Proctor & Gamble (P&G) owns a massive spectrum of premium brands in the household and beauty product sectors, but recently, the consumer product goods giant has begun cleaning house. Braun small appliances, Iams pet food, Duracell batteries, and Pringles potato snacks seem likely candidates to be swept out of the company’s portfolio.
High-end commodities, including household items, are suffering massive losses as private-label products compete more effectively. Customers question if they really need Dawn dish soap or if the generic dish soap will be fine. In most cases, their answer is to choose the cheaper dish soap. Tide detergent and Downy fabric softener similarly have lost significant market share, mostly to lower priced competitors.
The more than $1 billion in annual revenues that P&G earns comes mainly from its top 23 brands, which constitute 69 percent of its sales and 75 percent of its profits. The remainder of its sales come from less productive brands, which are candidates for removal. However, the portfolio rebalancing project also includes the possibility of some appropriate acquisitions, such as Sara Lee’s international household product unit that sells products like the Ambi Pur air freshener, which is widely popular in Europe.
Furthermore, P&G has introduced low-cost products, such as Tide Basic, that have successfully attracted consumers who hope to pay a lower price for these commodities. Fido and Rover will just have to make do with the generic version, because Iams has become too expensive for consumers’ tight budgets.
- What is the main problem P&G faces today?
- What can P&G do to increase profits, other than filter its portfolio of brands?
Jeffrey McCracken and Ellen Byron, “P&G Considers Booting Some Brands,” The Wall Street Journal, October 29, 2009.