Global manufacturer Procter & Gamble plans to wring $4.5 billion in savings from raw materials, packaging and logistics as part of a plan to save $10 billion.
Improvements in product design and formulation across P&G’s brands will deliver those savings, CEO Bob McDonald said at an investors conference Thursday. That includes “our work to drive concentration of products, which saves materials, transportation and warehousing costs,” McDonald said.
“We’re working to create substitute materials that deliver the performance consumers expect while saving money and increasing sustainability of supply,” he said. That includes using more efficient packaging to cut material and logistics costs.
The company announced it would cut approximately 5,700 nonmanufacturing jobs by the end of fiscal 2013, saving $800 million a year, as part of the four-year plan.
“This should make us more agile and fast moving,” said McDonald, speaking at the annual Consumer Analyst Group of New York conference in Boca Raton, Fla.
By the end of fiscal 2016, the job cuts alone — many at the executive level — will save the company about $1 billion a year, McDonald said at the event. In the current fiscal year, the company “reduced number of vice presidents and above by 15 percent, that’s 600 roles,” McDonald said.
Out of the $10 billion, “about 80 percent will come from cost reduction,” said McDonald, “and about $2 billion will come from leveraging fixed growth.”
The $10 billion includes $3 billion in overhead cuts — including the jobs — a $6 billion reduction in the cost of goods sold and $1 billion in marketing efficiencies.
P&G, an $82.6 billion company in the fiscal year that ended last June, is increasing sales but believes it needs to become more agile to spur faster global growth. The company’s net profit dropped 49 percent in the last quarter, to $1.7 billion, as it faced rising commodity prices and retail price competition.