Household Products

P&G to restructure company as maker of Gillette razors simplifies business units

Key Points
  • Procter & Gamble is simplifying its business, organizing the majority of its operations around 6 "small business units" with their own leaders
  • Activist investor Nelson Peltz had lobbied for the company to simplify its organizational structure, saying doing so would streamline the business.
  • Peltz joined P&G's board in March. 
Nelson Peltz
David A. Grogan | CNBC

Procter & Gamble is reorganizing the sprawling consumer products company as it looks to simplify operations, the company said Thursday.

The announcement comes after activist investor Nelson Peltz joined the board in March following a vigorous proxy battle. Peltz had previously pushed for a simplified structure, saying it would improve accountability, agility and responsiveness to local needs.

"This is the most significant organization change we've made in the last 20 years," CEO David Taylor said in a statement. "We will have a more engaged, agile and accountable organization focused on winning with consumers through superiority, fueled by productivity, and operating at the speed of the market."

The company announced the news at its annual investor meeting Thursday in Cincinnati.

Like all consumer behemoths, the maker of Gillette razors and Pamper's diapers has had to contend with smaller, more nimble rivals like subscription razor club Harry's.

Shares of P&G have jumped by more than 29 percent since hitting a 52-week low of $70.73 a share in May, giving it a market value of $227.6 billion. They closed at $91.36 a share Thursday and were about flat in aftermarket trading.

As part of P&G's new business structure, the company will now have six sector business units organized by industry. Each business will have a unit "CEO" responsible for running all major decisions, like marketing, costs and supply chain.

The units will expand across P&G's largest markets, like the U.S., Canada, China and Japan, which comprise roughly 80 percent of its sales. The remaining markets will have their own business unit.

P&G will continue to have a corporate research and development group to create platform technologies for multiple business units.

The maker of Tide also said it is expanding the duties of its chief financial officer, Jon Moeller, to include the role of chief operating officer. In Moeller's new position, he will oversee the markets not included within the major six units.

P&G last month reported its biggest quarterly sales gain in five years, with a number of brands, including Gillette, delivering strong performance.

CNBC's Sara Eisen taped an interview with Taylor that will air at 10 a.m. ET Friday on "Squawk on the Street."

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