Fat and oil. Those are two of the ingredients Procter & Gamble used to build its empire of products, from the humble potato chip to the ubiquitous bar of soap.
“The first one was actually a ho-hum every day product,” said Davis Dyer, of P&G’s Ivory, a co-author of “Rising Tide: Lessons from 165 Years of Brand Building at Procter & Gamble.”
Dyer said P&G turned Ivory, and eventually other commodity products, like Tide and Crisco, into premium, branded blockbusters that could carry a higher price tag.
But with the recent recession, consumers started buying more generic products. That’s according to Jeff Krumpelman, managing director and senior portfolio manager with RiverPoint Capital Management. Now, P&G may be forced to rethink its strategy of charging more for its iconic brand names.
“It’s a challenge when your prices are higher,” said Krumpelman.
A new CEO will start leading the company next month, and cutting prices might be one way to help sales.
“Price is one way to accelerate volume growth and to gain share of consumer wallet,” said Krumpelman.
P&G, he said, has already made moves to focus more on core brands that generate most of its sales and profits, divesting labels like Duracell that take energy away from its major money makers.
“They have a number of smaller brands that account for only about 5 percent of profits but take attention away and certainly generate a lot of cost,” he said.
And P&G said it already reorganized a couple of years ago to remain competitive.
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