P&G to Shed Up to 100 Brands
The Procter & Gamble Company (P&G) has consumer goods industry analysts guessing after CEO A.G. Lafley revealed to The Cincinnatti Enquirer last Friday that the company will sell or exit 90 to 100 brands. The purge is expected to enable the company to refocus the business on 70 to 80 of its best-selling brand names.
While Lafley declined to name specific brands targeted for sale, he did say that sales won't be the only consideration and that large brands will be shed if they don't fit into the company's core businesses.
"Some of our big brands are in industries that are not very attractive; they're not growing, or low margin, or commodities," Lafley said. "If it's not a core brand – I don't care whether it's a $2 billion brand, it will be divested."
Lafley confirmed that 23 of P&G's brands have sales of more than $1 billion; 14 have sales of $500 million to $1 billion; and 30 to 40 brands have sales of $100 million to $500 million.
Bernstein analyst Ali Dibadj speculated that P&G could target larger brands like Duracell batteries and Braun small appliances, as well as scores of smaller ones, while stalwart brands like Pampers diapers would be untouched. Dibadj guessed small labels — ranging from Glide dental floss to Clairol Professional hair care — could be sold off.
Morningstar analyst Erin Lash called the plan "striking" and said it would reduce investor pressure to split the company up amid concerns it has grown too large to respond quickly to changing consumer demands.
"We think this shows P&G is breaking ties with its former self, looking to become a more nimble and responsive player in the global consumer products arena," Lash wrote in a note to investors. "These efforts will quell calls to split up the company."
"Less will be much more," Lafley told analysts. "The objective is growth and much more reliable generation of cash and profit. We're going to be much more agile and adaptable."
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While Lafley declined to name specific brands targeted for sale, he did say that sales won't be the only consideration and that large brands will be shed if they don't fit into the company's core businesses.
"Some of our big brands are in industries that are not very attractive; they're not growing, or low margin, or commodities," Lafley said. "If it's not a core brand – I don't care whether it's a $2 billion brand, it will be divested."
Lafley confirmed that 23 of P&G's brands have sales of more than $1 billion; 14 have sales of $500 million to $1 billion; and 30 to 40 brands have sales of $100 million to $500 million.
Bernstein analyst Ali Dibadj speculated that P&G could target larger brands like Duracell batteries and Braun small appliances, as well as scores of smaller ones, while stalwart brands like Pampers diapers would be untouched. Dibadj guessed small labels — ranging from Glide dental floss to Clairol Professional hair care — could be sold off.
Morningstar analyst Erin Lash called the plan "striking" and said it would reduce investor pressure to split the company up amid concerns it has grown too large to respond quickly to changing consumer demands.
"We think this shows P&G is breaking ties with its former self, looking to become a more nimble and responsive player in the global consumer products arena," Lash wrote in a note to investors. "These efforts will quell calls to split up the company."
"Less will be much more," Lafley told analysts. "The objective is growth and much more reliable generation of cash and profit. We're going to be much more agile and adaptable."
Click here to read the article in its entirety.