P&G–Addition by Subtraction

P&G Core ProductsProcter & Gamble’s decision to sell its prescription-drug business to Warner Chilcott for $3.1 billion is the reverse of Nokia’s move into netbooks. P&G is recognizing–albeit belatedly–that prescription drugs have little in common with the rest of its portfolio of consumer products, even ones having to do with health.

Prescription drugs are sold through different channels than the rest of P&G’s products. Even if customers pick up prescriptions in supermarkets, near other P&G products, the drugs may be handled by different distributors, are bought in a pharmacy and are chosen largely by doctors rather than by the consumers themselves. Regulatory issues are obviously stricter. Even P&G’s vaunted advertising expertise doesn’t necessarily extend from consumer products into prescription drugs because of all the restrictions on how prescription drugs can be advertised.

We aren’t as sanguine about some of the other divestitures that analysts are now speculating that P&G will pursue. After all, P&G’s shaving products and toothpaste are often bought by the same customers in the same place, and the shaving and toothpaste businesses may have more similarities than differences. Some of the shuffling that may happen from here in P&G’s portfolio sounds like the kind of thing that mostly benefits the investor bankers who handle the deals. But, at least with the prescription drug business, P&G is clearly doing a smart thing.

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