Morton says he expects Dial to sell some of its noncore assets, such as its Armour Star canned meat unit or its specialty personal care lines like Freeman Cosmetics or Sarah Michaels. Some market watchers note that Armour Star would be a good fit for a company like Sara Lee, which makes Ball Park Franks and Jimmy Dean sausage and has made no secret about the fact that it’s on the prowl for acquisitions that would give its core products bigger scale.
The Logic of Finding Partners Though some analysts question the wisdom of a consumer products company being in the food business at all, and some, like P&G, have been shedding some noncore food assets, Banc of America’s Steele thinks consumer products companies would do well do link up with food companies.
“The channel’s the same, the marketing’s the same, the branding is the same. Is there really that much difference between selling soup and selling detergent?” asks Steele.
Others say a likely scenario will be for companies to decrease the number of products they offer and acquire smaller brands that can easily be marketed on a larger scale, much like Sara Lee is trying to do. P&G’s new CEO A.G. Lafley has also pledged to focus on core brands, leading many to think that further asset sales and acquisitions could be in store for the company.
“We’re only going to acquire a company when it make sense and when we see our core competencies adding value to that business,” says P&G spokeswoman Gretchen Briscoe. “We’re not just going to grow just for growth’s sake.”
In that same vein, most analysts say they aren’t expecting any mega-mergers among the larger players in the sector any time soon.
“With any mega-merger, companies look for growth more than just the cost savings that comes from eliminating redundancies,” said Jim Dormer, consumer products analyst at PaineWebber, which has done recent underwriting for Dial and P&G. “It’s difficult to see how the mega-merger can accomplish that in today’s environment.