P&G eyes hair cut

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Procter & Gamble Co.'s recently concluded $4.95 billion acquisition of Bristol-Myers Squibb Co.'s Clairol leaves P&G with a big question: What to do with a portfolio of U.S. shampoo, conditioner and styling brands that has suddenly ballooned from five to nine?

Some analysts and industry consultants expect the answer to include divestitures, with the struggling VS Sassoon brand leading the list of candidates. A failed 2000 restaging cut the brand's market share in most of its categories-its share of the $1.8 billion shampoo market, for example, was cut in half to 1%, according to figures from Information Resources Inc.

"They have some big portfolio issues to sort out," said a hair-care industry executive, who added that he anticipates some mass merchandisers will make the decision easier by delisting VS next year. A P&G spokeswoman denied VS Sassoon is being delisted by mass chains, though she said Target is pulling the brand from some stores serving lower-income areas.

The P&G spokeswoman added that a review of the hair-care business is to be completed by mid-February, and "We don't know at this point" whether any hair-care brands will be divested.

The Clairol deal adds Herbal Essences, a brand whose appeal to younger consumers makes it complementary to P&G's category-leading Pantene's somewhat older demographic skew, P&G President-Global Health and Beauty Care Bruce Byrnes said last May. But the deal also brings Renewal 5x, a brand launched in May and positioned squarely against Pantene, along with Aussie and Infusium. All three have low-single-digit market shares, albeit stronger than VS Sassoon's.

P&G restaged the brand formerly known as Vidal Sassoon last fall with sleek new packaging, improved products and retail prices 70% higher-just as the economy was steadily sliding. The brand also received more than $36 million in media support via Bcom3 Group's Leo Burnett USA, according to Taylor Nelson Sofres' CMR. But it still suffered from P&G's long-term decision to emphasize other hair-care brands, said Burt Flickinger, managing director of Reach Marketing.

To help recover, P&G this summer cut list prices on VS Sassoon shampoo by 16% and conditioner by 33%, bringing retail prices to under $4 from more than $5-albeit still higher than its initial pricing.

"I wouldn't be surprised if P&G has a different brand lineup [in hair care] 18 months from now," said William Steele, analyst with Banc of America Securities, adding that keeping small brands runs counter to its philosophy of emphasizing big ones. "VS still has some high-end niche brand recognition," he said, "so if it isn't core to their strategy, it is to someone else's."

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