P&G THROWS DUNCAN HINES BRAND ON THE SELLING BLOCK

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Procter & Gamble Co., deciding its Duncan Hines baking business doesn't have enough global reach, has put it on the block for a selling price of more than $250 million.

P&G issued a press release late Friday, in response to calls from Advertising Age, confirming it is soliciting bids for Duncan Hines. P&G said it will retain the brand if no acceptable offers materialize.

DOUBLE SALES BY 2005

The move follows the marketer's announcement in mid-August that it hopes to double sales to $70 billion by the year 2005, a big push that relies heavily on international growth. P&G has said its major focus will be in diapers, feminine hygiene, haircare and laundry.

Duncan Hines, a brand that saw sales declines in nearly all the U.S. segments in which it competed over the past year, presumably isn't limber enough to make the global leap.

"Duncan Hines is a strong, profitable brand," said Stephen Donovan, president of P&G's food unit. "But as our food and beverage business has developed, we have more promising strategic opportunities."

Duncan Hines accounts for less than 10% of P&G's food sales.

"The choice for [P&G President Durk] Jager in terms of return on investment is, 'I don't have enough capacity for disposable diapers and towels .

.. do I pour more money into a declining category where I'm No. 3?"

said Burt Flickinger a consultant with Reach Marketing.

NO GLOBAL APPEAL

Mr. Flickinger said that from a global perspective, Duncan Hines doesn't have legs, noting that U.S.-style cookies haven't caught on in Asia, while Europe prefers richer chocolate sweets.

The list of potential suitors for Duncan Hines ranges from direct competitors General Mills and Pillsbury Co. to ConAgra, H.J. Heinz Co. and Campbell Soup Co.

"The economics of the category make it better as a two-company race. A three-company race is dicey," said a food industry executive, referring to the three-way competition in baking mixes among P&G, Pillsbury and General Mills' Betty Crocker brand.

Antitrust concerns might lock out both Big G and Pillsbury, although executives close to General Mills said it's unlikely they'd be interested anyway.

Mr. Flickinger said P&G in recent years hasn't put many marketing resources against Duncan Hines.

FEW NEW PRODUCTS

"They lost new product initiative to Betty Crocker. They thought they'd pick it up in frosting and were outmarketed," he said.

P&G spent about $16 million on its Duncan Hines line for the first five months of this year, according to Competitive Media Reporting. Duncan Hines sales for the 52 weeks ended July 20 were $221 million, according to Information Resources Inc.

N.W. Ayer & Partners, New York, handles Duncan Hines, but would probably lose the business if a sale goes through.

P&G watchers said Duncan Hines' pending sale signals P&G's willingness to jettison brands from its portfolio that aren't of a sufficient size or have limited global appeal. Under that criteria, questions have been raised about other food and beverage brands, including Jif peanut butter and Folgers coffee.

FOCUSING ON LEADERSHIP BRANDS

P&G, however, denied those brands were possible sale candidates, noting the company is "focused on leadership brands-particularly in juice, drinks, coffee, snacks and Olean."

Food and beverages accounted for only about 11.5% of P&G's total $35.76 billion in sales for fiscal 1997, ended June 30. But food is also its second-most profitable sector; although return on assets figures for the most recent year are unavailable, the division's return on assets for fiscal 1996 was 28.3%, second only to laundry detergents' 35.2%.

Jif, a brand with $245 million in sales for the 52 weeks ended July 20, has had a growing U.S. share-34.8% dollar share in the creamy peanut butter segment and 29% in the chunky segment. Although profitable, it doesn't fit P&G's core competencies, said an executive close to the company.

"Jif is never going to be a category leader," the executive said.

Although Jif is noticeably absent from P&G's list of leadership brands, a spokeswoman said, "We are not considering selling Jif."

Handled by Grey Advertising, the brand had about $7.1 million in measured media support last year.

PRINGLES UNLIKELY TO MOVE

What's almost sure to be a keeper in foods is the internationally viable Prin-gles potato crisp brand-said to be the food and beverage unit's biggest return-on-assets contributor. The opinion is also split on the highly successful Sunny Delight, seen as an earnings booster but a brand outside P&G's core categories.

Some non-foods brands could be vulnerable, too. Should P&G choose to build its Oil of Olay cosmetics brand globally, it might sell its Cover Girl and Max Factor lines, a scenario P&G denies.

Crest also is safe. Although Crest will never be truly global because of Colgate's headstart, P&G's plan is to focus on growth in Eastern and Central Europe and China, according to executives familiar with the company's plans, while trying to rebuild it domestically.

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