Sunday, August 19, 2007

P&G acquiring superbrands, selling "tired" ones

P&G, the biggest consumer goods company in the world, (sales of $76.5 billion), is acquiring "superbrands," like Gillette and Clairol, while selling off "tired" brands, like Sunny Delight, Jif, Crisco, Pert Plus, and Sure.

The Economist (article) reports that the superbrands are being acquired to allow the company take advantage of economies in purchasing (foodstuffs, packaging, chemicals and energy), and to improve its bargaining position with Wal-Mart, the world's largest retailer.

I suspect that the superbrands are being acquired so that P&G can plug them into its innovative supply chain. Not only does it allow P&G to get product to retailers more quickly and efficiently, sophisticated software tools allow retailers to better track customer behavior so that it knows how best to sell P&G's products (article). P&G's supply chain makes the superbrands more valuable to P&G than to current owners.

As more manufacturers develop supply chains that can capture and use information about consumers and their purchasing behavior, data aggregators like IRI and Nielsen becomes less important. Wal Mart has since dropped out of these data collection networks, so that market share data, like those we reported earlier on baby food, have to be interpreted carefully.

Also notable is that P&G has begun outsourcing its innovation activity. It has 75 "technology scouts" that travel the globe looking for new ideas ("R") that it can develop ("D").

Stock price reaction to these changes has been tepid.

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