Jon Moeller, chief financial officer, Procter & Gamble Co.
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Deborah Henretta, group president, global beauty care, Procter & Gamble Co.
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Procter & Gamble Co. (PG) CFO Jon Moeller says beauty care is 'where the focus needs to be'

Analyst: Beauty revival could make Henretta CEO

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CINCINNATI - How do you make an old, stodgy consumer-products company more attractive to investors? You work on the hair and the makeup.

That was the message that Procter & Gamble Co. Chief Financial Officer Jon Moeller delivered to Wall Street analysts in Paris Wednesday.

It was the first investor presentation since A.G. Lafley returned to P&G, replacing Bob McDonald as CEO. Lafley did not appear at the conference, but he is expected to deliver earnings guidance for the 2014 fiscal year at an investor conference in August.

Bernstein Research analyst Ali Dibadj recently predicted that the beauty business would be Lafley's first major focus. After hearing Moeller's presentation in Paris Wednesday, Dibadj predicted that beauty care's recovery could lead to the selection of Deborah Henretta as P&G's first female CEO. Henretta was recently named group president of P&G's global beauty business, one of four executives who now report directly to Lafley. Each lead a major business segment for P&G.

"Each of the potential successors who were elevated have their own challenges to overcome to reach the golden ring of P&G CEO," Dibadj said via email. "However, beauty is probably the biggest challenge, so if Henretta can fix that, she will likely succeed Lafley."

In Paris Wednesday, Moeller spoke at length about two key brands: Pantene shampoo and Olay facial cream.

Together, they represent $5 billion in P&G's annual revenue and 25 percent of sales in P&G's beauty care segment.

"Both brands are underperforming," Moeller said. "We know it. We're working hard to fix them. Major changes in the momentum of brands this size don't happen overnight. It will take some time."

Moeller explained that a series of new product launches will be used to build market share for the brands.

"We've launched some pretty exciting innovations on the high end in Pantene and on the low end in North America on a product called Vidal Pro Series," Moeller said. "One of the issues we've had in hair care is not having product offerings in some of the fastest-growing portions of the market, in the super premium end and the lower priced end. We've addressed that.

"Similar situation with Olay, where we've launched Olay Fresh Effects, which is a mid-tier priced offering targeted at a younger consumer. So those are some of the things we're starting to do. The balance of the plan has significant competitive sensitivity and I can't go into it here."

P&G has been criticized for not having a strong enough innovation pipeline to invent new product categories, like the Swiffer line of cleaning products launched in 1999. Some analysts have complained that P&G innovation in recent years has focused on adding product options within existing brands, not inventing new categories. But Moeller stressed in Paris today that even incremental growth within existing brands can deliver the kind of revenue growth that investors are seeking.

"If we were growing our beauty business at the rate of the category growth, holding share, we would be adding about a point to our top line growth on a total basis every quarter," he said. "Olay and Pantene today comprise about 80 percent of that point. So, it's not the entirety of the story but it's clearly where the focus needs to be."

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