Coffee is keeping Procter & Gamble (NYSE: PG) wired, even as it exits the home-brew business, finalizing the sale of Folgers to The J.M. Smucker Co (NYSE: SJM). The company raised its fiscal second-quarter and full-year 2009 forecasts due to better-than-expected proceeds from the sale of America's biggest-selling coffee brand. Previously, Procter & Gamble had expected a gain of 50 cents per share; now the company expects 63 cents per share in profit. The gain is partly due to the unusual method of sale called a "reverse Morris Trust" transaction; P&G will spin off Folgers to its shareholders, then simultaneously Folgers and J.M. Smucker will merge to form a new company.
As a result, earnings per share will be $1.63 for the quarter, the company said, and between $4.28 and $4.38 for fiscal 2009.
The sale of Folgers may have been timely for Procter & Gamble, as consumers who have been pressed financially have not yet returned to brewing coffee at home, instead downgrading from pricey independent coffeeshops and Starbucks (NASDAQ: SBUX) to better values for enormous cups of brewed coffee (with a side of deep-fried pastries) at Dunkin' Donuts and the like. If the economy continues to decline, perhaps Folgers will see a resurgence; for now, P&G is happily focusing on its core brands while Smucker works in a different customer base which values "iconic" comfort food brands.
P&G to make more cash from Folgers sale
Posted Nov 11th 2008 4:32PM by Sarah Gilbert
Filed under: Forecasts, Deals, Good news, Procter and Gamble (PG)
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Reader Comments (Page 1 of 1)
11-15-2008 @ 8:08PM
sloane said...
Dr. Tantillo, who has marketing and branding blog ( http://blog.marketingdoctor.tv ), typically nominates a weekly brand 'winner' and 'loser,' and chose P&G two weeks ago as the winner: "Ultimately P&G is a marketing company —a company that owns, develops and innovates many brands, and it was this company that responded to the shift away from candles by mastering new markets as they emerged."
Tantillo's full post: http://blog.marketingdoctor.tv/2008/11/02/brand-winners-and-losers-pg-and-newspapers.aspx
12-11-2008 @ 1:16AM
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