Earlier this year, Procter & Gamble announced that it planned to get rid of as many as 100 brands in an effort to slim down the company. It revealed today that it is going through with the biggest anticipated part of that plan, and will spin off its valuable but stagnant Duracell battery business.
Over years of geographical expansion and acquisitions, the company has accumulated so many brands that it can’t effectively invest in all of them. The result has been sluggish growth for the company, which reported a 34% drop in net income year-over-year in its earnings yesterday.
But why Duracell in particular? Billion-dollar brands with huge name recognition don’t exactly grow on trees. To many people around the world, Duracell’s copper and black cylinders are batteries. And it’s not as though Duracell is a bad battery business: It’s still the biggest around, well ahead of the next-placed Energizer, according to a recent Citi note:
What it is, however, is a business that’s slowly dying. Continuing a long trend, sales overall are down 4.6% year-over-year. Energizer has closed plants and announced a plan to separate its battery business from other more valuable brands earlier this year (paywall).
Like countless other industries around the world, the battery business is losing out to smartphones and other rechargeable mobile devices. It’s easy to see why: Before you got a smartphone, you might have used to have a clock, radio, and flashlight—all requiring batteries. Now those are among the basic features of the simplest smartphones.
Batteries may also be falling victim to cable “cord cutters” too. Those who still watch their televisions use battery-hogging remote controls to operate them. But increasing numbers of people are turning instead to streaming content on their computers, and some now control their TV with their smartphone too.
All this might be bad for these businesses, but it’s likely good for the environment. Single-use alkaline batteries no longer contain mercury, but they’re still corrosive, and throwing them away adds up to a waste of raw materials. There are rechargeable options to reduce the number of batteries used, but they’re not terrifically popular, and eventually end up in the trash themselves.
There will probably always be a place for these type of batteries. But it’s hard to see any avenue for significant growth. That’s not the kind of business that P&G wants to be in anymore.