Procter & Gamble, the world’s largest manufacturer of consumer products, has decided to cut up to 100 brands from its line in a move that will allow the company to focus more on a core group of lucrative staples like Tide, Gillette and Gain.
The outgoing brands comprise less than 10 percent of the company’s revenue, according to the company’s chief executive, A. G. Lafley, who announced the move in a conference call with analysts on Friday to discuss the firm’s fourth-quarter results.
Procter & Gamble has faced pressure from one of its largest investors, the hedge fund manager William A. Ackman, to shed some of its brands and carry out other cost-saving measures. Mr. Lafley replaced Robert A. McDonald, who was ousted by the board under pressure from Mr. Ackman.
In April, Mr. Lafley agreed to sell the company’s Iams and Eukanuba pet food brands to the candy maker Mars for $2.9 billion. Procter & Gamble acquired the brands in 1999 for $2.3 billion, but experienced slow growth in the unit in recent years.
The planned divestitures put more of a focus on developing spinoff products from Tide, Gillette and about 70 other brands that have made up almost all of the company’s profits in recent years, Mr. Lafley said.
“This new streamlined P.&G. should continue to grow faster and more sustainably, and reliably create more value,” he said. » Importantly, this will be a much simpler, much less complex company of leading brands that’s easier to manage and operate.”
Mr. Lafley said the company planned to “harvest, partner, discontinue or divest” itself of 90 to 100 brands, although he did not specify which ones. The group’s aggregate sales have declined 3 percent a year over the last three years, he said, while profits have dipped 16 percent.
Procter & Gamble has already been focusing on some of its core products to try to bolster sales.
Taking cues from the success of single-use dishwasher detergents, for example, Procter & Gamble has been pushing the same idea with Tide Pods, individually wrapped doses of detergent.
On Friday, the company reported that net sales fell 1 percent to $20 billion in the quarter ending June 30, while cost savings helped increase profits by 38 percent, to $2.6 billion.
“We could have and should have done better,” Mr. Lafley said. For the year, net income rose to $11.6 billion, up from $11.3 billion the same period a year ago. That translates to $4.01 a share, an increase from $3.86 a share last year.
Shares of Procter & Gamble rose nearly 4 percent by late morning.
Analysts have expressed skepticism that the company’s other lines of businesses can keep up. Excluding currency fluctuations and certain one-time adjustments, sales of beauty products, which include brands like Pantene, Olay and Herbal Essences — fell 3 percent in the fourth quarter.
“It’s not just by chance that P.&G.’s beauty business has underperformed for such a long period of time,” said Nik Modi, an analyst with RBC Capital Marks, who said that the company’s growth in the beauty sector lagged a corporate average of 2 percent growth. “Maybe they just don’t have what it takes to be in the beauty business.”
Mr. Modi said that part of Procter & Gamble’s challenge was that it relied on a global strategy, whereas beauty is a more “nuanced” business.
“Women in China want something different than women in the U.S.,” Mr. Modi said. “That changes the way you actually manufacturer, go to market, how you advertise the product.”
