Procter & Gamble Co. CEO: We don't need more brands right now

Will P&G sell off Duracell, Braun and Iams?

CINCINNATI - It wasn’t the blockbuster deal some are looking for, but Procter & Gamble Co. CEO A.G. Lafley announced the “full exit” from the bleach business at an analyst conference in Boca Raton, Fla. Thursday.

Lafley also delivered strong hints that P&G is willing to sell brands like Duracell, Braun and Iams.

“We’re not ready to make announcements on that subject,” Lafley said in response to a question about which brands the company considers to be core strategic assets that aren’t for sale.

“About 90 plus percent of the portfolio is core,” he added. “I think in three of the businesses, the industry is well defined. Household cleaning, baby, feminine care and family care  - which is essentially disposable hygiene in one form or another - and beauty. The fourth piece is still a bit of a holding company but we will rationalize that over time.”

At least one Cincinnati money manager takes that as a signal that recent analyst speculation is correct about P&G, that the company is looking to sell business units that make Duracell batteries, Braun shavers and Iams pet food.

“Iams is not a beauty product,” said Matt McCormick, vice president, principal and portfolio manager at Bahl & Gaynor Investment Counsel, which owns P&G shares. “Unless Procter is thinking about ways to make dogs more beautiful, that appears to be a likely candidate.”

McCormick wasn’t expecting Lafley to name specific brands for sale.

“If he doesn’t have a buyer, he’s not going to identify who they are,” he said. “He’s laying the ground work. They’re looking at it and it’s now a question of when, not if.”

The bleach divestiture involves the Ace, Magia Blanca and Lavansan bleach brands sold in Central and Eastern Europe, the Middle East, Africa and Latin America. In 2012, P&G sold its Western European bleach business that competed in Italy and Portugal.  A spokesman said the sale is subject to regulatory approval and will have no local impact in terms of jobs.

On the broader issue of future divestitures, the company would not elaborate on Lafley’s remarks. However, spokesman Paul Fox said employee transitions are always a major concern when P&G exits a business.

“What we have said consistently during divestitures of businesses like snacks and coffee is that our first priority is to ensure a smooth and easy transition of our employees to their new homes,” Fox said.

Lafley’s 38-minute presentation marked his first appearance in his second stint as CEO before the influential Consumer Analysts Group of New York, a collection of Wall Street analysts who’ve already heard from most of P&G’s competitors this week. Lafley revealed no major policy shifts and broke no big news. He announced the bleach divestiture and one new product launch: An Oral-B toothbrush with Bluetooth technology that communicates with a consumer’s smart phone to improve brushing habits.

On big picture questions, Lafley aimed to reassure skeptical analysts that P&G is on the right track with a host of productivity improvements and new product innovations that are on their way to store shelves.

“When we get it right, new and really improved brands and products that consumers prefer can sustain value creation for a decade or more,” he said. “We have an improving product innovation pipeline and portfolio that will only get stronger as we focus in the days, weeks and months ahead.”

Lafley also delivered a different response to questions raised in its recent earnings call, when two analysts asked whether P&G needed to acquire a new beauty brand to restore growth in that segment. Chief Financial Officer Jon Moeller said “it’s not something that we have crossed off the list,” but wasn’t necessary to restore growth.

But Lafley told the CAGNY audience that a beauty acquisition is “the last thing” P&G needs.

“We don’t need more brands right now,” he said. “In fact if you think about this company, we do best when we can compete in a category for consumers with fewer brands.”

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