Procter & Gamble (NYSE:PG) recently sold Pringles, its well
known brand and the last remaining food brand in its portfolio.
P&G is the world's leading personal and household care
products' company followed by
(NYSE:UL), Colgate-Palmolive (
) and Kimberly-Clark (NYSE:KMB). Given the company's recently
sales, we believe that the company could look to shed other
non-core brands like Iams and Eukanuba brands of pet foods.
We value P&G with a
$68.41 Trefis price estimate of its stock
, at roughly 15% premium to its current market price. Here we
explore why selling Iams and Eukanuba pet food brands makes
Pet Foods have a very low contribution to P&G's
Iams and Eukanuba together contribute a mere $1.6 billion to
P&G's total sales that exceed $80 billion and account for under
3% of our price estimate so are clearly not a large focus for the
company. Branded pet foods also face stiff competition from private
labels and regional brands, which are cheaper and cater to local
With the divestiture of Pringles, P&G's dependence on
agricultural inputs has also declined considerably. The pet foods
segment is now the only product segment within P&G's portfolio
that sources raw materials directly from agriculture and hence
loses out on economies of scale from sourcing higher volumes with
other food brands.
While P&G pet foods are readily available in supermarkets,
they do warrant specialty distribution through pet stores and by
veterinarians in order to maintain market share. These distribution
and sourcing channels do not always overlap with P&G's other
products and so Iams and Eukanuba P&G's portfolio could be a
better fit for another company.
What could be the way out?
Iams and Eukanuba have a very established brand name in pet
foods and P&G could leverage this to offload these brands to
either a company focused on pet care (pet foods, medicines and
products) or to a company selling packed dry foods.
You can see a detailed analysis of our
$68.41 Trefis price estimate of Procter &
Gamble's stock here