Under the deal, which should close in the second half of next year, P&G will receive back $4.7bn in stock owned by Berkshire Hathaway, which is P&G’s fifth-biggest shareholder. P&G will contribute $1.8bn to recapitalise Duracell, a move chief executive AG Lafley said would be tax efficient.
P&G said last month it was looking to offload Duracell, saying at the time it preferred a spin-off of the business although it was open to other options. Duracell is the market leader in the battery market but sales have been sluggish in recent years as the market shifts to rechargeables.
That doesn’t fit with P&G’s renewed focus on improving profitability by focusing on its biggest brands with the best opportunity for strong growth. It has already offloaded 28 brands and Lafley said it has just started work to divest 10 more small brands and is in talks with prospective buyers.
P&G is looking to divest up to 100 of its brands, leaving it with a portfolio of between 70 and 80 where it can focus its research, innovation and marketing budgets. Lafley said P&G has identified a number of brands that, while having strong brand equity and market-leading positions, are struggling to boost share and are in need of investment.
The company highlighted Olay as an example of a brand they are looking to invest in as sales growth stutters. P&G said it needs to “get back to basics” by focusing on consumer understanding, innovation and brand building to return it to strong growth.
Plans include clarifying its brand architecture to make Olay more distinct on the shelf, strengthening beauty claims and enhancing messaging to communicate product benefits and make it easier for shoppers to find. The company says early results have been promising and that response to its “Your best beautiful” campaign have been positive.
“Olay is moving in the right direction but we need to get it back to market-leading growth. Our past success has been good in beauty and we will progress in the present by getting back to basics, starting with understanding consumers. We will do what is necessary to build and rejuvenate our beauty brands,” said Lafley.
P&G said plans for Olay would follow a similar route to Head & Shoulders, which has experienced a resurgence in recent years. The brand was “stuck” at sales of around $600m but by making Head & Shoulders “relevant again” with a new brand promise focused on dandruff protection and beautiful hair it boosted growth to sales of $2.8bn last year.