“Once you pop, you can’t stop”
by Joshua Butler, MBA ‘15 (4/7/14)
Welcome to the case study on the future of Pringles! Yes, Pringles, the potato chip in a can. Don’t worry, you can still find Pringles at your local convenience store – however, you will no longer be able to find it within the Procter and Gamble (P&G) portfolio. This week, the Investment Banking Immersion (IBI) went back in time to investigate the analysis underlying the divestiture of Pringles. We took the role of a financial manager in the Acquisitions and Divestitures department that had the challenge of deciding the fate of one of P&G’s most iconic, billion dollar brands.
This case had more twists and turns than a John Grisham novel. At the onset, divesting the business just didn’t seem right. For starters, Pringles boasted a strong global distribution platform. It was a market leader in a growing global category. It held over 90% market share in the US stackable chip category and it was the #2 global potato chip! However, Pringles was also the last remaining food business in the P&G portfolio and operating results during that time were just shy of mediocre. Hence, the tough decision regarding what to do with the business going forward.
Our class had to do much more creative analysis than the typical discounted cash flow and comparable company approach that we normally perform. This case not only focused on financial viability, but also strategic fit. Our job as a class was to decipher if the Pringles business was congruent with the P&G strategy. The IBI teams explored every type of consideration to maximize shareholder value, and armed with decks, models, and rationale made a pitch to the CFO of P&G – literally.
It’s not every day you get a chance to have the discussion led by the actual management team from the case – but for IBI – that day was Monday. Jon Moeller, the CFO of P&G, set the stage for what was actually happening behind the scenes with this transaction. He gave us context on the protagonist and antagonist players of the deal and taught us how to best navigate unforeseen circumstances when they arise. Having the opportunity to chronicle this experience is truly invaluable. So often, the art behind what it takes to execute a transaction is never known – yet that art for this divestiture was articulated to each and every one of us in IBI. Experiences like this one are what augments professional growth, deepens business acumen and further substantiates why this immersion produces future financiers that will add value in unprecedented ways to the global marketplace.