Whoever heard of multinational consumer product companies divesting themselves of category leading brands? Rumors have been flying for some time in business circles about CPG giants Kraft and P&G doing just that. In a recent Advertising Age article, Billion-Buck Brands on the Block, it seems this is more than just talk.


The rationale? Apparently, investors are seeking more top-line sales growth from category leading #1 and #2 brands in some quarters. Translation: some highly profitable cash cows will probably go on the block because they either aren't growing fast enough, or have seen their sales plateau over the past couple of years.
The article states: ". . .multinational marketers increasingly realize it doesn't pay to fight for share in slower-growing U.S. categories".
This has to make some of us wonder. With recent price increases, many of the brands in question have been more profitable than ever. Dropping smaller, under-performing brands from company portfolios is a fact of business life. However, it seems to me that it would have been inconceivable for consumer product companies to sell off some of their largest volume, profitable brands a few short years ago. How times have changed!
Some of the billion dollar brands in the U.S. included in the magazine article's list of possible divestments: P&G's Duracell batteries, Folgers coffee and Pringle's snacks; Kraft's Maxwell House coffee and Post cereals; Unilever's laundry brands including All and Surf. With great growth potential seen overseas and a weaker dollar, these same multinationals are investing in some of the very same brands for global distribution that they're looking to divest themselves of here in the U.S.! Another interesting tidbit.
"Emerging categories offer faster growth–higher than 10% in personal care and some food categories–compared with flat to 1% to 2% growth in the U.S. in such categories as coffee, alkaline batteries and laundry detergent," the article states.
And, of course, if companies are looking to sell some of their units, it makes perfect sense to sell them while they're at their peak.
It's going to be interesting to see how the following things unfold:
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Will these brands attract the investment dollars of private buyers?
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How will P&G, Kraft and Unilever move forward, sans some of their marquee brands? Will they make inroads in developing markets abroad with the very brands they divest themselves of stateside?
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How will these same companies position their brands here at home in future? And will they cave in to investor pressure to sell off even well-performing brands if these don't continue to meet high annual sales growth rates?
What is your take on this new trend? I'd love to get your input.