Kraft and Procter & Gamble divest brands to get back on strategy-by Eli

Consumer goods powerhouses, Kraft Foods and Proctor & Gamble, are divesting themselves of brands that do not fit into their respective growth strategies.

Historically, consumer product companies have added all kinds of brands to their portfolios through innovation or acquisition as a way to "grow" their business...in sales, profitability and retail dominance. However, after decades two major companies are changing course.

Kraft Foods is divesting itself of well known brands that do not fit into their growth plans. The company's current President, Irene Rosenfeld, has indicated that the sluggish performance Kraft has faced in recent years is directly attributable to brands that are not in sync with the rest of the company's offerings. The idea is to re-establish/clarify an umbrella brand identity and ensure that all products under that umbrella share consistent elements and "reasons for being".

Kraft has announced the sale of its beverage brands including Fruit2/0 water and Veryfine Juices to Sunny Delight. They are also looking for a buyer for their Post cereal business.

P & G is looking to sell its Duracell Battery, Pringles and Coffee businesses (including Folgers) to focus on "fast growing, high-margin" brands particularly in the health and beauty category.

Although each of the P & G brands noted are tremendously successful in their own right and are not "dogs" or "minor" brands, they are in categories where growth potential is deemed difficult or weak at best.

Potential buyers are likely private equity firms who seem to have an appetite for such purchases these days subject to the availability of financing.

This signals a long overdue change in consumer package goods corporate behavior to buy, launch and/or even keep brands that in many cases were not completely consistent with the overall brand strategy of the entity as it evolved over time . Too often senior management is focused on empire building at the expense of the smarter well thought through strategic branding needs of a company and its customers. Quaker's unsuccessful integration of Snapple into its corporate culture is one of the industry's most notable failures that many experts saw coming before the acquisition was complete.

I applaud the actions being taken by both companies and see this as the beginning of an industry wide change in business modeling.

Watching out for you everyday.

Eli