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Procter & Gamble (P&G) plans to divest as many as 100 of its brands globally, representing nearly half of its current lineup, in an effort to streamline operations and cut costs, according to reports.
The Cincinnati-based CPG giant plans to focus on its top 70-80 most profitable brands, which accounted for 90 percent of sales and more than 95 percent of profit since 2011, and either sell, discontinue or merge the remaining brands whose sales and profits have declined in as much time – 3 percent and 16 percent, respectively.
The brand names to be sold have not yet been revealed, but a Reuters report noted that P&G's family, feminine and baby care businesses "would lose fewer brands than its other four businesses."
P&G's move represents a "strategic step forward that will significantly streamline and simplify the company's business and brand portfolio," Chairman/CEO A.G. Lafley said on a conference on Friday. The company did not offer a concrete timeline in which this divesture will be complete, but CFO Jon Moeller estimated between 12 and 24 months.
The decision to cut as much as half of its current brand lineup follows in the wake of the company's tepid sales growth and decision to cut global ad spending – $9.1 billion, down from $9.7 billion last year – according to reports. The company noted it would continue to reassess its marketing efforts and focus more heavily on digital media.
“We look at things like the reach, the frequency, the targets that we’re reaching, the conversion rates on the messaging, and that’s much more important than actual dollars spent given what’s happened in that industry," Moeller added. "But you should not mistake this for a second as lack of willingness to invest behind smart ideas to build the top line.”
The ripple effect of P&G’s initiative through the retail environment could be significant. While many believe that consumers would be happier with fewer choices at retail, online availability is ensuring that consumers can obtain the brands they want if their preferred retailer doesn’t carry them. Any disruption in brand availability at brick-and-mortar retailers will mean that P&G’s divested products – at least those transitioning to a new owner – could spur online shopping. These purchases might start small, but would easily build to impact other categories.
At press time, Procter & Gamble had not responded to a request for comment.