Friday, July 18, 2003

Goodbye Sunny D Procter & Gamble is planning to unload its small beverage division. Like many competitors, P & G seems determined to get rid of non-core brands. The company, which mainly sells personal and household care products (Crest, Tide), does sell some grocery items that do very well, such as Folger's Coffee and Pringles snacks. (These two are "billion dollar brands".) But the cold drinks business, with brands Sunny Delight (Sunny D in Europe) and Punica has been a relative disappointment. Sunny Delight is a hybrid product. It is a sugary non-carbonated soft drink, but it looks like fruit juice and is sold in the refrigerator case, alongside orange and grapefruit juice. For that reason, it has caused some controversy, particularly in the UK, where Paul McCartney and others have denounced the product as a destroyer of childhood nutrition. It was acquired by Procter & Gamble in 1989. Punica juices are sold mainly in Germany. As an article in the Kansas City Star points out: "The business model for the juice market is better for companies that focus solely on those brands." These two brands have sales of around $550 million a year. And while no profit figures have been revealed, they certainly make a profit. But apparently it's not enough for Procter & Gamble, where the return on expanding their billion dollar brands has a far higher payback. So Procter & Gamble wants to hand off these brands, to someone who thinks they can make a sufficient profit. They also get rid of the headache of distributing cold drinks, something quite different from their usual dry goods. The likely buyers make a short list: Kraft (Altria), Coca Cola, Pepsico, and Cadbury-Schweppes. Kraft owns a similar beverage brand, Capri Sun. The others, as we've shown, are the leading beverage sellers. But al these companies have competitive products, so a sale at a good price is far from assured. And it's hard to imagine a less well-funded and market-savvy than one of these doing better than P & G. 3:51:37 PM

comment []