US finance magazine Barron’s has published an article suggesting that FMCG giant Procter & Gamble should consider more radical solutions in the face of rising competition and diminishing demand.
P&G has been pursuing a divestment strategy aimed at reducing its portfolio to just 100 core brands, however, according to Barron’s, the plan isn’t working. “It’s time for the Cincinnati-based company’s new CEO, David Taylor, and its chairman and former Chief Executive AG Lafley to consider more radical action: breaking up the company,” claimed author Leslie P Norton. “Smaller, more focused concerns tend to be more agile competitors than a lumbering giant like Procter & Gamble.”
Norton suggests a split into three separate companies, beauty – including P&G’s remaining Pantene and Olay brands; health care, which would comprise Gillette and Crest; and home care and family care consisting of Tide and Pampers. According to Barron’s, a broken-up company could be worth more than US$97 a share, versus the US$4.25 a share P&G expects for fiscal 2017.
“We’re not averse to looking at any option that creates value. But for shareholders it’s not intuitive [that a break-up] creates the best value longer term,” P&G CFO Jon Moeller told investors last week.