P&G #EverydayEffect Live from New York
Diane Bondareff/Invision/P&G/AP
It's one of the most ruthless brand slaughters in corporate history. Procter & Gamble (PG) last week announced, concurrent with its latest quarterly results, that it would jettison as many as 100 of its products. This is more than 50 percent of its total, an awfully big number for any company rationalizing a product portfolio.

Eliminating the Esoteric

But no one should worry that the company's more famous items -- Gillette razors, for example, Pampers diapers or Duracell batteries -- are being abandoned. Although the company hasn't specified which goods will go, it has said that they will be its smaller and more obscure offerings. (One analyst suggested Ausonia, Discreet, Blend-a-Dent, Braun Oral-B and Rindex will go.)

The rationalization is sensible. After it's finished, P&G will have around 70 to 80 products, which were collectively responsible for roughly 90 percent of its $83 billion in global sales for fiscal 2014.

It intensifies a strategy the company has begun recently. This past April, it shed most of its pet food brands, notably the Iams and Eukanuba lines to Mars (best known as the maker of candy like M&Ms and Snickers) for $2.9 billion in cash.

Divest and Grow

Procter & Gamble's stock rose on news of the sell-offs. Investors, it seems, are cheered by the potential of eliminating that dead weight.

Although the company hasn't been doing badly of late -- it beat the average analyst estimate for profitability in its recently reported quarter -- its growth has been sluggish, and it could use some streamlining. That $83 billion sales figure is less than 1 percent higher than the 2013 tally, while net profit advanced by 3 percent to $11.6 billion.

Likely adding to that positive sentiment is the fact that the company has done the divestment dance many times before (although, it has to be pointed out, not with so many products at once).

Starting in 2001, it inked deals with comestibles giant J.M. Smucker (SJM) that saw it part ways with familiar brands Jif peanut butter, Crisco shortening and Folgers instant coffee. Combined, those deals were valued at nearly $4 billion.

More recently, it sold another well-known food line, Pringles potato chips. That brand, which was originally to have been transferred to Diamond Foods (DMND), eventually ended up at Kellogg (K), with the latter firm ponying up nearly $2.7 billion for the salty snacks.

With that kind of track record, investors can be reasonably confident that Procter & Gamble can dispose of its lesser brands just as effectively.

Sell a Brand and Win

Whatever the impetus for doing so, companies often benefit in numerous ways when they jettison their less critical product lines.

The promise to do so helped General Motors (GM) ultimately draw tens of billions of dollars in bailout money from the government after the company came to the brink of failure during the 2008-2009 recession.

General Motors made good on that pledge, selling Saab and, following a failed attempt at divestments, shuttering its once-innovative Saturn line and that of Hummer, the gas-guzzling civilian version of the military's Humvee troop car.

U.K.-based consumer goods multinational Unilever (UL), meanwhile, began shedding some of its food brands in late 2011, and it has since seen its share price grow by around 22 percent.

Products that left the company's portfolio include Skippy peanut butter, sold in 2012 for $700 million to Hormel Foods (HRL), and the Bertolli and P.F. Chang's Home Menu frozen prepared meals lines. Those brands were bought by ConAgra Foods (CAG) for $267 million in that same year.

Like Procter & Gamble, Unilever is a veteran at divestment. In 2008, the company unloaded its North American laundry detergents business (comprising the All, Wisk, Surf and Snuggle brands) to private equity concern Vestar Capital Partners. Laundry detergent might be a low-cost item, but the deal wasn't. Unilever brought in nearly $1.5 billion in cash and stock from the sale.

Results Slide

Slimming down Procter & Gamble won't be an easy or quick task; the company hopes to sell a lot of brands, and its less-popular ones at that. In spite of the firm's experience in sell-offs, this will take plenty of time and not a little effort.

But at least it's taking concrete steps to become leaner and more focused, and the market seems to be cheering the attempt. Hopefully for its shareholders, Procter & Gamble's try will lead to better financial results, and keep up support for that stock price.

Motley Fool contributor Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends General Motors, Procter & Gamble and Unilever. Try any of our newsletter services free for 30 days.

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23 Comments

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amosbyrd

Very strange management decisions.
Profitable businesses should never be sold off, unless you are desperate for cash, or management is ripping off the investors to put cash in their pockets.

This is very disturbing.
Either P&G does not have the management know how to operate this company, or they are starved for cash. Again, because of poor management.

A long term hold of P&G stock does not look like a good thing with this management crowd running the place.

August 11 2014 at 1:27 PM Report abuse rate up rate down Reply
SPQR

The Chinese will probably buy it and then sell it all back to us until they get every penny we have left. Get ready to go back to the economy of the 1950s but with inflated prices. 1 car for every family, 1 -19inch flat screen tv, push lawn mowers, clothes from the salvation army, hot dogs every week for dinner, sticks and stones for Christmas gifts, and on and on

August 09 2014 at 1:20 PM Report abuse -6 rate up rate down Reply
1 reply to SPQR's comment
elendil3136

Did you get that sunny disposition from the Romans?

August 10 2014 at 1:33 AM Report abuse +1 rate up rate down Reply
ARMOUROUS :)

how many gold bathtubs do the oil companies need...give back corporate america..without us you would not have a company...we own you!! quit ripping your customers off !!!

August 09 2014 at 7:26 AM Report abuse rate up rate down Reply
1 reply to ARMOUROUS :)'s comment
elendil3136

I take you are not familiar with the saying among corporate CEO's.

"Too much is not enough!"

August 10 2014 at 1:35 AM Report abuse rate up rate down Reply
LoadHarvester

Has anyone noticed that all the brands of liquid dishwashing detergent are about half strength from what they used to be? It takes a quarter of a cup just to make enough suds to wash the dinner dishes. What is going on? Even the major brands are like that.

August 08 2014 at 7:12 PM Report abuse +1 rate up rate down Reply
3 replies to LoadHarvester's comment
LoadHarvester

Laundry detergent is a "low cost" item?

August 08 2014 at 7:10 PM Report abuse -2 rate up rate down Reply
cavkchas

The variation in "feel" of Bounty paper towels from purchase to purchase is horrible. The reduction of the size of the sheets in Charmin toilet paper is unbelievable. P & G are screwing their customers right and left anyway. It's all about greed, money, greed, money, selfishness, greed and did I say GREED??????? No respect for this company.

August 08 2014 at 5:56 PM Report abuse +5 rate up rate down Reply
2 replies to cavkchas's comment
Linda

Yes it is all greed and the greed is in the pockets of the CEO and their bank accounts. What can we do about this? We need to do something!!!!

August 08 2014 at 11:28 PM Report abuse rate up rate down Reply
1 reply to Linda's comment
STAN

Don't buy their products it's that simple.
Companies are in business to make money and the only way to do that is to sell whatever they manufacture to you,if you don't buy they don't make money from you so it all starts with you.

August 09 2014 at 8:34 AM Report abuse rate up rate down
Tuffyrascal

Scott tissue too. The rolls are a lot shorter than they used to be. I saw a comparison picture online of how big a 12-pack of Scott tissue used to be next to a current size 12-pack of Scott tissue, and the dramatic difference in size is unbelievable! And I have been buying Bounty paper towels for about 25 years. The rolls used to have more sheets on them and the sheets were so much softer years ago!

August 09 2014 at 3:02 PM Report abuse rate up rate down Reply
petpetdon

All of these companies bought up all the small manufacturers in the past 10 to 15 years. Now they are getting rid of these brands. 30 years ago the country has hundreds of food brokers (companies that represent these lines in a market place. They were throughout the country. Now there are about 5 in the whole country. None of these 5 brokers do a good job for the manufacturer because they are too big. They treat their employees worse than Walmart. Advantage Sales and Marketing is the worse of the lot. They have snowed the manufacturers into thinking with all the reporting systems they have, they are great. They don't call on the stores in an effective manner.

Essentially the manufacturers destroyed the broker system in the country. When they bought up all the smaller brands they destroyed the "free market place" by eliminating competition. Now the food manufacturers are just using these brands as chess pieces and trading them with other manufacturers.

August 08 2014 at 2:13 PM Report abuse +2 rate up rate down Reply
1 reply to petpetdon's comment
STAN

Walmart is a major part of the problem but people will never really understand why and tll the people that think a higher minmum wage is the answer to all your problems think again,why do you think so many companies moved overseas?
I remember when gas was under $.20 a gallon,bread $.15 a loaf,cigs $.17 a pack and minimum wage was $1.55/hr. When the price of gas started going up so did everthing else and when the minimum wage started to rise steadely more and more manufacturing went overseas taking with them jobs regardless of whether they were good paying or not they were jobs that were here in the USA helping the economy not someplace else hurting our economy because they only help or hurt there is no middle ground.Since then we have had massive jumps in the price of goods ann wages in some sectors of the work force however when the economy goes bad the price of the goods usually stays the same never actually going down like the economy does so it further helps to degenerate the economy in an endless cycle.There is a term for the new economy drivers,they are called hoarders.

August 09 2014 at 9:16 AM Report abuse -1 rate up rate down Reply
kstilllooksgreat

Other companies should also declutter 75% of the supermarket shelves and help to get rid of their own "dead weight." Are 20,000 shampoo choices really necessary?

August 08 2014 at 1:21 PM Report abuse +1 rate up rate down Reply
2 replies to kstilllooksgreat's comment
petpetdon

If you give people too many choices their brain freezes and they just stare at the shelves like a deer caught in the headlights. I have no idea how many shampoos P& G makes but I am sure if it is over three it is too many. Ask Dr. Oz to quit showing off the wall products on his show and the grocery stores won't have to carry them.

VARIETY IS NOT THE SPICE OF LIFE.

August 09 2014 at 6:02 AM Report abuse -1 rate up rate down Reply
Matt Dougherty

IF YOU ARE SKIN HEAD YOU DON'T NEED SHAMPOO !

August 09 2014 at 9:10 AM Report abuse -2 rate up rate down Reply
jdykbpl45

What a crock of meaningless drivel.

August 08 2014 at 9:01 AM Report abuse +1 rate up rate down Reply
1 reply to jdykbpl45's comment
nf1stinks

hahaha and you wasted 3 minutes reading crap from aol. Some people never learn.

August 08 2014 at 11:24 AM Report abuse -7 rate up rate down Reply