Sarah Halzack is a Bloomberg Gadfly columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.

Procter & Gamble Co. and activist investor Nelson Peltz were each likely hoping the company's Friday earnings report provided an occasion to say, "I told you so."

The consumer-goods company and Peltz's Trian Fund Management LP are fresh off a hard-fought proxy fight, in which Peltz angled for a seat on P&G's board, arguing it was a lumbering bureaucracy needing fresh ideas. Peltz appears to have lost that fight by a razor-thin margin.

But the latest quarterly results didn't give either side much opportunity for gloating, because they didn't paint a picture of P&G that was drastically different from the one we had right before the vote.

The maker of Bounty paper towels and Dawn dish soap reported Friday that its organic sales grew just 1 percent in the quarter compared to a year earlier. That relatively slow rate is somewhat discouraging, but less so when you consider the company had earlier warned this period was likely to be its most lackluster of the current fiscal year.

In Need of a Quicker Picker-Upper
P&G's organic growth has been relatively steady since a turnaround began taking hold nearly two years ago

P&G's profit exceeded forecasts, and its outlook for organic sales and earnings per share remained unchanged for the year ahead. Its biggest weak spot in the quarter came from the men's grooming division, which has long been a drag on sales. 

The report did little to suggest P&G is veering from its long-term turnaround plan. But it simultaneously did little to shut down some of Peltz's criticisms.

Take, for example, those men's grooming results. Organic sales were down 6 percent compared to last year. In part, that decline was fueled by selling fewer razors. But a bigger contributor to the decline was that P&G had to slash prices in this category to compete with newer, cheaper rivals.

This underscores an important point: Newcomers such as Dollar Shave Club and Harry's Razors are not just capturing market share because of their e-commerce-centric business models. They were filling a price "white space" in the market, to which P&G must now adapt. 

Think about how this could play out in other categories -- especially considering Trian's point that P&G is not often a winner on price:

A Fancy Pantry
P&G products tend not to be a value play for consumers
Source: Trian white paper, Consumer Edge Research

And it's hard to see how price pressure does anything but intensify in the personal-care and household-products business. Inc. is building a vast array of private-label products that could eventually pose a more serious threat to P&G's. Startups are bound to emerge in other categories just as they have in men's grooming, and they could hold the incumbent's feet to the fire in similar ways.

This a problem that P&G, in theory, can solve with innovation, either by creating new products or by finding efficiencies that let it cut prices on existing products. But it must give investors reason to believe it has the talent and agility to pull that off in a timely manner. 

And that brings us back to Peltz. As Gadfly has previously argued, his harsh analysis will loom large over P&G for the near future. Though shareholders ultimately sided with P&G management on the vote for the board seat, Peltz poked holes in their argument that the company is in good shape. 

P&G would do well to accelerate its turnaround effort. Then the ultimate result would be a win for Peltz and P&G alike.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Sarah Halzack in Washington at

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Mark Gongloff at