Alan Lafley, Procter & Gamble's chairman and CEO announced last Friday after a fiscal fourth-quarter earnings call, that the consumer products giant are planning to shed up to 100 brands to help make P&G a more efficient and streamlined company. Lafley has yet to announce which brands are up for the axe, but he did say that the 70-80 brands the company will keep in its portfolio will be the ones that are “Consumer preferred and customer supported,” in other words, the brands that the most popular. He says that of those brands many are market leaders in their respective categories, 23 boast sales between $1 billion and $10 billion, and that when combined, the companies they plan to keep account for 90% of the company's sales and 95% of their profits. P&G will “Harvest partner, discontinue, or divest” the brands it wants to get rid of, brands which make up less than half the average company margin.
Lafley has yet to announce which brands are up for the axe, but he did say that the brands the company are keeping will be ones that are “Consumer preferred and customer supported.”
The results of the fiscal-fourth quarter are through to be the primary catalyst for the decision. The bottom line showed that the company managed to log core profits per share of 95 cents, 4 cents more than what was expected, and revenues came in at a tidy $20.2 billion, though this was slightly less than the $20.4 billion that was expected. Lafley said that whilst they met their objectives “In a very difficult operating environment,” and built on a “Strong track record of cash returns to shareholders,” they “Have more work to do to deliver the profitable sales growth and strong cash productivity,” he believes they are capable of delivering.
Procter & Gamble's headquarters in Cincinnati, Ohio
Lafley, who returned as the CEO in May 2013 after 4 years away from the company, has stressed that sales won't be the only criteria on which they judge which brands to shed, stating that they will even be willing to axe large brands if they don't fit into the company's core sectors of beauty and fabric care. He says some of their big brands “Are in industries that are not very attractive; they're not growing, or low margin, or commodities," and that if it's not a core brand, he doesn't care “Whether it's a $2 billion brand, it will be divested." With this criteria taken into account it would appear that brands such as Duracell batteries and Braun, the small-appliances manufacturer, could be up for the chopping block, whilst brands in the fabric, home, baby, feminine, and family care sectors, which logged 4% gains for the quarter, are less likely to be culled.
The move will affect agencies working on P&G brands, which includes Publicis, Leo Burnett and Grey amongst others
According to Lafley, “Less will be much more,” and “The objective is growth and much more reliable generation of cash and profit.” He believes that the “Strategic narrowing and refocusing of the brand portfolio will have a number of significant benefits, mutually reinforcing. 70 to 80 brands will bring clarity, focus and prioritisation and simplicity to a smaller, more integrated, better coordinated organisation.” The move will affect agencies working on P&G brands, which includes Publicis, Leo Burnett and Grey amongst others. Adweek stresses that “Although these agencies work on big brands like Tide and Crest that won’t be affected by the divestiture, they also handle smaller, regional brands that collectively represent significant chunks of revenue from the world’s biggest marketer.”
Official Procter & Gamble Website
Benjamin Hiorns is a freelance writer and musician from the UK.
