Trian Partners Activist Presentation Deck
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 in FY17" - Q4 '16 Earnings Call
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i In reality, P&G cut advertising spend by $125mm in 2017. Those ad savings should have been
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reinvested in other forms of brand building to regain lost market share. Instead, management
chose not to reinvest, in our view benefitting near term earnings at the expense of long-term growth
2017 Advertising Spend
Q4 2017 Advertising Spend(¹)
% of Sales
$7,243
CLOROX
2016
11.1%
2% decline
$7,118
$125mm
benefit to
operating profit
in 2017
2017
10.9% ↓ -20 bps
$1,811
Source: SEC filings, earnings transcripts.
(1) Estimated based on disclosure from the Q4 2017 earnings press release and Trian analysis.
2016
11.2%
6% decline
$1,696
2017
10.5%
Est. $115mm
benefit to
operating profit
in Q4 '17
~50% of the
EPS beat vs.
Q4 consensus
Meanwhile, peers have increased investment in digital advertising:
"We've stepped up digital [advertising]. Why? Because it's working, and we're getting the
returns, and we can see the returns both in volume and in sales and importantly, in terms of
profit."
- August 2017
-70 bps
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