Tue, 18 Jan 2022

WASHINGTON - US consumer goods multinational giant Procter and Gamble Friday unveiled plans to cut as many as 100 brands from its arsenal as part of a strategy to focus on its 80 high growth products that generate maximum profits and sales.

The company hopes to improve its financial performance by "doubling down on about 80 brands that generate 95 percent of the profits and 90 percent of sales, said A.G. Lafley, Procter and Gamble Chairman, President, and Chief Executive Officer, reporting the company's fourth quarter performance.

Stating that the company has faced pressure as consumers continue to spend less than they did before the financial crisis, Lafley said: "This new streamlined PandG. should continue to grow faster and more sustainably, and reliably create more value.

"Importantly, this will be a much simpler, much less complex company of leading brands that's easier to manage and operate," Lafley told reporters and analyst in a teleconference Friday.

Declining to identify the estimated 100 brands that would either be discontinued or sold off, Lafley said that taken together they had aggregate sales declines of 3 percent a year over the last three years. The cuts would leave about 70 to 80 more lucrative products remaining.

Last year, the company had faced pressure from one of its main investors, the hedge fund manager William A. Ackman, who helped push the board to oust the previous chief executive, Robert A. McDonald.

Lafley, who served as chief executive and president from 2000 to 2009, appears determined to streamline the company's core operations. In April, Procter and Gamble agreed to sell its pet food brands Iams and Eukanuba to the candy maker Mars for $2.9 billion.

While focusing on some core products to push sales, the company has been trying to replicate the success of single-use dishwasher detergents, for example, to boost sales of other products.

The progress has been slow. During the April June 2014 quarter, core earnings per share of the company were $0.95, an increase of 20 percent versus the prior year period.

Net sales during the fourth quarter were $20.2 billion, a decrease of one percent versus the prior year period, including a negative two percentage point impact from foreign exchange and a modest negative impact from minor divestitures.

Excluding the impact of foreign exchange, currency-neutral core earnings per share increased 25 percent. Diluted net earnings per share were $0.89, an increase of 39 percent percent.

Organic sales grew two percent, including a two percentage point benefit from pricing. Shipment volume was in-line with prior year levels.

In an interview with the Enquirer, Lafley stressed size of sales won't be the only criteria for shedding brands. Though he wouldn't name brands, Lafley said P and G will unload even large brands if they don't fit into the company's core beauty, fabric care and other businesses.

"Some of our big brands are in industries that are not very attractive: they're not growing or low margin or commodities," he said. "If it's not a core brand I don't care whether it's a $2 billion brand, it will be divested."

"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."

For the fiscal year 2014, the multinational company reported core earnings per share of $4.22, an increase of five percent versus the prior year. Excluding the impact of foreign exchange, currency-neutral core earnings per share increased 14 percent. Diluted net earnings per share were $4.01, an increase of four percent.

Organic sales grew three percent driven by three percent unit volume growth. Net sales were $83.1 billion, an increase of one percent versus the prior year, including a negative two percentage point impact from foreign exchange.

According to Sanford Bernstein analyst Ali Dibadj the company could offload detergents like Trojan, Hi Wash, fragrance Gabriela Sabatini and Escada, vitamins Pregnavit,.

He reckons P and G will keep Gillette, Pantene, Oral B, Olay, Always and Old Spice as well as Pampers nappies and Tide detergent, among the company's most popular brands.

But he speculated that lesser-known brands like Zooth, a children's oral care brand, and the beauty brand Graham Webb could be cut.

Dibadj felt beyond sales "a strategic fit is also going to be important."

Dibadj speculated that the company could also choose to divest itself of brands that did not necessarily fit in with its traditional baby and family products, like the battery maker Duracell or the Braun line of small electronic appliances.

Shares of Procter and Gamble rose 3 percent on Friday to close at $79.65.

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