P&G a quarter of the way through brand cull

Speaking on a conference call today (24 October) following the company’s results announcement, P&G boss AG Lafley said that over the past five quarters the company has either “divested, discontinued or consolidated” 25 brands, a quarter of the up to 100 brands it plans to cull.

These include its Duracell battery brand, which it announced plans to spin-off today, bleach and pet care businesses. Smaller brands such as DDF ski care, laundry brands Essex & Rol, Lavasan and Perla have been consolidated while it has chosen not to renew the license or sold brands including Iman Cosmetics, Avril Lavigne, Replay and Puma fragrances.

The aim, said Lafley, is to create a “streamlined brand portfolio” and a simpler, more focused company based around 70 or 80 brands.

“We will compete in businesses that are structurally attractive and play to P&G strengths,” he added.

Oru Mohiuddin, senior analyst for beauty and personal care at Euromonitor International, believes Duracell offers limited synergy with P&G’s wider portfolio in terms of R&D and product development, hence the decision to spin it off. This despite it being one of the company’s billion-dollar brands and a market leader.

She says Duracell should bring in a good price given its strong global reputation, giving P&G resources to invest in core product areas.

“One of the challenges P&G faces is limited coverage in the lower pricing points, an area the company is increasingly focused on. Herbal Essences, one of its more competitively priced hair care brands, has become more dynamic in terms of product launches in the last two years. With the resources released from Duracell, P&G can further invest on expanding its presence across pricing tiers and developing a more segmented portfolio,” she adds.

P&G’s will now focus its brand building, through both marketing investment and product innovation, on its “biggest opportunities” and in markets where it is market leading. The launch of its Always adult incontinence product in the UK in July has caused the wider market to see 20 per cent growth over the past three months and given P&G a 9 per cent value share.

P&G is now prepping a number of new products, including a range of premium Pampers nappies, the launch of its latest Gillette razor outside the US and the introduction of Crest Sensi-Stop strips. Lafley claims the product is “revolutionary”, offering customers immediate relief from sensitive teeth which, unlike toothpastes in the segment, offers protection for a month.

P&G says it will see increasing marketing effectiveness from having fewer brands to focus on and its continuing shift to an optimised mix focused around digital, mobile and social. Savings will be reinvested back to support innovations and improve topline growth.

The focus on innovation and the efficiency drive, which will see P&G exceed its planned $10bn cost-cutting goal, comes as growth both in developed and developing markets contines to slow. P&G’s sales were flat in its most recent quarter, while profits were down by a third.