Procter & Gamble Co's
The maker of Gillette razors, Pampers diapers and Tide laundry detergent on Wednesday named Chief Operating Officer Robert McDonald, a 29-year company veteran, as its new chief executive and president effective July 1.
There's an honor code up here and a way of looking at ethical living, said Col. Robert McClure, CEO of the West Point alumni association, who graduated the U.S. Military Academy at West Point a year after McDonald.
McDonald will immediately face hard decisions as P&G must reignite growth as its leading brands have lost luster as recession-weary consumers trade down to less costly products.
In the cadet prayer, they say choosing the harder right instead of the easier wrong, McClure said.
Early on, McDonald will have to decide how much the company should promote its lower-priced products such as Gain laundry detergent at the expense of premium brands such as Tide that it has spent billions of dollars to develop and advertise.
The leadership change marks a shift from Navy veteran A.G. Lafley to McDonald, who graduated from West Point in 1975 and served five years in the Army, mostly with the 82nd Airborne Division. During that time, McDonald earned his master's from the University of Utah.
It is the latest in a string of upper management transitions at Cincinnati-based P&G, which has come under pressure as consumers trim spending on everything from makeup to diapers in the recession.
While analysts and investors do not expect drastic changes with McDonald at the helm, they do believe he might bring a greater focus on cutting costs as the company faces slower sales trends, especially in its home market.
He has been for quite some time really a very strong leader at Procter & Gamble, doing everything from expanding their presence in Asia to pushing on innovation, Sanford C. Bernstein analyst Ali Dibadj said of McDonald.
He is, in my mind, one of the strongest leaders out there in the business right now, added Dibadj, who has a market perform rating on P&G shares.
CHANGING OF THE GUARD
Lafley, who turns 62 later this month, served in the U.S. Navy from 1970 to 1975 before he joined P&G in 1977. He has been CEO since 2000 and chairman since 2002.
Lafley served as McDonald's mentor early on and McDonald in turn has implemented many of Lafley's strategies.
He's been around it for 29 years, Eric Schoenstein, co-portfolio manager of the Jensen Portfolio, said of McDonald.
That kind of veteran leadership will help him really hit the ground running, added Schoenstein, whose fund owns 1.2 million P&G shares.
Born in Gary, Indiana and raised in Chicago, McDonald graduated 13th out of 862 at West Point, where he was one of the campus leaders, recalled McClure.
McDonald, who turns 56 on June 20, joined P&G in 1980 and became COO in July 2007 after serving in numerous positions, including 14 years abroad in such markets as the Philippines, Japan and Brussels.
The straight-talking McDonald, who early in his career helped manage such brands as Solo detergent, Cascade dishwashing products and Tide, is credited with trimming costs throughout P&G's operations.
He spent the 1990s in Asia, and analysts said that experience will come in handy as overseas markets will be critical to P&G's future growth.
Analysts and those who have worked with McDonald believe he is up to the challenge as he is already spearheading company efforts to transform P&G's transportation system.
The thing that impresses me about him is his real understanding of the operational opportunities that the company has, said BMO Capital markets analyst Connie Maneaty, who has an outperform rating on P&G shares.
Blair Sheppard, dean of Duke University's Fuqua School of Business, called McDonald, who serves on a school board, probably the most responsive, hardest-working person I may have ever met and said P&G employees should be excited.
A great leader is someone who doesn't have self-interest, but only cares about the organization they lead, Sheppard said. That's exactly who he is.
(Reporting by Ben Klayman; Editing by Ted Kerr)