Is P&G about to divest part of its beauty portfolio?

By Simon Pitman contact

- Last updated on GMT

Is P&G about to divest part of its beauty portfolio?

Related tags: Procter & gamble

Procter & Gamble is looking into either a sale or an IPO for part of its beauty, hair and personal care portfolio, if a report citing anonymous industry insiders is credible.

The company is currently in the middle of a significant restructuring that will see up to 100 brands culled from the portfolio, giving reason to believe that the next step could be for P&G to make a bold move and sell off a significant slice in one swipe.

According to a Bloomberg report, ‘people with knowledge of the matter’ have shared details that the company is exploring this avenue, which could help put the company back on track after over-expansion caused the business to lose focus and revenues to slide.

P&G’s beauty operations have traditionally been the mainstay and most profitable division, but in recent years that trend has been reversed as the company has hit market challenges amidst intense competition.

Selling lesser brands to focus on the biggies

The aim of its brand restructuring exercise is to sell off some lesser known and lower revenue-generating product lines in an attempt to focus on key beauty brands and further develop them.

At this point the company insiders say that there are still many details to finalize, including what brands will be sold off, while the deal many not even take place, the report states.

The report goes on to say that a number of fragrance, make-up and hair salon beauty brands are likely to be top of the list as potential divestitures.

The company is also looking into the sale of its Well hair care business, the report cites.

Will celebrities or fashion brands get the boot?

Currently the P&G beauty and personal care brand portfolio includes 34 principle brands, including celebrity names such as Christina Aguilera Fragrances and Naomi Campbell and fashion brands such as Hugo Boss and Lacoste Fragrances.

Besides Wella, big hair care brands include Head & Shoulders, Nice ‘n Easy, Vidal Sassoon and Herbal Essences.

But its two biggest brands, and the ones P&G is tipped to hang on to for further development, are the Pantene hair care range and Olay skin care.

Outlook is tough

For its most recent second quarter, the company reported net sales down by 4% to $20.2bn, a figure that was impacted by currency translations and a 1% fall in organic sales for its hair, beauty and personal care division – the only one of its four divisions to see a decline.

The company said that the decline was mainly driven by a fall in sales in the Prestige and Skin and Personal Care categories, as demand for products such as Olay dropped.

Looking ahead to full year 2015 sales, the company is predicting that revenues will fall by 5%, while net earnings will decline by 12%.

Related topics: Business & Financial

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