 2021 operating cash flow was $ 18 billion.

Here is what I feel the ask of the new CEO would be:

• Significant acquisitions – deploying the cash, likely with additional leverage, to buying businesses which P&G can scale up with its operating and marketing systems. P&G is among the biggest advertiser globally, spending $8.2 billion on advertising in 2021. As a result, it has a considerable scale advantage in negotiating media costs.
• Sell off businesses with relatively lower cash returns.
• Aggressively prune costs and go leaner, releasing more cash.
• Scale-up stock buybacks. P&G's usual stock buybacks are neither opportunistic in the timing nor are they at scale to make an impact.