The Procter & Gamble Co. is slimming down to gain muscle.
That was the message delivered by A.G. Lafley, the firm’s chairman, president and chief executive officer, on Thursday at the Consumer Analyst Group of New York Conference, held this week in Boca Raton, Fla.
Once the company whittles down its portfolio to its goal size of 65 brands — which it expects to achieve in fiscal 2016 — its brands will be organized into 10 key categories.
“We will become a much simpler, more focused company of leading brands in structurally attractive categories that play to our strengths,” Lafley told Wall Street analysts. “We’re going to create a faster growing company that is far simpler to operate.”
The company has already divested or made plans to sell 35 brands, including bleach, batteries and pet care, noted chief financial officer Jon Moeller. He said the businesses that remain will fit P&G’s core capabilities, have a proven track record and be sold in its core channels of distribution.
While P&G has yet to announce which of the remaining brands will go, the company is said to have hired Goldman Sachs to explore the sale of its Wella business. Industry observers have speculated that its high-end brands, such as fragrances and its Dolce & Gabbana cosmetics line may also be ripe for a sale given P&G’s repeated call to focus on its strengths in household goods and personal care.
Lafley on Thursday emphasized that the leaner portfolio “strategically resets P&G’s where-to-play choices for at least the next five years.”
He told analysts, “Decade after decade, we have to find the strategy and the business model that wins with consumers.” Lafley said the company has done just that with its Pampers brand, pulling it out of the doldrums to grow it into a $10 billion business that’s grown at a rate of 5 percent over the last three years by focusing on trial and trade-up. He said the company has done the same in fabric care. Tide Pods alone is expected to reach $1.5 billion on sales this year. Now, P&G needs to focus its turnaround efforts on beauty care, which has seen megabrands such as Olay and Pantene lose ground in recent years.
Lafley said the company is making progress in the hair-care business. “P&G hair care is now growing share in both the U.S. and China, by far the two biggest markets in the world,” said Lafley. He noted that Pantene has grown share in five of the last six months in the U.S. market.
“If P&G hair care could grow just one point ahead of the market this would result in an increase in our company’s top-line growth of about $500 million,” he said, adding that both Pantene and Head & Shoulders are responding well to better branding, new product introductions, and improved marketing and sales execution.
In skin care, Olay is still struggling. Lafley said the company is working to clarify Olay’s brand and stockkeeping unit architecture to ensure its core collections garner the bulk of consumer attention. The efforts, he said, are starting to show some positive results. Over the last 12 months, Olay’s value share in the U.S. facial moisturizer market has improved, driven by Luminous.
Lafley rejected earlier thinking by the company — and the industry — that these brands were too big to gain meaningful traction. He declared that “it was a mistake” to think its core brands were too mature and too big to grow.
Meanwhile, the company’s ongoing cost-cutting efforts are touching nearly every area, including staffing and marketing.
By January, it had reduced its employee count by 18 percent, and the company expects to reach 22 percent in reductions this year — a year ahead of schedule.
On the advertising front, P&G continues to shift toward digital in a bid to “deliver more with less.” Moeller said the company is seeing a higher return from digital efforts than from TV or print. He noted that P&G’s #LikeAGirl campaign for Always, which aired during the Super Bowl, generated 4.5 billion free impressions in one week. It became the number one most tweeted ad and the most discussed ad on Facebook, said Moeller, adding that the Always brand is now seeing sales rise in the high single digits.