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P&G cuts 40% of its agencies

News, 03 August 2015

CINCINNATI: FMCG giant Procter & Gamble (P&G) has cut the number of agencies it works with by 40% globally, saving $300m in agency and production costs, but much of that sum will be reinvested into other media.

Speaking during an earnings conference call, P&G chief financial officer Jon Moeller said agency spending in Brazil had been cut in half, spending on its hair care brands in the US was down by 20% and that there will be further global savings next year, Advertising Age reported.

$300m amounts to 15% of the company's total spend on its extensive range of agencies and fits into its strategy, announced early this year, that it would seek savings of up to $500m as it shifts more ad dollars to digital, social, video and mobile.

Outgoing chief executive AG Lafley, who will be succeeded by David Taylor in November, confirmed that P&G wants to reallocate media budgets to more digital channels and that some brand media budgets are growing by 10% to 20%.

"It's hard for you to see our investments in communication and media because most of it's being funded by reallocation," he said.

"We're simply shutting down the unproductive non-working dollars and we're converting it to working and we're getting a heck of a lot more out of our digital, mobile, search and social programs."

The initiative comes as P&G continues its divestiture strategy of merging or selling off more than half its brands as it tries to adapt to an increasingly competitive global FMCG market.

The company intends to retain a core portfolio of 65 brands, including Tide detergent and Gillette shaving products, and AG Lafley said the Gillette brand will be revitalised when an improved cartridge is launched in January next year.

The executives were speaking as P&G reported net sales of $17.8bn over the quarter, its sixth successive quarterly fall, although sales were hit mainly because of the strong dollar.

Data sourced from Advertising Age, Reuters; additional content by Warc staff