Folgers to go solo in P&G profit shake up

By Neil Merrett and Katie Bird

- Last updated on GMT

Procter and Gamble (P&G) has announced that it will look to
operate its folgers coffee operations as an independent business in
a bid to improve the value of the brand, which it says does not
meet annual growth expectations.

Jamie Egasti, current president of P&G's Coffee and Global Snacks division, will helm the new standalone company, which the group claims will be better positioned to meet the challenges within the global coffee market. The announcement comes as P&G said it was enacting price increases throughout its food, beverage and personal care portfolio to offset higher commodity and energy costs, despite improved revenues over the last financial quarter. The group said it had not yet decided whether it would separate the coffee brand from its business operations through a spin-off or split-off venture. The company stated that a split-off transaction was most likely. This would lead to a significant one-off gain for the parent company, thereby suggesting the possibility of further acquisitions by the company in the future. A spokesperson for the P&G told that as the number one retail coffee label within the US, Folgers remained an exceptional brand. However, they added that the brands prospects were not in line with the group's high growth focus of between four to six per cent annual growth. "Despite its number one position in theUS, we predict that the Folgers brand will perform below our cooperate targets,"​ the spokesperson said. Following the separation, the new entity is expected to have about 1,250 employees at its four production sites within the US, with its headquarters in Cincinnati, Ohio. The company's coffee business prior to the announcement was responsible for about $1.6 billion in sales and operating income of about $350 million in fiscal 2007. This helped the group to post net sales growth of 9 percent to $21.6 billion for the three-month period ending 31 December 2007. Organic sales were up 5 percent for the quarter, in line with P&G's expectations. Operating profit was also up, posting an 8 per cent gain over the period to $4.71bn on the back of increased sales, though there was a slight decrease in operating margins due to higher commodity and energy costs.

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