What P&G Could Look Like in 5 Years


Recently Procter & Gamble ( PG ) sold Pringles, a well known foods brand and the last foods brand remaining in its portfolio. We wrote on this recently in a note titled P&G Walks Away From Foods, Sells Pringles For $2.35 Billion . Also it entered into a joint venture with Teva Pharmaceutical Industries to market over-the-counter drugs outside U.S., see Market Share Upside as P&G Sharpens Focus on OTC Drugs . With P&G taking active steps to distance itself from competitors Unilever ( UL ), Colgate-Palmolive ( CL ) and Kimberly-Clark ( KMB ), we decided to explore what P&G could look like five years from now.

We value P&G with a $75.25 Trefis price estimate of its stock, at roughly 15% premium to its current market price.

Found in More Pharmacies

The joint venture with Teva merges P&G's heath care brands (Vicks, Metamucil and Pepto-Bismol) with Teva's portfolio of over 1,500 pharmaceutical products across the over-the-counter pain medicines, cold & cough drops and digestive treatments.

This will help P&G gain market share by selling more to the aging baby boomers demographic and take advantage of the upcoming wave of patents due to expire worth an estimated $50 billion. P&G will brand generics manufactured by Teva and sell them though its distribution system across the globe.

Look More Asian

P&G embarked on its ambitious goal to acquire a billion additional consumers by 2014/15, which naturally draws its focus to the two most populous nations in the world - China and India.

Out of the 38 product categories in which Procter & Gamble competes globally, it is present in only 19 on an average globally, 14 on an average in Asia and only 12 in India. We wrote on this recently in a note titled India is Key to P&G's Additional Billion Customer Goal.

Sell More Online

In May 2010, P&G entered the e-commerce market by launching its e-store in the U.S. see P&G's E-Commerce Play Should Help Operating Margins. While North America leads with a 77% Internet penetration, Asia witnessed a 6x growth in the number of Internet users in the last decade and penetration levels are still under 22%. With rising Internet penetration, we expect P&G to increasingly sell online to reach the under-served emerging markets.

Have Fewer Non-Core Brands

P&G sold Pringles, a well known brand otherwise despite its elaborate portfolio of personal and household care products. Other non-strategic and non-core brands such Iams and Eukanuba pet foods and Duracell batteries might also be candidates for sale at some point.

You can see a detailed analysis of our $75.25 Trefis price estimate of Procter & Gamble's stock here .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: AVP , CL , KMB , PG , UL



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