Procter & Gamble shaves off a few brands
Tide laundry detergent, made by Procter & Gamble Co., is seen on display at the Arguello Supermarket in San Francisco.
Two ingredients. That’s all Procter & Gamble needed to launch its enormous brand empire.
“Fat and oils," says Davis Dyer, co-author of "Rising Tide: Lessons from 165 Years of Brand Building at Procter & Gamble." "Originally, those were the key ingredients of soap."
Ivory, to be exact. Dyer says P&G worked business magic at the time by branding a commodity like soap. After that, the company used its technology and those key ingredients to develop other products like shortening, peanut butter and detergents. The rest is classic corporate history, but now P&G is getting rid of lots of the brands it worked so hard to build.
“I’m actually surprised it’s taken this long," says Barbara Kahn, a professor of marketing at Wharton. She points out the company has a lot of redundant products, like shampoo. P&G doesn't just make Head & Shoulders, but also Herbal Essences, Pantene and Vidal Sassoon.
"At one time that made a lot of sense," Kahn says, "because it allowed them to appeal to different segments. It allowed them to get more shelf space."
Kahn notes reaching audiences in the last century was a lot easier than it is now, when consumers' attention spans have splintered. It used to be much easier to build brand awareness.
“There used to be three networks, and everybody watched Ed Sullivan on Sunday night,” Kahn says.
Morningstar senior equity analyst Erin Lash says more problems face today's marketers, like today's increasingly global market.
“Some of their struggles, at this point, may have resulted from the fact that they have maybe tried to get into or tried to play in too many categories, in too many regions,” she says.
Tastes and preferences vary, says Lash. You can’t always take a product, like razors, that work in the U.S. and easily transport it to an emerging market.
Procter & Gamble hasn’t announced which brands it will be shaving away, but it says the products it’s holding on to account for almost all of its profit.
The world of brands at Procter & Gamble