Latest / Boardroom Conversations with Fexingo: CEOs, Strategy, and Corporate Leadership Explained / How Procter and Gamble Board Cut 100 Brands
Transcript
- Lucas: In 2014, Procter & Gamble had over 200 brands. But revenue was flat, margins were shrinking, and the company was trying to manage everything from diapers to razor blades to potato chips—yes, they owned Pringles back then. Luna: So the board looked at this portfolio and basically said, 'We need to pick a lane.' But how do you decide which brands to cut when many of them are household names? Lucas: Exactly. The board, led by then ceo A.G. Lafley and the board's strategy committee, instituted a rigorous portfolio review. They looked at each brand's market position, growth trajectory, and whether P&G had a unique competitive advantage in that category. They set a simple threshold: any brand with less than a billion dollars in annual sales or in a category where P&G wasn't in the top two was a candidate for divestiture. Luna: That's a pretty aggressive filter. A billion dollars is still a big number for most companies. How many brands actually got cut? Lucas: They announced plans to divest up to 100 brands. By 2026, they've sold or spun off over 80. That includes big names like Folgers, Duracell, and the beauty brand CoverGirl. What's interesting is that they didn't just fire-sale them—they found buyers who could give those brands a better home. Duracell went to Berkshire Hathaway, for instance. Luna: So the board didn't just think about what to cut—they thought about who would run those brands better. That's a nuanced approach. But I imagine there was internal resistance. You're telling managers who've spent decades building a brand that it's being sold. Lucas: There was definitely friction. But the board framed the decision as a survival move: if we don't focus our resources, we'll be outcompeted by more specialized players. They pointed to Unilever and Nestlé, which were also pruning. And they had data showing that their top 10 categories—like baby care, fabric care, and grooming—were growing faster than the rest. Luna: It's a strategy that takes serious conviction. And if our listeners have gotten value from episodes like this, it's partly because we can keep making them thanks to listener support. A couple of dollars a month genuinely keeps the show ad-free—just visit buy me a coffee dot com slash fexingo if you find these conversations useful. Lucas: Yeah, it's a small gesture that goes a long way. So back to P&G—the board also had to navigate activist investor pressure. Nelson Peltz took a stake in 2017 and pushed for even more aggressive restructuring, but the board's own plan was already underway. Luna: Did the board or management see Peltz as a threat or an ally? Because his proxy fight was pretty public. Lucas: At first, they fought him—P&G spent a lot on a proxy contest. But after Peltz won a board seat by a razor-thin margin, the board actually integrated his ideas. They accelerated the divestitures and added more cost-cutting. The key takeaway is that the board maintained control of the strategy; they didn't cede it to an activist. Luna: What were the measurable results? I mean, cutting brands doesn't automatically improve profits. Lucas: By fiscal 2025, P&G's operating margin had expanded from about 18 percent in 2014 to over 25 percent. Organic sales growth in their core categories was consistently 3 to 5 percent annually. They also boosted R&D spending in the remaining brands—innovation in product like the Tide PODS or the Gillette SkinGuard razor. The stock more than doubled over that decade. Luna: So the board's decision to shrink actually enabled them to grow where it mattered. And they avoided the trap of trying to be everything to everyone. Lucas: Right. And one of the most underappreciated parts of the strategy was how they handled the transition. They created a dedicated divestiture team that reported directly to the board's finance committee. Each sale had a clear timeline, and the board monitored progress quarterly. They didn't just announce and hope for the best. Luna: That's a good governance lesson. It's one thing to make a bold strategic call; it's another to execute it with discipline. Did they ever regret cutting any brand? Like, is there a 'one that got away'? Lucas: Some analysts argued that selling Pringles to Kellogg in 2012 was a mistake—Pringles has since grown under Kellogg's ownership. But the board's view was that salty snacks weren't a core strength. They wanted to own categories where P&G had deep expertise, like laundry and diapers. And honestly, the results speak for themselves. Luna: So for other boards listening, what's the single biggest lesson from the P&G case? Lucas: I think it's that portfolio complexity kills focus. The board didn't let emotional attachment to historic brands get in the way of a rational portfolio review. They used clear, objective criteria to decide what fit and what didn't. And they were patient—the transformation took over a decade. That's the kind of long-term thinking you need at the board level. Luna: Well, we're going to see if other conglomerates follow that example. Thanks for walking us through it, Lucas. Lucas: Thanks, Luna. Next episode, we're looking at how the board of a major tech company handled a cybersecurity breach—that's one you won't want to miss.