Procter & Gamble (P&G) seems to be following in the footsteps of Nestle and Unilever. Recently, consumer packaged goods giant P&G made headlines when they announced that they would be refocusing their company and shedding nearly 100 brands. Nestle and Unilever took similar steps last year in an effort to drive sales by focusing on their most profitable, core brands.
Procter & Gamble, which is the parent of big name brands like Tide and Pampers, currently owns close to 180 different brands. The company’s top 80 or so brands account for 95% of their total profits. P&G brand sales are expected to take place over the course of one to two years. In fact, many marketing and growth professionals are already discussing how the specific brand sales will take place and what other companies will need to do to acquire them. They say the sales are “creating a pu-pu platter of household-name brands that private equity firms or other companies may want to gobble up for the right price.”
The announcement is timely for the CPG giant. It comes in the midst of growing investor pressure to divide up the company. Some of the key players had become concerned that Procter & Gamble had simply become too big to effectively meet the needs of customers. CEO A.G. Lafley is confident that a less is more strategy will be good for the company. He says of the brand sales, “The objective is growth and much more reliable generation of cash and profit. We’re going to be much more agile and adaptable.”
While it remains unclear which brands will be on the chopping block, P&G has suggested it will mostly be smaller brand names. Though, according to Lafley, larger brands aren’t exempt. The CPG giant is intent on focusing on core brands that fit into specific categories. Lafley says, “If it’s not a core brand – I don’t care whether it’s a $2 billion brand, it will be divested.” He also goes on to mention that if a brand isn’t growing, it may also be put up for sale.
The lack of clarity around which brands will be sold has led to speculation on Wall Street. Many experts are coming up with their guesses of which household names will be on the P&G chopping block. Here are our top three predictions based on what is known to date.
Duracell is a widely known and well-respected name in household. It’s one of the largest battery brands in the world. Why would P&G decide to sell it? Analysts speculate it might be put up for sale for two reasons. First, it hasn’t experienced any growth in recent years. Technological advances involve more rechargeable batteries, alternate power sources, and devices with extremely long battery lives, all of which are leading to stagnant growth. And secondly, the brand might not fit in with P&G’s pared down core categories.
Ivory is one of Procter & Gamble’s oldest products, but it operates on razor-thin profit margins. The lack of growth could put Ivory on the chopping block. Lafley has already indicated that if a brand isn’t growing, it could be put up for sale. Ivory may be iconic, but that doesn’t make it exempt from being sold. Ivory’s potential for creating additional products may be too limited for further investment from P&G. But with its existing brand equity, it’s possible that a private equity firm or another beauty brand that’s interested in revitalizing the marketing behind the brand could build it further.
The small appliance company is a household name. But last year P&G sold off the kitchen appliances division of the brand due to lagging sales. Experts speculate that the remaining Braun products, including electric toothbrushes, shavers, and alarm clocks, could also be put up for sale in the upcoming cull. Letting Braun go is a natural next step, and despite flagging growth the brand is likely to attract interested buyers.
While it remains unclear what the future holds for popular brands like Duracell, Ivory, and Braun, one thing is for certain; Procter & Gamble is making changes so that they are able to respond more effectively to changing consumer demands. Selling off brands that are lagging in sales or don’t align with the company’s core categories could help put P&G in a much better position for growth moving forward. The strategy may seem bold, but it makes sense. In the long term, P&G will be more focused and more profitable after the changes.