Procter & Gamble (PG) looking to sell under-performing business units

Analyst: Pet care division will be first to go

CINCINNATI - Procter & Gamble Co. is looking to sell under-performing business units, CEO A.G. Lafley told analysts Wednesday morning.

“Already been through the portfolio in detail, already discussed with the management team, already discussed more than once with the directors and board. We’re on it,” Lafley said at the Barclay's Back-to-School Conference in Boston. “We know what doesn’t fit strategically and what does. We know what’s under performing and what's performing."

Also during the call, Lafley announced that P&G's Tide brand will launch a new lower-priced version of its liquid detergent.

Tide Simply Clean and Fresh will be launched in February and will be priced in the mid tier of laundry products, where Lafley said P&G is "underdeveloped with a 30 percent share."

Tide is the nation's largest laundry brand, with annual sales of $4.5 billion. Critics have complained that Tide lost share to cheaper laundry products during the recession because its products carried premium prices. Lafley said the new lower-priced Tide will cost about 25 percent less than its premium products. It's a strategy that P&G used successfully to gain market share with Bounty Basic and Charmin Basic lines.

"Consumers have different needs and wants," Lafley said. "We aim to meet their needs with brands and products they prefer and can afford."

On the divestiture issue, Lafley declined to name any business units that could be sold, but said they will involve products that on a combined basis represent less than 10 percent of P&G sales.

“Most of our businesses that we developed in the last 10 or 20 years are now core and probably represent 90 plus percent of what we have and we’re looking at the rest,” he said. “There will be a few moves that will be obvious and we’ll announce them when it’s the appropriate time and there are always a few businesses that are on what I would call a watch list.”

Analysts have long speculated on possible divestitures at P&G, including Duracell batteries and its Iams and Natura brands of pet care products. The pet care division is the last business unit that produces food at P&G. As WCPO has reported, the pet care division has endured a string of product quality issues, including several recalls of dry pet food because of possible salmonella contamination.

Other products, including Jif peanut butter, Pringles potato chips and Folgers coffee, were long ago pruned from the portfolio.

Bernstein Research analyst Ali Dibadj thinks pet care is the mostly likely divestiture, but he considers Duracell batteries, Braun shaving products and consumer tissue brands to be candidates for sale.

"Pet has done badly," said Dibadj, who predicts it will be sold "as soon as they can get a good price."

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