"Today we are announcing an important strategic step forward
that will significantly streamline and simplify the company's
business and brand portfolio," Mr. Lafley said. "We will become a
much more focused, much more streamlined company of 70 to 80
Effect on agency relationships?
That move will mean divesting, discontinuing or finding partners
for another 90 to 100 brands in P&G's current portfolio, which
also implies major consolidations of agency and other
marketing-services brand assignments in the future.
Mr. Lafley didn't provide a timeframe for how long the
restructuring would take, other than to say it's "more time than we
"The timing on this will be governed by our ability to create
value," said Chief Financial Officer Jon Moeller, though he
estimated it would take 12 to 24 months to complete the
"In an ideal world, we would have done this in the depth of the
financial crisis," Mr. Lafley said, acknowledging that had occurred
during his last watch as CEO. "I don't want to wait another
Those 70 to 80 keeper brands account for 90% of company sales
and over 95% of profit over the past three years, Mr. Lafley said.
That still leaves room for elimination of brands accounting for
more than $8 billion in sales annually.
Culling the herd
"We will harvest, partner, discontinue or divest the balance of 90
to 100 brands," Mr. Lafley said. On the whole, the brands in
question have seen sales declining 3% and profits declining 16%, he
said, and have margins less than half the company average.
The move to eliminate brands comes as P&G has cut ad
spending for the first time in years, with reported ad spending as
a share of sales falling half a percentage point to 11% in the
just-completed fiscal year, Mr. Moeller said on the company's
earnings-day media call.
That takes P&G's global ad spending to around $9.1 billion
from $9.7 billion last year. Part of the drop reflects the
divestiture of the company's pet-care business, announced in April
and mostly completed today.
Mr. Moeller said the company will continue cutting marketing
spending this year as it continues shifting to more efficient
digital media and improving the impact of its messages.