CINCINNATI - Procter & Gamble Co.’s decision to unload up to 100 brands over the next two years could have a big impact on the Tri-State. Whether that impact is a net positive or negative depends on who buys the brands and how fast P&G grows after the winnowing process is completed.
“My guess is this will result in a headcount reduction in Cincinnati,” said Matt McCormick, vice president and portfolio manager for Bahl and Gaynor Investment Counsel downtown.
Because P&G has a responsibility to make the best deal for shareholders, McCormick says it will look for buyers that create the most value for P&G – as opposed to employee-led buyouts or private-equity investors who want to keep business units intact.
That means the most likely buyers are out-of-town companies that will ask P&G employees to move with the business, just as J.M. Smucker Co. did when it bought P&G’s Jif and Folger’s brands, and just as P&G did when it acquired Gillette.
“What will potentially happen is just like the reverse of Gillette,” said McCormick. “If Smuckers buys it, you have the opportunity to move to Orville, Ohio. Or you don’t. That’s up to you.”
P&G spokesman Paul Fox said there will be employees displaced by the process, but it’s too early to tell how many jobs will be affected. P&G told analysts Friday that it will discontinue, sell, harvest or seek partners for 90 to 100 brands in the next 24 months, brands that lack the growth potential that the company expects from its 70 to 80 core remaining brands.
Harvesting a brand means cutting off future investments to maximize profits for as long as it survives.
P&G won’t name any brands as targets for divestiture, but stresses it isn’t just looking to unload businesses that fall below a certain threshold for annual revenue or profit margins.
“We’re going to focus on those brands that are operating in structurally attractive businesses that play to our core capabilities and where we have a higher percentage chance of winning,” said Fox.
Become a WCPO Insider to learn more about how the divestiture will work. Plus, see a list of 10 brands that P&G is likely to retain and 10 that are having growth issues.