Procter & Gamble Company (the) · NYSE:PG
Procter & Gamble Company (the) — Proxy Contest (September 2017)
94 slides from Procter & Gamble Company (the)'s proxy contest presentation, Sep 6, 2017
Slide 1: September 6, 2017
SEPTEMBER 6, 2017 © 2017 Trian Fund Management, L.P. All rights reserved.
Slide 2: Disclosure Statement and Disclaimers
Disclosure Statement and Disclaimers Additional Information Trian Fund Management, L.P. (“Trian”) and certain of the funds and investment vehicles it manages (collectively, Trian with such funds and investment vehicles, “Trian Partners”), together with other participants (collectively, the “Particip
Slide 3: Disclosure Statement and Disclaimers
Disclosure Statement and Disclaimers Forward-Looking Statements This presentation contains forward-looking statements. All statements contained in this presentation that are not clearly historical in nature or that necessarily depend on future events are forward-looking, and the words “anticipate,”
Slide 4: Revitalize P&G – Together
Revitalize P&G – Together Why Does P&G Need Change? Despite 10 years of turnaround strategies and portfolio changes, we believe P&G still suffers from: Market share erosion and low organic sales growth Aging brands and a lack of breakthrough innovation Suffocating bureaucracy and excessive cos
Slide 5: What We Are NOT Recommending
What We Are NOT Recommending Trian’s objective is to create sustainable long-term value at P&G. Trian is: NOT advocating for the break-up of the Company NOT suggesting that the CEO be replaced NOT seeking to replace any Directors NOT advocating taking on excessive leverage NOT seeking to c
Slide 6: Why Adding a Shareholder Voice to the Boardroom is Critical
Why Adding a Shareholder Voice to the Boardroom is Critical The Company’s Spin “You are being asked to choose between a Board and management team that are successfully executing a proven plan to build a better and more valuable company, and Mr. Peltz” – David Taylor, CEO, August 14, 2017 The Reality
Slide 7: P&G Faces Numerous Challenges
P&G Faces Numerous Challenges P&G faces several challenges, but the greatest has been market share loss P&G has lost significant share to traditional peers(1) Moreover, all traditional Consumer Packaged Goods (“CPG”) companies must be concerned with new competitive threats: ► Consumer preference
Slide 8: Trian’s Strategic Initiatives: Regain Lost Market Share
Trian’s Strategic Initiatives: Regain Lost Market Share Through The Following Initiatives – We believe P&G’s current “matrix” structure results in limited accountability – Selling & Market Operations (SMOs) sit outside the Global Business Units (GBUs), creating three dimensions to P&G’s matrix struc
Slide 9: Trian’s Strategic Initiatives: Regain Lost Market Share (continued)
Trian’s Strategic Initiatives: Regain Lost Market Share Through The Following Initiatives Make M&A a – P&G must acknowledge that others will inevitably come up with new ideas, new Growth Strategy opportunities for growth and new products that are on-trend with consumers 5 and a Core – P&G must be pr
Slide 10: P&G Has Underperformed Under this Board’s Watch
P&G Has Underperformed Under this Board’s Watch, Yet It Claims Unequivocally that Nelson Peltz Would Not Add Value “Adding Nelson Peltz of Trian on our Board has the potential to derail the transformation we’re leading at P&G… P&G has a diverse and experienced Board that is actively overseeing our t
Slide 11: P&G Touts Its TSR Since David Taylor Became CEO
P&G Touts Its TSR Since David Taylor Became CEO But Results Must Be Taken in Context TSR Under David Taylor P&G’s TSR of 24% since David Taylor took over as CEO (11/1/2015 – 6/15/2017) is 2% higher than the peer average, but he took over after a one-year period where P&G underperformed peers by 31%
Slide 12: Underlying Business Performance Has Not Improved Under David Taylor
Underlying Business Performance Has Not Improved Under David Taylor P&G’s organic sales growth under David Taylor (FY15 – FY17) is less than that of prior years, and is half the peer average over the same time frame(1) Annual EPS growth under David Taylor is eight percentage points lower than th
Slide 13: In 2017, Share Loss and Earnings Underperformance Continued
In 2017, Share Loss and Earnings Underperformance Continued, Despite P&G’s Claims P&G once again lost market share in FY 2017 (5 out of 5 segments lost market share) EPS growth of 7% was in the bottom third of its peer group (peer average of 11%) Adjusted for the share count reductions from th
Slide 14: P&G Also Cut Advertising Spend in 2017
P&G Also Cut Advertising Spend in 2017 – Breaking a Cardinal Rule P&G originally committed to grow advertising spend in 2017: “…We’re committed to four quarters of brand support. The fourth quarter we increased meaningfully our media investment versus previous year and we’re going to continue that i
Slide 15: Management is Being Paid For, And the Board Accepts, Mediocrity
Management is Being Paid For, And the Board Accepts, Mediocrity Most recent 3-year long-term compensation targets (covering 7/1/16-6/30/19) pay management for market share losses and bottom quartile EPS growth Targeting 2.8% organic sales growth from 2016-2019 – LOWER than expected market growth
Slide 16: Consumer Companies with Nelson on the Board Have Outperformed P&G
Consumer Companies with Nelson on the Board Have Consistently Outperformed P&G P&G Spin “Since the CEO transition on November 1, 2015, our team has delivered total shareholder return (“TSR”) of 27%...the weighted average return of the companies where Mr. Peltz serves as a Board member has been only
Slide 17: Trian Has Developed Strong Relationships Following Prior Proxy Contests
Trian Has Developed Strong Relationships with Company Boards and Management Teams Following Prior Proxy Contests Trian has been involved in three proxy contests in its history: – (i) Heinz in 2006; (ii) DuPont in 2015; and (iii) P&G in 2017 In all three, we heard substantially the same rhetoric
Slide 18: Revitalize P&G – Together
Revitalize P&G – Together I. A Record of Underperformance II. Trian Strategic Initiatives: Regain Lost Market Share a. Organize in Way That Promotes Accountability b. Ensure Management’s $12-$13bn “Productivity Plan” Delivers Results c. Fix The Innovation Machine d. Develop Small, Mid-Size & Local B
Slide 19: Context on Key Assumptions, Peer Group & Time Frames
Context on Key Assumptions, Peer Group & Time Frames P&G peer group We believe the relevant peer group is comprised of companies domiciled in the U.S. and Europe larger than US$4bn in market capitalization that generate at least half of their sales in similar health and personal care categories
Slide 20: TSR Has Trailed the Vast Majority of Peers
TSR Has Trailed the Vast Majority of Peers TSR – 10-Year TSR – 5-Year TSR – 4-Year CHD 402% RB 175% RB 97% RB 289% HE 162% CHD 86% HE 278% UL 141% UL 85% UL 276% LO 126% CLX 84% Peer Avg. 210% CLX 123% HE 78% CLX 195% CHD 120% Peer Avg. 67% CL 189% Peer Avg. 118% S&P 64% KMB 174% S&P 102% LO 62% Con
Slide 21: TSR Has Trailed the Vast Majority of Peers (Cont’d)
TSR Has Trailed the Vast Majority of Peers (Cont’d) TSR – 3-Year TSR – 2-Year TSR – 1-Year UL 76% UL 63% UL 42% RB 69% RB 47% HE 26% CLX 69% CLX 41% BE 22% CHD 62% CHD 34% S&P 21% LO 55% KMB 31% RB 20% HE 55% Peer Avg. 31% LO 19% Consumer Peer Avg. 48% 27% Peer Avg. 15% Staples Consumer 39% BE 26% P
Slide 22: Organic Sales Growth Has Underperformed Peers
Organic Sales Growth Has Underperformed Peers P&G’s organic sales growth has deteriorated over time… Organic Sales Growth CAGR (FY 2011 – FY 2017): 2.3% 4% 3% 3% 3% 2% 2% 1% 2006-2011 2012 2013 2014 2015 2016 2017 CAGR And has significantly underperformed the peer group since 2011 6.3% Organic Sales
Slide 23: Volume Growth Continues to Trail Peers
Volume Growth Continues to Trail Peers Indexed Organic Volume Growth: FY 2011 – FY 2017 Average Volume Growth During David Taylor's Tenure (Q2 '16 - Q4 '17) P&G Peers Clorox(1) 4.0% Church & Dwight 3.6% Henkel 2.7% Kimberly-Clark 2.1% Unilever 1.4% 117% P&G 1.1% 116% (2) Colgate-Palmolive 0.6% Peer
Slide 24: P&G is Losing Market Share at the Local Level Across Businesses
P&G is Losing Market Share at the Local Level Across Businesses Market shares are down in 68% of the top 20 country-categories Losing market share in each individual category on a global basis over the past 5 and 3 year periods Value Share Market Share Gain / (Loss) Baby, Feminine & Fabric & Bea
Slide 25: P&G’s Operating Results Have Underperformed Peers
P&G’s Operating Results Have Underperformed Peers P&G’s income statement has stalled since 2011, underperforming the peer average on virtually every line item including: sales growth (volume and organic growth), gross profit growth, gross margins, operating profit growth, operating margins and EPS
Slide 26: Competitors Have Grown EPS Faster than P&G
Competitors Have Grown EPS Faster than P&G P&G largely blames volatility in the currency markets for poor financial performance but it is not the only CPG company with adverse currency exposure In fact two peers, Colgate-Palmolive and Kimberly-Clark, have grown EPS at a much faster rate than P&G
Slide 27: P&G’s Dividend Suffered as Revenue and Earnings Growth Stalled
P&G’s Dividend Suffered as Revenue and Earnings Growth Stalled P&G’s dividend per share growth is near worst in class as growth has stalled over the last few years At the same time, EPS growth has been flat, resulting in a payout ratio that is the highest in the industry We are not suggesting
Slide 28: P&G Has Lowered the Bar for Performance Over Time
P&G Has Lowered the Bar for Performance Over Time Despite promises of transformational change, improved organizational design, and large headline cost savings meant to fuel reinvestment and earnings growth, P&G has generally lowered the bar for performance over the past decade Organic Sales Growth
Slide 29: P&G Investments Have Not Generated Returns For Many Years
Big Picture: P&G Investments Have Not Generated Returns For Many Years Since 2011, P&G has invested ~$96bn in R&D, advertising and promotion (“A&P”) and capital expenditures (“capex”), yet volumes have increased less than 1% annually and market share is down P&G’s cumulative investment is larger
Slide 30: Revitalize P&G – Together
Revitalize P&G – Together I. A Record of Underperformance II. Trian Strategic Initiatives: Regain Lost Market Share a. Organize in Way That Promotes Accountability b. Ensure Management’s $12-$13bn “Productivity Plan” Delivers Results c. Fix The Innovation Machine d. Develop Small, Mid-Size & Local B
Slide 31: Trian Strategic Initiative: Organize in a Way That Promotes Accountability
Trian Strategic Initiative: Organize in a Way That Promotes Accountability We believe P&G’s current “matrix” structure results in limited accountability – Selling & Market Operations (SMOs) sit outside the Global Business Units (GBUs), creating three dimensions to P&G’s matrix structure – GBUs, SM
Slide 32: Organize in a Way That Promotes Accountability (Cont’d)
Organize in a Way That Promotes Accountability (Cont’d) We believe P&G should organize into a lean holding company with 3 largely autonomous GBUs 1) Beauty, Grooming, & Health Care ($26bn revenue) 2) Fabric & Home Care ($21bn revenue) 3) Baby, Feminine & Family Care ($18bn revenue) – Strategy: Run
Slide 33: P&G’s Existing Structure = Suffocating Bureaucracy and Complexity
P&G’s Existing Structure = Suffocating Bureaucracy and Complexity P&G’s current organizational structure is highly matrixed with 3 power centers: (1) 1. 10 GBUs (Categories): Global, Regional and Country 2. 6 SMOs (Sales & Market Operations): Regional and Country Report to Corporate, not the GBUs; r
Slide 34: Highly Matrixed = Allocated Costs = Diminished Morale
Highly Matrixed = Allocated Costs = Diminished Morale If GBU leaders (who theoretically “own the P&L”) controlled 100% of their costs, their incentives would be clear: fund growth investments, optimize costs and maximize profits But because P&G is highly matrixed, GBU leaders are “allocated” sig
Slide 35: Matrix Structure Does Not Leverage Scale and Other Advantages
Matrix Structure Does Not Leverage Scale and Other Advantages P&G is ~4x Larger than its Average P&G has a ~50% price premium, across Competitor its categories Sales vs. Peers ($bn) Average U.S. Price Premium (vs. Category)(1) $65 $60 53% 40% 30% ~4x peer average sales $29 13% 11% 10% $22 $18 NA NA
Slide 36: Current Structure Has Led to Near Worst-In-Class International Margins
We Believe Current Structure Has Led to Near Worst-In-Class International Margins P&G’s international margins are meaningfully lower than peer averages despite scale advantage We believe this may be indicative of the downside of a highly matrixed and globally-led GBU structure Unilever, P&G’s
Slide 37: Management Says It Has Improved the Structure…
Management Says It Has Improved the Structure… P&G says it has improved its highly matrixed organizational design by implementing two “work-arounds” designed to improve the legacy structure What P&G Says Our Concern While management tries to portray “End-to-End” as giving the GBU full control of the
Slide 38: …But the Results Have Not Improved Under the “End-to-End” Model
…But the Results Have Not Improved Under the “End-to-End” Model In the U.S. where “End-to-End” has been in-place for 2 years, results remain mixed at best Question from Research Analyst on Last Earnings Call Regarding End-to-End: “I just wanted to talk a little bit about implementation of End-to-End
Slide 39: Shareholders Have Heard The Same Promises Before
Shareholders Have Heard The Same Promises Before What They Said Then (2011-2013) What They Say Now (2017) “End-To-End” “We are radically simplifying our end-to-end organization design so there are “In large markets, we're implementing what we call an End-to-End ownership and now only three handoffs
Slide 40: Shareholders Have Been Hearing About Structural Improvements for Over a Decade
In Fact, Shareholders Have Been Hearing About Structural Improvements for Over a Decade P&G’s leadership has promised many incremental improvements to P&G’s structure over the years, including numerous changes under the watch of current Board members ─ P&G Independent Director Start Dates: 2000(1
Slide 41: Market Share Losses Continue Across P&G’s Largest Countries
But the Market Share Losses Continue Across P&G’s Largest Countries… Market share losses across the majority of P&G’s largest markets over the past 5 years P&G Global Market Share Change: 2011-2016 (bps) 2016 P&G Retail Sales by Country ($ bn) Saudi Arabia (240) Saudi Arabia $1,002 China (220) Chi
Slide 42: …And Across P&G’s Largest Categories
…And Across P&G’s Largest Categories Market share losses in each of P&G’s 7 largest categories (marked with *) over the past 5 years P&G Global Market Share Change: 2011-2016 (bps) 2016 P&G Retail Sales by Category ($ bn) Sanitary Protection (490) Sanitary Protection $6,021 * Men's Shave (350) Men
Slide 43: China Diapers Case Study
China Diapers Case Study P&G has lost significant share behind one of its largest Premium Diapers as % of Total Sales brands (Pampers) in P&G’s second largest market (China). China is also the world’s largest diaper market and has been growing at a double-digit CAGR over 5 years P&G was an early e
Slide 44: Gillette Case Study
Gillette Case Study In 2005, P&G acquired Gillette for $57bn but has lost 1,250 bps of share in the U.S. men’s shave category in just 5 years “Platform” Introductions Have Slowed Sensor 1989 Lack of innovation: From the 1980s through P&G’s acquisition, Sensor Excel 1994 9 years Gillette launched a
Slide 45: Trian’s Proposed Organization Structure for P&G
Trian’s Proposed Organization Structure for P&G Lean HoldCo with 3 Independent Businesses Lean Holding Company CEO oversees 3 GBU Presidents Procter & Gamble Ensures best-practices cross-GBU (Lean holding company) HoldCo controls public company functions and costs Back-office / shared servic
Slide 46: Proposed Structure Has Numerous Advantages Over Current Matrix
Proposed Structure Has Numerous Advantages Over Current Matrix 3 GBUs Under Lean Holding Company Current Matrix Clear accountability Limited accountability – GBU leaders are empowered – Sales resources (SMOs) sit outside of the GBU – GBU has full control of its own sales force – Functions often
Slide 47: An Empowered Gillette Would Have Defended Market Share More Aggressively
We Believe an Empowered Gillette Would Have Defended Market Share More Aggressively In September 2003, before P&G acquired Gillette, Schick launched its 4-blade razor system, Quattro, leapfrogging Gillette’s Mach 3 system that had been on the market since 1998 The launch was well-timed and dange
Slide 48: Revitalize P&G – Together
Revitalize P&G – Together I. A Record of Underperformance II. Trian Strategic Initiatives: Regain Lost Market Share a. Organize in Way That Promotes Accountability b. Ensure Management’s $12-$13bn “Productivity Plan” Delivers Results c. Fix The Innovation Machine d. Develop Small, Mid-Size & Local B
Slide 49: Ensuring P&G’s Productivity Plan Delivers Volume Generating Investments
Regain Lost Market Share By Ensuring P&G’s “Productivity Plan” Actually Delivers Volume Generating Investments Management’s latest productivity plan targets $12-$13 billon of gross cost reduction through 2021 Trian believes that management lacks credibility for three reasons: 1) Management has a
Slide 50: P&G’s Headline Productivity Plans Appear Unrealistic
P&G’s Headline Productivity Plans Appear Unrealistic P&G has announced two major productivity programs, beginning in fiscal 2012 and running through 2021, for a total of up to $23bn in targeted savings(1). For context, net sales were only $65bn in 2017 $23bn represents ~29% of 2017 gross sales,
Slide 51: The First Cost Program Did Not Create Value (2012-2016)
The First Cost Program Did Not Create Value (2012-2016) In 2012, P&G announced Today, P&G claims that they over- a $10bn productivity plan achieved against this target(1) $3bn reinvested in business Of the $10bn, P&G claims that $7bn was offset by foreign exchange (FX)(2) and the rest was reinvested
Slide 52: Peers Have Outperformed P&G on Growth and Margin Expansion
Peers Have Outperformed P&G on Growth and Margin Expansion Since The Productivity Plans Began P&G claims it over-delivered on its 2012-2016 $10bn productivity plan, and is now one year into a new $12-13bn plan, yet peers have grown organic sales and operating margin faster since the plans began
Slide 53: P&G Making Bold Claims but Not Committing to Net Savings
Once Again, P&G is Making Bold Claims but Not Committing to Net Savings or Market Share Gains Management’s latest Productivity Plan targets $12-$13bn of gross cost reduction through 2021… At midpoint, implies ~1,700bps of cumulative margin benefit by 2021 (excl. trade spend) …yet management has only
Slide 54: As a Board Member, Nelson Will Seek to Ensure Productivity Delivers
As a Board Member, Nelson Will Seek to Ensure that Productivity Delivers Improved Operating Results Current Productivity Plan Not Driving Differentiated Results Despite $12-$13bn of claimed productivity, management is still targeting market share losses through 2019, and bottom-quartile EPS growth
Slide 55: Cost Reduction and Faster Growth are NOT Mutually Exclusive
Cost Reduction and Faster Growth are NOT Mutually Exclusive At Trian’s consumer investments where Nelson Peltz has served on the board, margin improvement coincided with sales growth, often due to reduced bureaucracy, greater accountability, and a faster moving organization Margin Improvement Growth
Slide 56: Revitalize P&G – Together
Revitalize P&G – Together I. A Record of Underperformance II. Trian Strategic Initiatives: Regain Lost Market Share a. Organize in Way That Promotes Accountability b. Ensure Management’s $12-$13bn “Productivity Plan” Delivers Results c. Fix The Innovation Machine d. Develop Small, Mid-Size & Local B
Slide 57: Trian Strategic Initiative: Fix the Innovation Machine
Trian Strategic Initiative: Fix the Innovation Machine P&G spends $1.9bn on R&D per year, more than Henkel, Kimberly-Clark, Colgate-Palmolive, Beiersdorf, Reckitt Benckiser, Clorox, Church & Dwight and Edgewell combined While there have been successes (e.g., Tide Pods in 2012), P&G has not drive
Slide 58: It Has Been Decades Since P&G Created a New Leading Brand
It Has Been Decades Since P&G Created a New Leading Brand P&G has not created a meaningful new brand since Swiffer, almost 20 years ago All of P&G’s Brands Per the Company’s Website Created Pre 1960 Created 1960-1980 Created 1980-2000 Created 2000 - Today * * * * (2008) * * Despite ~$2bn in * * *
Slide 59: Nelson Peltz Will Propose a Board-Led Study on the Lack of Breakthroughs
Nelson Peltz Will Propose a Board-Led Study on the Lack of Breakthroughs Key Questions to Address Regarding Innovation 1) Where are breakdowns occurring from a process perspective: Resource allocation? Governance on decision making (i.e., corporate vs category, global vs local)? Personnel? 2) Is P&G
Slide 60: Revitalize P&G – Together
Revitalize P&G – Together I. A Record of Underperformance II. Trian Strategic Initiatives: Regain Lost Market Share a. Organize in Way That Promotes Accountability b. Ensure Management’s $12-$13bn “Productivity Plan” Delivers Results c. Fix The Innovation Machine d. Develop Small, Mid-Size & Local B
Slide 61: P&G Doubled-Down on Proven Brands As The World Went Small/Local
Short-Term Thinking: P&G Doubled-Down on “Proven Brands” Just As The World Went “Small”/“Local” P&G’s 2015 Bet P&G’s portfolio “transformation” consisted of exiting ~100 mostly small brands [Post Coty and exiting ~100 brands] “The businesses that will remain in our portfolio fit very well within our
Slide 62: P&G Must Learn to Play the Small and Local Game
P&G Must Learn to Play the “Small” and “Local” Game Big brands like P&G’s that sell at high prices face increased risk of commoditization, particularly as competitors innovate with technologies and marketing strategies targeted at millennials, specialty channels, local consumers, etc. Examples Withi
Slide 63: Revitalize P&G – Together
Revitalize P&G – Together I. A Record of Underperformance II. Trian Strategic Initiatives: Regain Lost Market Share a. Organize in Way That Promotes Accountability b. Ensure Management’s $12-$13bn “Productivity Plan” Delivers Results c. Fix The Innovation Machine d. Develop Small, Mid-Size & Local B
Slide 64: Outsiders Will Come Up with Great Ideas P&G Can Use Through M&A
Outsiders Will Come Up with Great Ideas that P&G Can Take Advantage Of Through M&A, As Peers Have Done Cumulative M&A Spend Since YE 2011 Examples of Small / Mid-Size Acquisitions(1) $ Spend % of Current Enterprise Value $17.7bn RB 20.6% Unilever Avg. Price Per Brand Acquired: $225mm $6.9bnHenkel 12
Slide 65: P&G Must Make M&A Integration a Core Capability
But P&G Must Make M&A Integration a Core Capability…The Company Has Either Given Up Or Is Struggling With Past Deals P&G should be well positioned to acquire small, mid-size & local brands and use its R&D and marketing clout to take those businesses to the next level Unfortunately P&G’s M&A trac
Slide 66: …Which Will Require a Change in Culture
…Which Will Require a Change in Culture Given the growing importance of developing small, mid-size & local brands, P&G must make M&A a core competency – finding the right brands to buy and developing strong post-merger integration capability Historically, we believe that P&G’s culture and struct
Slide 67: Revitalize P&G – Together
Revitalize P&G – Together I. A Record of Underperformance II. Trian Strategic Initiatives: Regain Lost Market Share a. Organize in Way That Promotes Accountability b. Ensure Management’s $12-$13bn “Productivity Plan” Delivers Results c. Fix The Innovation Machine d. Develop Small, Mid-Size & Local B
Slide 68: P&G Must Have More Anxiety Over E-Commerce
P&G Must Have More Anxiety Over E-Commerce P&G does not appear to be prioritizing a clear strategy for the new digital ecosystem, beyond reliance primarily on third parties – e.g. Amazon, Alibaba, etc. In our experience, big companies tend to focus on near-term challenges that are easily underst
Slide 69: Small Competitors Are Doing More with Less in Digital & Social
Small Competitors Are Doing More with Less in Digital & Social Small companies are better at using the internet to build brands despite fewer resources P&G must bring on more talent from the outside with modern marketing expertise to complement core competencies in traditional brand building It
Slide 70: E-Commerce Brands Are Now Entering Traditional Channels
“E-Commerce” Brands Are Now Entering Traditional Channels, Threatening P&G’s Core Business As small and mid-size brands develop enough brand awareness through social media, digital marketing and online / “as a service” channels, they are making a push to enter P&G’s traditional retail channels W
Slide 71: Wendy’s Case Study
In Case There Is Concern Nelson Lacks Digital Awareness… Wendy’s Case Study Wendy’s (where Nelson Peltz serves as Chairman) has delivered 18 straight quarters of positive same-store- sales in N. America. Social media has played a key role in these results In a recent interview with Forbes: Wendy
Slide 72: Revitalize P&G – Together
Revitalize P&G – Together I. A Record of Underperformance II. Trian Strategic Initiatives: Regain Lost Market Share a. Organize in Way That Promotes Accountability b. Ensure Management’s $12-$13bn “Productivity Plan” Delivers Results c. Fix The Innovation Machine d. Develop Small, Mid-Size & Local B
Slide 73: Trian Strategic Initiative: Address Insular Culture
Trian Strategic Initiative: Address Insular Culture Trian believes P&G’s decade-long record of underperformance relates in great part to a culture that is insular ‒ rejecting outsiders and new ways of thinking. In our experience, there is a correlation between underperforming companies and the unw
Slide 74: Navigating Changes Requires External Experience
Navigating Changes in Consumer Tastes, Social Media and Technology Requires External Experience Given today’s realities, with sweeping changes in technology, consumer preference and local markets, P&G must supplement company “Lifers” in leadership positions with others who have had senior-level expe
Slide 75: No P&G Leaders in Operating Roles Have External Experience Today
No P&G Leaders in Operating Roles Have External Experience Today A very small subset of P&G’s top managers have meaningful experience outside of the Company. Of P&G’s top 33 executives (listed on P&G’s website as of September 2017): Only three executives have more than 3 years of work experience o
Slide 76: Detail on P&G’s Leadership Team as Listed on Its Website
Detail on P&G’s Leadership Team as Listed on Its Website Top Executives From P&G Website Tenure > 3 Yrs Work Pre-P&G? Chief Executive Officer 37 No CFO 29 No Group President, Global Healthcare 31 No Group President, Global Fabric & Home and Baby & Feminine 30 No Group President, Global Family Care a
Slide 77: Future CEO Succession Process Should Plan for External Candidates
Future CEO Succession Process Should Plan for Potential External Candidates Many peers who have outperformed P&G have had CEOs with substantial external experience P&G’s last four CEO’s all spent their entire career at P&G At the time the Board made these CEO decisions, very few if any GBU or
Slide 78: Revitalize P&G – Together
Revitalize P&G – Together I. A Record of Underperformance II. Trian Strategic Initiatives: Regain Lost Market Share a. Organize in Way That Promotes Accountability b. Ensure Management’s $12-$13bn “Productivity Plan” Delivers Results c. Fix The Innovation Machine d. Develop Small, Mid-Size & Local B
Slide 79: Trian Strategic Initiative: Improve Corporate Governance
Trian Strategic Initiative: Improve Corporate Governance The fact that P&G chose to engage in a proxy contest with Trian, rather than settle, speaks to the state of P&G’s corporate governance given: – Trian asked for one Board seat and Nelson has committed to recommending that the Board reappoint
Slide 80: By P&G’s Own Standards, Nelson Would Be a Valuable Director
By P&G’s Own Standards, Nelson Would Be a Valuable Director Not in P&G Independent Board Member Experience (’s per P&G Proxy Statement(1)) Proxy Statement Consumer Digital, Packaged Consumer Government / Goods International Transformation Finance Technology & Industry / Retail Regulatory Experience
Slide 81: Nelson Will Add Significant CPG Experience to the Board
Nelson Will Add Significant CPG Experience to the Board Nelson has had a long history of working with both small and large multi-national CPG companies, as a Director, executive, and highly engaged shareowner P&G’s 10 independent Directors, on the other hand, have had almost no CPG experience ou
Slide 82: Nelson Will Bring an Entrepreneurial Mindset to P&G’s Board
Nelson Will Bring an Entrepreneurial Mindset to P&G’s Board In addition to experience improving large, multi-national CPG companies, Nelson has successfully invested in and grown small and mid-size consumer brands Examples: These brands have successfully competed against A Harvard Business indus
Slide 83: CEO Succession Planning Has Been An Area of Weakness
CEO Succession Planning Has Been An Area of Weakness for P&G’s Board P&G’s CEO Timeline Bob David A.G. Lafley A.G. Lafley McDonald Taylor 2002 – Jul 2009 – May 2013 – Nov 2015 - Jul 2009 May 2013 Nov 2015 Today There have been 3 CEO changes in the past 8 years All 3 CEO’s have been internal cand
Slide 84: P&G Flip-Flopped on Strategy Over the Past Decade
P&G Flip-Flopped on Strategy Over the Past Decade: Long-Term Strategic Planning is the Board’s Responsibility “[G]o back a few years ago when we went to more countries, more places, we got out of balance on the top line. We went hard on the top line and what happened is we started to have real profi
Slide 85: Management Has Received Generous Bonuses Despite Poor Results
Management Has Received Generous Bonuses Despite Poor Results As a result of steadily declining financial targets, management has been paid out approximately 100% of their annual target bonus over the past 5 and 10 years, even with weak operating results and near worst-in-class TSR 5-Year TSR vs.
Slide 86: Management Rarely Achieves Long-Term Performance Targets
Despite Achieving ~100% of Annual Bonuses Over Time, Management Rarely Achieves Many of The Long-Term Performance Targets…Does the Board See the Disconnect? The Board’s decision to pay management ~100% of their annual bonuses on average should indicate that P&G’s performance is somewhat in line wi
Slide 87: Did the Board Give Fair Consideration to Adding Nelson?
Shareholders Need to Ask: Did the Board Give Fair Consideration to Adding Nelson, Before Choosing to Spend an Estimated $100mm+ of Shareholder Money to Keep Him Off the Board Despite the benefits of adding Nelson to the Board, the request was rejected on the spot at both meetings held with indepen
Slide 88: Revitalize P&G – Together
Revitalize P&G – Together I. A Record of Underperformance II. Trian Strategic Initiatives: Regain Lost Market Share a. Organize in Way That Promotes Accountability b. Ensure Management’s $12-$13bn “Productivity Plan” Delivers Results c. Fix The Innovation Machine d. Develop Small, Mid-Size & Local B
Slide 89: Long Track Record of Value Creation in the Consumer Sector
Long Track Record of Value Creation in the Consumer Sector Trian has worked closely with numerous companies across the consumer landscape, and has demonstrated a consistent track record of value creation with numerous corporate and brand turnarounds Trian Consumer Investments Where Nelson Peltz Se
Slide 90: Trian: A Highly Engaged Shareowner
Trian: A Highly Engaged Shareowner Trian Overview – Founded in November 2005 by Nelson Peltz, Ed Garden, and Peter May – Investment management firm with total assets under management of $13.2 billion and callable commitments of $0.9 billion* – Focused on buying large stakes in high quality compani
Slide 91: What Differentiates Trian?
What Differentiates Trian? • Average investment horizon of ~7 years and growing when Nelson Peltz joins the board of a Trian portfolio company, longer than the average holding Long-Term period of US equity mutual funds(1) • Stable “blue-chip” capital base, with substantial amount of capital locked u
Slide 92: Experience Revitalizing Consumer Brands, Including Multi-Nationals
Experience Revitalizing Consumer Brands, Including Multi-Nationals Select Case Studies • Prior to forming Trian, Nelson led the parent company that acquired Snapple from Quaker Oats for $300mm in 1997 • Rebuilt relationships with distributors and key marketing partners, rebuilt core Snapple innovati
Slide 93: Experience Revitalizing Consumer Brands, Including Multi-Nationals
Experience Revitalizing Consumer Brands, Including Multi-Nationals Select Case Studies • Trian invested in Wendy’s in 2005 and Nelson Peltz is currently Chair, helping lead the effort to restore the brand’s “cut-above” positioning, develop a strong management team and drive significantly improved re
Slide 94: Management & Board Testimonials
Management & Board Testimonials: Bill Johnson (CEO from 1998-2013, Trian Advisory Partner Since 2015): “I said to another CEO…who had called me and inquired about Nelson, that if I were to form the board today, Nelson would be one of the first Directors I’d ask to serve because he is an insightful,