Procter & Gamble expects bigger gains from non-core brand clearout
Procter & Gamble (P&G) expects to generate more sales from the clearout of its 100 non-core brands than previously indicated in an accelerated version of its divestment strategy.
The FMCG business has revealed the impact of the brand cull will amount to 14 per cent of annual sales or around $11.5bn, up from the original target of 10 per cent or $8.2bn it announced last August. It will also throw between five and 15 additional brands into the pot with the streamlined portfolio to consist of 65 brands in 10 key categories instead of the 80 that was first announced.
Speaking at the Consumer Analyst Group of New York conference yesterday (19 February), chief financial officer Jon Moeller said it hoped to “have negotiated and announced” all the deals “as early as this summer”, roughly one year from its initial announcement. Consequently, the brands should be under new ownership by 2016, allowing P&G to move into 2017 with its new range fully in place.
P&G has revealed 35 of the 100 brands it plans to boot out, spanning the breadth of its portfolio including Iams and smaller beauty products. Most noteworthy to date has been the sale of Duracell, which had annual sales of $2bn, to venture capitalists Berkshire Hathaway in exchange for the $4.7bn worth of shares it had in the P&G business.
The non-core brands are not bad businesses, Moeller insisted, they “simply do not play to our strengths”. A more focused will be much simpler for the business to market at a time when the company is searching for to improve profitability in a sustainable fashion.
Part of the gains will come from the company’s ongoing recalibration around more cost-effective marketing. Driven by the belief that digital media delivers higher ROI than TV or print, P&G is targeting savings from cheaper but better targeted digital media, search, social, video, and mobile.
P&G cited its popular Super Bowl spot for feminist hygiene brand Always as an example of how it was benefiting commercially from the shift. In just over one week, this spot generated nearly 4.5bn free impressions and was seen by over 50 per cent of the target women aged between the 12 and 24 demographic.
“We achieved in store activation and retail customers representing about 80 per cent of North America sales resulting in a high-single digit sales increase with some retail partners. And Always pads weekly dollar sales were up 6 per cent ahead of the average week this fiscal year," claimed Moeller.
The FMCG company’s efforts to spur growth took a knock at the end of last year, forcing it to slash its sales target for its full financial year by 5 per cent, far more than planned. Sales slid 4 per cent year-on-year to $20.2bn in the three months to December.