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What Does A.G. Lafley's Return Mean for P&G and Its Retail Partners?

Written by George Anderson

Procter & Gamble is the latest company to go the "Meet the new boss, Same as the old boss" route as it announced last week it was bringing back former CEO A.G. Lafley to run the company following the resignation of Bob McDonald.

Mr. McDonald wrote a letter to P&G employees explaining that he decided to step down to remove "distractions" caused by ongoing criticism of the company's performance during his tenure along with speculation about his job security.

Some shareholders, most notably Bill Ackman of Pershing Square Capital Management, have expressed unhappiness with P&G's performance. In an interview with CNBC last October, Mr. Ackman said the consumer products giant had "stumbled" under Mr. McDonald.

Mr. Lafley returns to P&G as its chairman, president and CEO. He held the CEO job from 2000 to 2009. Interestingly, despite criticism of Mr. McDonald, Mr. Lafley wrote a letter to employees claiming the company would "build on the business momentum behind the current growth strategies."

There's no doubt that Mr. Lafley faces numerous challenges as he takes over. The company has lost share in key categories as consumers have engaged in trading down to mid-tier and value-priced brands. P&G has been criticized for focusing on line extensions of core brands rather than true innovation. A Bloomberg News report pointed out that P&G hasn't had a $1 billion new launch since Swiffer hit the market ten years ago.

Under Mr. McDonald, P&G has been engaged in cutting $10 billion in costs. Mr. Ackman referred to P&G's corporate structure as "very fat and very bloated" when he spoke with CNBC last year.

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