Procter & Gamble – Before and After the Divestment

In the last article on Procter & Gamble, entitled “Procter & Gamble to Lose Number One Spot in Beauty”, it was stated that, despite losing its number one spot in the global beauty market, Procter & Gamble was expected to come back stronger and healthier. We now take a closer look into how the company’s portfolio is expected to shape up more specifically. Our previous analysis, Which Brands Could Procter & Gamble Divest to Inject Growth Elsewhere?, laid out the potential framework for divestment, which aligns strongly with the recently confirmed 43 brands to be sold off.

PandG

Source: Euromonitor International

Benefits of the divestment

The image at the top reveals Procter & Gamble’s beauty portfolio inclusive of the brands it is reported to be in the process of divesting, while the chart underneath is what the portfolio is expected to look like after the divestment. The bubble sizes represent sales, while green indicates the company has gained share in the category and orange indicates it has lost share. The vertical axis shows projected growth of the category in absolute terms, while the horizontal axis represents proximity from the third leading player in the category. Comparing the two charts, the points that become evident are:

 

The outcome:

  • Hair care, its largest beauty portfolio globally, would show gained share, as denoted by the green colour, following the divestment of the weaker performing brands Clairol and Wella.
  • The remaining categories are hair care, oral care, bath and shower, deodorants, baby and child-specific products and facial care (in the mass segment), which benefit from retailing, marketing and distribution synergy. Colour cosmetics and fragrances are more fashion-orientated and the marketing dynamics in terms of product development and advertising are different to the other categories in which Procter & Gamble operates.
  • Without colour cosmetics and fragrances, Procter & Gamble is expected to be free from having to assimilate less similar categories, in addition to freeing itself of less profitable brands.
  • In summary, Procter & Gamble’s portfolio would be more compact, as indicated by fewer categories in the bottom chart, which means the company is expected to be left with more resources to invest in the existing categories.

The opportunities:

  • Even though the hair care bubble turns green once Wella and Clairol are excluded, indicating market share gain, Procter & Gamble is still left with a number of orange bubbles, which means the company would be better off investing in these categories to drive share growth.
  • Despite being the leading player in men’s razors and blades, it has been losing share, but is now in a position to focus on driving share gain.
  • Facial care is of importance, since it has the highest growth projection among all the categories in which Procter & Gamble is present. With a globally well-known brand such as Olay, it is in a position to benefit from future growth potential in the category.

While Procter & Gamble is soon to lose its clout as the number one player in the global beauty market, it stands to benefit from improved portfolio health and a more nimble structure to utilise the growth potential of its existing categories.