Procter & Gamble just won a long-fought battle against activist investor Nelson Peltz, founding partner of hedge fund Trian Partners, the consumer goods giant announced today.
Peltz nabbed a $3.5 billion stake in the company earlier this year; he wanted to land a seat on the board to shake up P&G as Wall Street investors and shareholders are frustrated with its slow growth. After a proxy vote today, P&G is declaring victory while Peltz has yet to concede and may call for an audit of the results.
“We are encouraged that shareholders recognize P&G is a profoundly different, much stronger, more profitable company than just a few years ago,” said a representative for P&G in a statement. “The changes the company has made are broad based and delivering results. We look forward to continuing our transformation journey. We are committed to meeting the needs of consumers with our brands and products, and to creating value for P&G shareholders.”
Still, while it seems P&G has won this fight, the pressure from Wall Street to grow the company’s consumer brands is certainly top of mind. “Despite an astounding $600 million a year spent on marketing, our industries still aren’t growing enough. [We’re] holding stubbornly onto low single-digit market growth,” Marc Pritchard said last week at the Association of National Advertisers’ Masters of Marketing Annual Conference in Orlando, Fla.
And analysts believe this fight could affect the company’s agency relationships and how it spends its media budget.
“The bigger picture is that there’s huge pressure on P&G on how it goes to market to become more agile,” said longtime brand consultant and founder of Brand Simple Consulting Allen Adamson. “Big brands are under pressure across the board. They operate in relatively slow growing categories. How do you energize P&G’s portfolio brands and deliver faster market growth?”
Adamson continued: “Whether or not the activist gets the seat P&G needs to accelerate growth, the problem is that it’s much harder to grow bigger brands than it is to grow smaller brands. They are risk averse, and there’s no quick fix for accelerating P&G’s growth, but they are under huge pressure from Wall Street to show growth.
“There could be challenging times ahead for P&G and all of their marketing partners.”
John Lame, CEO of Cincinnati-based financial advisory firm Lenox Wealth Management, doesn’t believe the current proxy will impact P&G’s corporate reputation. “They have a great corporate reputation and they’ll keep it,” said Lame. “I also don’t see the vote changing the media spend. The trend in media spend will continue, and they will continue to spend where it makes economic sense. I don’t believe the [results] of the shareholder vote will impact it.”
Leading up to the proxy vote, Trian and P&G spent nearly $100 million on ads to sway voters, according to Reuters. P&G, for example, had a “vote blue” campaign that highlighted how the company has changed and what it can deliver for investors.
But Lame, who works for clients who are current and retired Procter & Gamble employees and was once a finance manager for P&G, does see the potential this battle has in “changing what is spent inside and what is spent outside [the company] and who they share the resources with.”
Both Lame and Adamson noted that the proxy battle is about more than P&G and Trian. They believe it represents a larger fight between big companies, their shareholders and Wall Street in the face of slow growth.
If last week’s Masters of Marketing conference was any indication, brands and major marketers are keenly aware of the need to drive growth for brands.
“When you’re under pressure and companies need to show short-term change, the one thing they often turn to is to change agencies, to change media strategies,” added Adamson. “You can make those changes quickly. It’s often a result of new management and a need to show action, but those changes don’t always result in growth.”
The pressure from investors won’t go away anytime soon, he added.
“Winning this battle is a small skirmish in the bigger battle to transform P&G. I don’t think Wall Street will go away,” Adamson said. “Anytime a company is under pressure they will often be forced to make changes even if they are cosmetic in nature—anyone that is connected to doing business as usual when a company is under this intense a pressure from Wall Street, this is a rocky place to be.”