Search for insights in P.&G's farewell to food

by Morton Sosland
Share This:
When Procter & Gamble Co. earlier this year sold its last food operation, questions arose about why this was done and what it may mean for the entire food industry. After all, P.&G. is one of the largest and most highly regarded companies operating globally that is engaged in selling consumer products. For this company to take an action that signals abandonment of what had been a major effort in the branded food business requires careful analysis. Since the company itself has not seen fit to offer an explanation, beyond what had been known moves to sell the Pringles operation, considerable guesswork and even speculation are needed.

No one familiar with the history of P.&G. over the years has reasons to doubt that a great deal of thought went into many decisions regarding food, including this final step. Observing its actions over the years seems to indicate that many of its undertakings in food were half-hearted at best and were never of a dimension intended to make food a main line. Without knowing exactly the size of the investments made in acquisitions, it is sensed that a large share of the food outlays were made up of internal spending on research and brand-building. These are areas where P.&G. has a formidable reputation, but they differ from the capital spending that would have clearly meant a stellar role for food.

This assessment also flows from how P.&G. bought and acted in ways resembling a series of experiments with popular food categories. The company’s entry into food came as the result of its location in Cincinnati, which in the mid-19th century was known as Porkopolis for its lead role in pork production. Selling lard was an important business until an early 20th century hog shortage that encouraged research resulting in Crisco, the all-vegetable oil shortening not requiring refrigeration. It was after World War II that the company sought to use its great branding skills with additional foods. Thus, it purchased what was to become Jif peanut butter, followed by Folger’s coffee and Duncan Hines cake mixes. Bought from the predecessor of ConAgra Foods, Inc. in 1956, Duncan Hines cake mixes were seen as a way of expanding in grain-based foods. The most notable move was the early 1980s introduction of a line of soft cookies under the Duncan Hines brand, provoking a hotly competitive battle with Nabisco and Keebler, the two companies that viewed P.&G.’s entry into cookies as an intrusion demanding harsh counter-attacks. The ensuing “cookie wars,” which have left enduring scars, finally resulted in the sale of Duncan Hines mixes in the 1990s.

Like Crisco, Pringles originated with internal research that produced the stackable potato crisp in a new type of container. Even as this product gained an adequate domestic market and met with greater success in many foreign countries, its role as the only surviving food owned by P.&G. obviously made it vulnerable. That was especially the case as the company’s major acquisitions focused on brands with much greater margins than prevail in even the most successful of food brands. Disposing of peanut butter and cake mixes because they were deemed products with scant international potential had to have made the decision to sell Pringles, which won its best results overseas, a bit of a quandary.

It is likely that P.&G.’s participation in the food business, from the time in the mid-1950s when foods accounted for more than a quarter of its global sales to the present, will provide an instructive business book chapter about diversification not working for this giant company. Yet, the businesses, like Pringles, were sold at impressive, even rewarding, prices, reflecting their continuing excellence. All of this underscores the value of every one of these food assets outside the P.&G. sphere.
Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.

The views expressed in the comments section of Food Business News do not reflect those of Food Business News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.