Procter & Gamble plans to eliminate nearly 100 brands [Times of Oman]
(Times of Oman Via Acquire Media NewsEdge) New York: Procter & Gamble (P&G), the world's largest consumer-products company, plans to sell, discontinue or otherwise eliminate as many as 100 brands in the next two years to cut costs and focus on its most important product lines. The shares rose the most in two months.
The 70 to 80 brands that will remain have accounted for 90 per cent of the company's sales and more than 95 per cent of its profit in the past three years, Chief Executive Officer A.G. Lafley said on a conference call to discuss fourth-quarter earnings, which beat analysts' estimates.
Lafley has said he was reevaluating the company's portfolio of brands and had already started to narrow P&G's focus since returning as CEO last year. So far his most notable move was agreeing to sell most of P&G's pet-food operations, including Iams and Eukanuba, for $2.9 billion earlier this year. The company's top brands include Tide detergents, Pampers diapers, Crest toothpaste and Gillette razors.
"This will be a much smaller and less complicated company of brands that will be easier to operate," Lafley said on the call. The strategy will lead to a "significant rationalisation" of product items and a more "significant pruning" of unproductive selling units, he said.
Lafley, speaking later in a interview, declined to identify which brands the company is planning to let go in order to avoid a "fire sale." Some deals already are in the works, and while the company isn't changing the four main sectors it sells in — household products, paper goods, beauty and grooming — it would consider a deal for a larger name, he said.'Selling flies'
"We will sell a billion dollar-plus brand if it is no longer strategic," Lafley said. "We are not selling flies on the tail of a dog."
Among the brands P&G may sell are Ausonia, Discreet, Blend- a-Dent, Braun Oral-B and Rindex, all of which have less than $100 million in sales each, according to Ali Dibadj, an analyst at Sanford C. Bernstein in New York.Fewer brands
Marketing, research and development, manufacturing and the company's supply chain all will benefit from having fewer brands on which to focus, Lafley said.
The positive changes the company has made, including improving its innovation and cutting costs, have yet to significantly improve its "mediocre" earnings, Bernstein's Dibadj said in an e-mail. The brand-trimming plan may not be enough, and the company needs to evaluate whether its current conglomerate structure is the right one, he said. "This is a miniscule step in the right direction, but in the end is just an excuse for them to ride out a tough macro and allow them to cut massively more costs," he said. Dibadj has the equivalent of a buy recommendation on the shares.
Fourth-quarter profit excluding items such as restructuring expenses was 95 cents a share, the company said in a statement. That topped the 91-cent average estimate of projections compiled by Bloomberg. Sales declined one per cent to $20.2 billion in the period ended June 30. Analysts projected $20.5 billion, the average of 20 estimates compiled by Bloomberg.
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