CNBC Exclusive: CNBC Transcript: Procter & Gamble CEO David Taylor Speaks with CNBC’s Sara Eisen Today
WHEN: Today, Thursday, January 24, 2019
WHERE: CNBC’s “Squawk on the Street” – Live from World Economic Forum in Davos, Switzerland
The following is the unofficial transcript of a CNBC EXCLUSIVE interview with Procter & Gamble CEO David Taylor and CNBC’s Sara Eisen on CNBC’s “Squawk on the Street” (M-F 9AM-11AM) today, Thursday, January 24th, live from World Economic Forum in Davos, Switzerland. The following is a link to video of the interview on CNBC.com:
Procter & Gamble CEO David Taylor: Consumer categories aren’t showing a recession risk
All references must be sourced to CNBC.
SARA EISEN: Hi, Carl and David. Well, we start with Procter & Gamble reporting earnings yesterday, topping Wall Street estimates. A decision to raise prize on a number of products due to higher commodity and transport costs and helping deliver strong sales numbers. Joining me now exclusively here from Davos Procter & Gamble CEO David Taylor. Hello. Welcome.
DAVID TAYLOR: Good to be here.
SARA EISEN: So another quarter of 4% organic revenue growth. Here we are in Davos talking about the big picture trends for the world economy. What do your results say about the global economy right now?
DAVID TAYLOR: Certainly it says when you have products this appeal to consumers and deliver to them when and where they want to get it, that they get excited and they buy it. And I’m excited, this is the second quarter in a row we’ve been able to grow organic sales ahead of the market. And it tells that you superior products consumers will still buy.
SARA EISEN: So is it an execution story with some of the changes you made within the organization that we’ve talked about getting rid of the matrix structure, or an overall better view on consumer?
DAVID TAYLOR: I think the consumer is still very engaged. I’ve heard a lot of stories about the consumer not engaging. That’s not been our experience. Whether it’s the U.S., China or around the world, the consumer is willing to buy products that meet their needs. At the end of the day, they want a product that delivers benefit, and they want it delivered for a great value. And so the superiority strategy that we have is working. And it’s underpinned by the investment that we have delivering better products. And you’re right, though, about the organization. Everything that happens at P&G happens because we have outstanding, engaged, agile and accountable organization.
SARA EISEN: What’s the level of innovation in terms of the product?
DAVID TAYLOR: It’s very high and across all ten of our categories. And to me that’s what’s required right now. In order to win, you’ve got to be able to innovate on all parts of your business model: the product, the package, how you communicate to consumers, how you deliver it to consumers, either online or offline, and it’s got to be a great value to the consumer. When that comes together, the consumer is delighted and you’re able to win the value proposition.
SARA EISEN: What gave you the confidence to raise the top end of the sales forecast? What do you see out into the future?
DAVID TAYLOR: What we’ve seen underpins the sales growth product growth is share growth. And that’s critical, because it says you’re winning, your products are winning. So we now have share growth in the past one and three months globally. In our biggest country, the U.S., we’re growing share the last month, the last three months, the last six months and the last 12 months. And we’re seeing other important markets like China actually accelerate, which is very important. So our top 15 markets all grew sales over the last quarter. So with that we thought it was appropriate to go ahead and raise the upper end of our guidance range because we believe that consumers are coming into our brands because they see them providing great value.
SARA EISEN: I want to get to the China story.
DAVID TAYLOR: Yes.
SARA EISEN: A lot to unpack there. But first, just on the business. You know, it wasn’t broad-based fully. I mean, grooming was still declining. What did you see in that business?
DAVID TAYLOR: Grooming still remains a challenging category for us, but we’re bring innovation. In fact, one of our biggest innovations is hitting the market right now. And we believe with both innovation and improved communication, and there’s been some communication recently that we think is very much connecting with the consumers, that we will be able to grow the category —
SARA EISEN: Be the best man.
DAVID TAYLOR: Yes. Be the best. And certainly —
SARA EISEN: That is so controversial.
DAVID TAYLOR: That started a conversation. What we want to do is we want to connect with consumers, and there are some things that we do need to talk about. There is an issue with toxic masculinity. And what we wanted to do was show that there are some things, whether it’s bullying or sexist behavior, that we can be better. And to me, men are stepping up. And we showed in the commercial very clear examples of that happening. And while there was a very well-organized but small number that did not like that initially, what we’ve seen is each day more and more people coming in and saying they connect with that and they understand that it is a relevant message. Conversation will lead to understanding and improved behavior by all of us.
SARA EISEN: Do you actually see a sales impact, either positive or negative, as a result of this commercial?
DAVID TAYLOR: It’s too early to see and it only broke a week and a half ago. But we’ve had 90 million views of that spot, which says it certainly has connected with people, and it started an important conversation. And to me I think men want to be better on this, and I think men are stepping up.
SARA EISEN: Were you inspired at all by Nike’s Colin Kaepernick campaign?
DAVID TAYLOR: Certainly we’ve seen a number of examples. The one that really inspired us was our “Like a Girl” campaign that we had a few years ago, and that communicated an important message where teen girls at puberty were seeing their confidence drop. And when we ran that ad what we saw is people’s view of the phrase “Like a Girl,” move from 19% positive to 79% positive. And it lifted the brand. So it was good for business, it communicated an important societal message. And we’ve seen the same thing with “The Talk,” which also talked about an important topic, and now this ad. So I think brands need to stand for something, and they need to deliver superior performance. When you do them both, you connect with the consumers. And to me that’s what’s important to me going forward.
SARA EISEN: You mentioned pricing — I mentioned pricing. That was a contributor to growth. So you passed along some of the higher prices to the consumer. Are we going to expect more, are we going to expect to pay more for our everyday products from Procter & Gamble this year?
DAVID TAYLOR: In general we want to provide outstanding value. There are outstanding cases and there were some categories – and certainly some of the paper categories and others — that were impacted by input costs. When input costs go up so much that we need to pass along price, we try to do that in a very responsible way. We want to provide great value to consumers. It’s been in a few categories and a few countries. We needed to do that. And to me consumers so far have shown they have accepted that as long as the product still delivers great value. It’s typically associated with innovation when we can, so that we give the consumer an even better experience.
SARA EISEN: And a reason to pay a higher price.
DAVID TAYLOR: Absolutely.
SARA EISEN: Any impact on the consumer psyche and behavior from the government shutdown, which is now in record territory?
DAVID TAYLOR: Certainly if it were to sustain itself it would be a very high concern. It is a concern for all of us. We want our government operating. I haven’t seen yet a big impact on the business. The category sizes. But do I think it will over time? Certainly if text tends itself.
SARA EISEN: The last few months of 2018 were rocky in the markets.
DAVID TAYLOR: Yes.
SARA EISEN: This period of incredible volatility, and there were concerns about the U.S. slowing down, whether the consumer had peaked. How did you read the volatility in the markets?
DAVID TAYLOR: Well, the volatility in the markets to me, we’re not seeing in the categories. So in the consumer categories, we weren’t seeing big gyrations in category size. And it’s evidenced in our top end results, the plus 4%. Certainly we all see the challenging trade situation. To me that concerns people. It concerns us. We want to see free and open trade. We think that’s right to do and better for all stakeholders, and certainly we hope for good resolution. But I have not seen as much, as we’ve heard about this, I haven’t seen evidence in category size and most of the business categories that we operate in and most of the countries we operate in where we’ve seen that depressed. There is a risk, if the there’s too much bad news will affect consumer confidence. And when consumer confidence goes down you’ll see it show up in category size or category growth – size but the growth rate. And the growth rate has not been slowing down. It’s slightly higher this year than it was last year, even with all the volatility.
SARA EISEN: Globally or in the U.S.?
DAVID TAYLOR: Both U.S. and globally. It’s a little bit higher than it was before. You know, whether it was 2.5% or so or moving more to 3%, but I have not seen –
SARA EISEN: When you hear talk of recession, what are you thinking?
DAVID TAYLOR: It’s certainly not in the consumer categories right now. Am I concerned if some of these things don’t get resolved? Yes. But if you look at, again, the growth rate of categories in the major countries, we’re not seeing significant drops in aggregate, it’s up about half a point.
SARA EISEN: Do you see any pain globally? Which countries?
DAVID TAYLOR: Well, certainly we’ve seen some volatility in turkey. We’ve seen some volatility in Argentina, some that have very high foreign exchange exchanges and other disruptions. But even Turkey you’ve seen now, the Turkish lire extended a bit and that seems to be getting more stable. But certainly, there are a number of countries that tend to have more volatility, some in Latin America and as I said Turkey. But generally what I see right now, there’s actually little more stability. The dollar seems to have stabilized.
SARA EISEN: You must be very happy about that.
DAVID TAYLOR: That’s a positive thing. Yes, that’s a positive thing. And even a little bit weaker, would be even better.
SARA EISEN: Well, one thing that’s contributed is Europe has slowed down its growth.
DAVID TAYLOR: Yes, it has.
SARA EISEN: So what are you seeing there? Especially with Brexit looming.
DAVID TAYLOR: Brexit is the high concern. We have to prepare for all eventualities. We have to make sure, and we’re trying to reassure our consumers, on whether it’s in the U.K. or the balance of the EU, we’ll be there for them with our products. But if Brexit is a hard exit, it will disrupt the supply chains. We make some things in the U.K. that we ship to Europe and other countries. We make a number of things on continental Europe that we ship into the U.K. So we have to be ready.
SARA EISEN: What does that mean, consumers are going to pay higher prices in Europe?
DAVID TAYLOR: It depends what happens. See, we don’t know. What we are doing is making sure we have the ability to supply them. You know, what the costs will be, I don’t think we know right now. And that’s a real concern right now. Uncertainty is not good for business. It’s not good for the consumers. So I think we all hope for it to be an appropriate ending to this, where there is an ability to ship back and forth without any kind of tariff. If there is a tariff, certainly that puts cost in the system and that will have to be addressed.
SARA EISEN: Higher prices, for both Europeans and British consumers?
DAVID TAYLOR: Depends again how it works. If you can tell me — which way the tariffs will be–
SARA EISEN: I have no idea it’s going to end up.
DAVID TAYLOR: Neither does anybody else. And that’s the real challenge right now. So the one thing we do want to know, is we want products on the shelves for consumers in the U.K. and in continental Europe. So we have to look at our supply chains and we have contingency plans for almost any eventuality, which is challenging right now.
SARA EISEN: How are you planning contingency plans if the trade war does not get resolved by the March 1st deadline between the U.S. and China?
DAVID TAYLOR: For most of our products that we sell in the U.S., we make in the U.S. For the vast majority products we make in China, or that we sell in China, we make in China. So certainly the first thing we want to do is where we can we want to localize our supply chains and serve the consumer and make the product in the country where they can consume it where it’s economically possible. That’s true today for the U.S. and China. So that does minimize the impact that we have. But to me there’s a broader impact on the economy if this thing goes in a way that disadvantages both countries. And so I think it’s in the best interest of the U.S. and China to find an amicable solution to the trade war.
SARA EISEN: And you’re not really seeing an impact from the Chinese consumer?
DAVID TAYLOR: Today, we reported the last quarter was our best quarter in China in a number of years. If I look at the last six months, it’s ahead of the previous year. If I look at the previous year, it’s ahead of the year before that. So what I am seeing is the consumer respond to innovation and great value. The superiority strategy is really working. And there’s no evidence in the category size or in our growth rate, our results that we just reported, that the consumer is pulling back in the consumer categories we compete in.
SARA EISEN: David Taylor, thank you very much. Good to get a world view, especially after those earnings. David Taylor, the CEO of Procter & Gamble. Both of us from Cincinnati to here in Davos, Switzerland.