Bowing Out of the Battery Business: P&G To Exit Duracell
Bowing Out of the Battery Business: P&G To Exit Duracell
Proctor & Gamble Co recently announced that it will be selling its Duracell battery business. In a sign that split is “in” this year, P&G also indicated the exit could be via spinning off Duracell this year into a separate company. With this move, the corporate group aims to concentrate on its more rapidly growing brands.
Proctor & Gamble shares rose by 3% as investors did not seem to be bothered by the fall in quarterly sales as well as the strong dollar, reported Reuters. About 39% of P&G's revenue is from developing markets.
This is the world's number 1 household products maker and it is now aiming to sell half of its slow to grow brands within the next 2 years. What is interesting is that Duracell is the world's biggest battery business yet Reuters reports that it is “widely considered to be one of the largest assets that P&G was likely to divest.”
On a conference call with media personnel, CFO John Moeller indicated that the company had either sold or discontinued as many as 11 brands in the last quarter, according to a Reuters report. This company also sold another 25 brands within the last 5 quarters.
Laundry brands Fab and Trojan as well as Perma Sharp and Fekkai are among the likely brands which will be sold off next, analysts are quoted as saying in the Reuters report. Duracell may be the leading battery business, but Reuters has reported that its non-rechargeable, disposable alkaline batteries have become extremely unpopular following the advent of re-chargeable batteries.
P&G's brands include Pampers diapers and Tide detergent. The company has indicated it will sell its interest in the China based battery JV and then move out of Duracell completely probably through a split into a stand alone firm for its battery unit. CEO Lafley is also pushing for a more focused company, according to Wall Street Journal. The unit may lead in the battery market with annual sales of USD 2.2 billion, but WSJ says its sluggish growth is counterproductive for Lafley's strategy.
“This will not be a straight line, and competitive intensity in this category is significant,” P&G Chief Financial Officer Jon Moeller said on Friday’s earnings call. “But still, forward progress is encouraging.” P & G's scale is to Lafley's credit as he was responsible for the USD 57 billion Gillette acquisition. Now it is time for the company to let go of its battery business. In fact, WSJ reports that the company was looking to sell its battery business since 2007. With things looking up for a better innings in the next quarter, Lafley seeks a supercharged P&G minus Duracell.
