CINCINNATI -- Kentucky Fried Chicken, Ralph Lauren Corp., Gap Inc., Revlon Inc., Signet Jewelers and Bacardi Limited owe Procter & Gamble Co. a note of thanks. They’ve all gained from the talent that has left the Cincinnati-based consumer products giant.
The company’s annual report, filed with the Securities and Exchange Commission Aug. 7, provided the latest numbers on six years of downsizing. The company has now reserved $2.45 billion in severance payments for 19,190 departing executives since 2012, including $206 million for 2,120 employees in the 12 months that ended June 30.
It’s all part of P&G’s “shrink to grow” strategy, which called for the sale of about 100 under-performing brands and $20 billion in cost cutting to fund new growth initiatives for the 65 core brands that remain.
P&G’s mixed results from that strategy so far have prompted activist investor Nelson Peltz to wage a costly proxy fight against the company, asking shareholders to vote him onto the board. Among other things, Peltz wants to reduce P&G’s bureaucracy, arguing that will give its brand leaders more power to nimbly respond to changing market conditions.
But in one alarming sense, P&G has already empowered its executives to do just that -- for other companies. For example, Kevin Hochman left P&G in 2014 to be chief marketing officer for Kentucky Fried Chicken. He brought Colonel Sanders back to its advertising, helping to spark a 12-quarter streak of rising same-store sales. Yum! Brands Inc. promoted him to president of KFC U.S. in March.
And Hochman isn’t alone. WCPO research found at least eight companies with new CEOs who left P&G since 2012, when the first wave of severance packages was offered. Others have risen to lofty non-CEO roles, impacting company growth.
“At some point, you can cut too much,” said Lori Hudson, vice president and principal of Bahl & Gaynor Investment Counsel. Its clients hold more than 4 million P&G shares. Hudson is advising clients to vote against the Peltz agenda. She said P&G was too bloated when the restructuring began, but another re-organization could be too much for P&G to handle.
“We need time to see how this works out before somebody comes in to make additional changes,” she said.
P&G did not respond to WCPO’s questions, but previously has defended its cost-cutting moves as necessary.
“These funds can be reinvested for growth, whether that is into research and development, trial-generating programs or other areas that will allow us to innovate faster and engage more deeply with our consumers,” P&G spokesman Damon Jones told WCPO in April. “This will lead to growth. Our efforts all along have been about making P&G a more agile and profitable company -- size flows from that.”
In the meantime, ex-P&Gers will continue to rise outside the company.
“There’s a lot of really good talent at P&G,” said Lydia Jacobs-Horton. Her 34-year P&G career ended in 2015 when she left her job as a global director of facilities and real estate. “It’s the culture, the environment, the fact that you’re around a lot of good people. It was generally known that if you left P&G, you didn’t have to worry. You could get something upon exiting, usually a great job.”
Jacobs-Horton was hired in July to be the first executive director for Urban Land Institute Cincinnati, a professional real estate organization that wants to boost its impact on regional development.
Here’s a look at how other P&G alumni are faring in their new roles:
- Chris Peterson was chief financial officer for P&G’s global household care brands when he left the company in 2012 after 20 years. He was Ralph Lauren Corp.’s CFO after that. Revlon Inc. hired him as chief operating officer in April. Revlon posted a second-quarter loss of $36.5 million Aug. 4, when its stock was down 39 percent since the start of 2017. During its earnings call, Peterson unveiled several new initiatives to reduce cost, simplify its list of product offerings and accelerate new product development. “Our goal is to create a fast-track innovation capability with a six months speed to market cycle time,” he told analysts.
- Patrice Louvet left P&G after 28 years in May to become CEO of Ralph Lauren Corp. He was a global president for P&G beauty brands before that. Ralph Lauren’s stock soared 13 percent this month after Louvet touted better-then-expected sales and profit results in his first earnings call since joining the company Aug. 8. “People who know me well describe me as a builder of both brands and teams,” he told shareholders. “Building up people and teams to accomplish amazing things motivates me.” Another interesting twist: Louvet has been a Bacardi Limited board member since 2012, arriving four months after Edward Shirley became CEO. Shirley was a Gillette executive who rose to vice chairman for beauty and grooming at P&G before ending his 33-year career there in 2011. He left Bacardi in 2014 and started his own private-equity firm, PTW Capital, to acquire companies in consumer products and the food & beverage industries.
Virginia Drosos was group president for global beauty care at P&G when she ended her 25-year career there in September 2012.
By the end of 2014, she was CEO of Assurex Health, a Mason-based company that was sold to a larger rival last summer. Signet Jewelers Ltd. in Cleveland hired her as CEO in July. She’d previously served as a board member for the company. Stock in the parent company of Zales, Jared and Kay jewelers has lost more than 40 percent of its value this year, amid disclosures that its chief operating officer resigned due to violations of company policy unrelated to financial matters and the settlement of a 10-year-old lawsuit that the company discriminated against female sales associates.
- Teri List-Stoll was senior vice president and treasurer when she ended her 19-year career with the company in 2013. Now she is chief financial officer for Gap Inc., which was touted by an Oppenheimer analyst in June as a retailer likely to benefit from department-store downsizing. List-Stoll told analysts in May that the company was investing more heavily in store remodeling. “We’re doing a very thoughtful job of going through our inventory of stores and making sure that they live up to the brand statement that we want to make to our customers,” she said.
- Patricia Lopez was vice president and general manager for P&G’s Eastern Europe companies when she left after 25 years in 2012. Now, she is CEO of High Ridge Brands, a private-equity owned company in Stamford, Connecticut. It owns 13 brands, many of which compete against P&G, including Alberto VO5 shampoo, Zest soap and Reach toothbrushes.
Dipak Golechha left P&G in 2013 as CFO for its global feminine health and hygiene products.
Now he’s the president of Excelligence Learning Corp., a Monterey, California-based provider of online learning tools. It took only four months for Golechha to move the needle: Excelligence acquired the ChildCare Education Institute in Georgia in March, boosting its service offerings to early childhood learning centers and elementary schools. In April, the company bought Dallas-based Frog Street Press Inc., which makes educational materials for children under 6.