Click for details P&G, which has cut nearly 80% of its brands, is once again in acquisition mode amid ongoing performance pressure. P&G recently announced that it is acquiring Walker & Company, a health and beauty company. A P&G spokesperson said that upon completion of the acquisition, Walker & Company will expand P&G's diversified business scope. It is worth noting that P&G had previously significantly reduced its brand portfolio from over 300 to 65 in an attempt to boost performance, but the effect was not obvious. In fact, the 180-year-old FMCG company has been trying to find new growth drivers, but with little success. Now, P&G has resumed brand acquisitions, which industry insiders see as the beginning of a return to its "multi-brand" strategy. Expanding Brands Again P&G announced that Walker & Company, a health and beauty company targeting Black consumers, will join P&G. After the acquisition, Walker & Company will operate as a wholly-owned subsidiary of P&G and will continue to be led by CEO and founder Tristan Walker. Walker & Company was founded in 2013 and has been dedicated to developing products and services for Black consumers for five years, with brands such as Bevel and Form Beauty. Bevel is a comprehensive grooming brand for men with coarse or curly hair, while Form Beauty is a hair care line developed to meet unique needs. According to Alex Keith, CEO of P&G Beauty, this acquisition will add to P&G's multicultural business and accelerate the growth of Walker & Company's existing brands. Jiang Xiaofeng, a senior marketer and founder of brand consulting firm Zhiyuntu, said that internet e-commerce and venture capital have spawned many new players in China, and the same is true in the U.S. Walker & Company uses internet advertising, celebrity CEOs, African-American KOLs, and venture capital to break the traditional distribution model of FMCG that emphasizes channels and stores, selling directly to specific consumer groups. In addition to acquiring Walker & Company, P&G made several other acquisitions in late 2017 and 2018, targeting niche markets and new industry brands. In November 2017, P&G acquired Native Deodorant, a San Francisco-based deodorant brand. In 2018, P&G acquired First Aid Beauty, a sensitive skin care brand, and Snowberry, a New Zealand natural skin care brand. Additionally, P&G acquired Merck KGaA's consumer health business. P&G stated in the announcement that it will enter therapeutic areas it has never been involved in before. An industry insider who wished to remain anonymous said that P&G's current acquisitions are more focused on niche market segments, which is closely related to its long-term sluggish performance. Beijing Business Today contacted P&G for comment, but the company had not responded by press time. Performance Continues to Face Pressure According to data, P&G was founded in 1837 and is one of the world's largest consumer goods companies. Currently, P&G operates 65 brands globally, available in more than 180 countries and regions. P&G's products cover ten categories, including beauty and grooming, home care, family health, health care, and food and beverages. According to P&G China's official website, P&G currently has 25 brands with annual sales of over $1 billion, accounting for about 38.5% of its total brands. However, the long-term multi-brand strategy has caused P&G's performance to hit a growth ceiling. Data shows that P&G's revenue exceeded $80 billion in fiscal years 2008, 2011, and 2012, reaching $81.748 billion, $81.104 billion, and $82.006 billion, respectively. In fiscal 2012, revenue increased by 1.11% year-over-year, but net profit attributable to shareholders fell by 8.82%. Although P&G reached its revenue peak in those three years, the main contributor was the increase in the number of acquired brands; P&G once had more than 300 sub-brands. As revenue peaked, net profit attributable to shareholders failed to be effectively boosted, so P&G launched a $10 billion restructuring plan. At the same time, accusations arose that P&G lacked blockbuster new products and was slow to cut costs. Then-Chairman and CEO Bob McDonald said P&G would need a longer period to turn things around and expected improvement in fiscal 2013. However, data shows that in fiscal 2013, P&G's revenue fell 9.87% year-over-year to $73.91 billion; gross profit fell 11.67% to $35.858 billion; and net profit attributable to shareholders rose 5.17% to $11.312 billion. In fiscal 2014, revenue rose slightly by 0.66% to $74.401 billion. In the following three years, revenue declined. In fiscal 2016, revenue fell again to just over $60 billion. In fiscal 2018, revenue was $66.832 billion, up only 2.73% year-over-year; net profit attributable to shareholders fell 36.38% to $9.75 billion. This is roughly flat compared to fiscal 2006. At the same time, in the 2018 Fortune Global 500 list, P&G ranked 18th, still first among global FMCG companies, but its overall ranking slipped one place. Multi-Brand Strategy Encounters Awkwardness Struggling with persistently low performance, P&G has launched a series of restructuring and reform measures. In 2014, P&G announced a global brand "slimming" strategy, planning to gradually divest brands with annual sales of less than $1 billion over several years. Subsequently, P&G sold Duracell to Warren Buffett and sold 43 beauty brands to Coty Inc. In 2017, P&G sold several hair care brands to Henkel, the German FMCG giant and parent company of Schwarzkopf. It is worth noting that P&G once relied on its multi-brand strategy to become the global leader in the FMCG industry, especially in the Chinese market. In 2009, P&G reached its peak in China. Data shows that P&G's overall market share in China once reached 47%; in the hair care market, its share was as high as 50.5%. However, P&G's journey in China has not been smooth. P&G changed its Greater China head four times in four years, with rumors that some executives left due to "high performance pressure." In fact, as competition in the FMCG industry intensifies and its own performance faces many challenges, P&G has begun internal strategic adjustments to adapt to market changes. In 2018, P&G began attempting to "slim down" its internal structure. A P&G spokesperson told Beijing Business Today that starting July 1, 2019, P&G will operate six industry-based sector business units (SBUs), each with its own CEO responsible for sales, profit, cash, and value creation. P&G Global CEO David Taylor said: "Simplifying the management structure will further improve P&G's agility and accountability." However, P&G, which once expanded its brand portfolio and then slimmed down, is now starting to "buy, buy, buy" again after cutting many sub-brands. In response, Jiang Xiaofeng said: "Whether globally or in China, the personal care market has entered a mature stage. At this stage, product and audience segmentation and differentiation are very important. Therefore, one of the important tasks for P&G in the future is how to face competition from new players outside the industry who use 'internet + venture capital' to challenge traditional FMCG giants with asset-light, agile methods. P&G needs to further shape the vitality of its brands, enhance product differentiation, and better provide diversified services." Zhang Bingwu, a senior brand marketing expert, believes that P&G's main products are FMCG with low profit margins. Acquiring brands in niche markets could theoretically help boost P&G's performance, but the effect remains to be seen over time. Source: Beijing Business Today Click here to register