Since its founding in 1837, the company has amassed sales of $84.7 billion and an income of $10.94 billion. Chief executive A.G. Lafley says the focus will shift to the company’s remaining brands. Together, they account for about 90% of Procter & Gamble’s sales and 95% of the profits.
Thanks to clever timing (Procter & Gamble also announced a profit of $11.6 billion for its fiscal year on Friday), it looks like investors are on board as well. Stocks shot up 3% to $79.65 following the report.
Analysts say the brand downsizing is designed to lighten the company while lighting a fire under the firm’s stock price. It has stagnated over the past year.
The cuts mean fewer brands to choose from, but many of the brands are so obscure, consumers might not know what’s missing. Although the company hasn’t announced the exact brands to be axed, analysts already have predictions.
For example, the woefully underexposed children’s oral care brand, Zooth, or the Trojan line of laundry detergent sold in Southeast Asia. In fact, American consumers may scarcely notice a difference at the supermarket.
After all, only 25 of Procter & Gamble’s brands break the $1 billion mark in sales every year. So the real question is, how will this affect investors?
Overstretched and Underperforming
Although the move will hack Procter & Gamble’s portfolio nearly in half, most brands were little more than dead weight. Thus, the company’s decision to drop them has carried over as a sense of proactivity in the eyes of analysts.
Lately the company has struggled to connect with consumers of its beauty products. Some analysts, predict that Procter & Gamble plans to eliminate a handful of brands within that category.
Maybe that’s why streamlining Procter & Gamble’s ops has been a priority for Lafley and his return to the CEO position in 2013 following a successful nine-year foray from 2000 to 2009. Lafley reclaimed the position from former CEO Bob McDonald, who investors ousted in the wake of four years of shaky growth.
Almost immediately, Lafley starting eliminating brands. For $2.9 billion, he sold Procter & Gamble’s Eukanuba and Iams pet food brands to Mars Incorporated.
Analysts say Procter & Gamble has been under pressure to increase sales in an