Cincinnati-based consumer products major Procter & Gamble said Thursday that they are planning to sell off majority of a 100 brands by summer for a consolidation in various segments they operate in.
The company made the announcement during the Consumer Analyst Group of New York annual conference in Boca Rato. Chief Financial Officer Jon Moeller said that the company’s decision would account for a decrease in annual sales by 14 percent (nearly $11.5 billion) which is more than its original estimate of 10 percent. He also gave information about the effect of the brand consolidation strategy on sales and profits of the company.
The latest move is the largest ever consolidation announced by the company. P&G will exit certain segments and could as well spin off some of the segments by July 2016.
P&G had already sold Duracell and Iams, MDVIP concierge physician service and Avril Lavinge fragrance license among others. Other brands it plans to sell include Wella, Braun, Camay soap and Scope. Duracell batteries, which makes up $2.6 billion in annual sales is the company’s largest sell-off. Warren Buffet's Berkshire Hathaway firm will be acquiring that brand.
The manufacturing giant announced that it has sold 35 brands out of the current target of 100 brands. The company registered estimated annual sales under $6 billion for the brands it plans to exit. Some of its brands have been performing well in certain markets. After the sale, P&G is expected to still hold some iconic brands on which it plans to concentrate after the consolidation of its brand portfolio, including Tide detergent, Gillette blades, Pantene shampoo, Bounty paper products and Pamper nappies.
The brands that are considered to be sold had been generating less revenue, Moeller said. Since the last three years, the revenue had been sliding by mid-single digits. Such low-margin businesses which didn't make development were sold, he added.
Moeller said, "The businesses we're exiting are not bad businesses. Most simply do not play to our strengths." The company will focus on key segments after the divestments in the 100 brands.
While announcing the brand consolidation in August 2014, P&G CEO A.G. Lafley said, “The broadest articulation of the company's strategy is we're going to play where we can create significant consumer preference for differentiated, premium-priced brands and clearly, noticeably, importantly better-performing products.”
After the latest move, P&G will be managing nearly 65 brands in 10 categories. Most brands will be market leaders in their segment, or will be among the key performers for P&G. In 2014, Procter & Gamble reported $83 billion in sales and registered $11.6 billion in net profit.