P&G to become a ‘simpler’ business with beauty refocus ‘essentially done’

Alan G. Lafley, who will remain at the helm until November this year​, says that the company has essentially completed the strategic portfolio reshaping after the beauty brand merger with Coty​, with future plans to focus its portfolio on 10 categories and 65 brands that best leverage its core competencies, thus becoming a “much simpler businesses, easier to operate, easier to grow, easier to create value creation from.”

“We were clearly over-extended in several categories. The most obvious one was beauty where we got into service businesses and more fashion and trend oriented businesses,”​ Lafley commented on a conference call to analysts.

“That didn't turn out to be a good fit for us. So I would argue we've changed quite a bit in the last two years. And the big change has been a dramatic narrowing of the focus and choices​ [and] getting back to balanced innovation and productivity that really drives value creation.”​

The P&G chief explains that all this change takes time but with much of it underway the company is making good strides, despite another challenging quarter figures-wise​.

Beauty refocus​

Looking at the Beauty business, in hair care the Ohio-based firm sold off a number of salon and hair colorant brands to Coty, exiting these markets, as well as selling off small non-strategic brands like Fekkai and Wash & Go, following a challenging year.

Hair care had a challenging year, but progress is being made. Head & Shoulders grew global organic sales mid-single digits for the twentieth year in a row and continued to build profit and cash value creation.

However, Lafley says that the divestments mean that the company can now focus on its core brands that it has kept such as Head & Shoulders and Pantene, which have bothe seen sales grow modestly.

“P&G's remaining hair care portfolio consists of brands with real consumer equity. These brands will not only benefit from better performing products but also from more focus, better packaging, marketing and sales execution,”​ says Lafley.

One of the notable points from the recent brand divestment was that P&G did not entertain the thought of shedding its skin care businesses, Olay and SK-II.

Lafley labels skin care and personal care a ‘mixed bag’ as there has been sales growth although more focus is needed to kick on in this market.

For Olay in particular, he says that P&G is committed to return to sales growth and to continue value creation growth in North America in fiscal 2016, as it focuses once again on its masstige strategy.

There has also been a change in focus in P&Gs standalone Grooming business as consumer habits and practices change, moving it from just a facial shave care business to a broader grooming business.

Lafley notes that the vast majority of sales and profits are in shaving, but with Gillette facing challenges in the last year, P&G is looking at other avenues to grow this business segment.