Newell Brands indicated earlier this week a tentative plan to divest operations that are currently generating annual revenues of between $250 million and $300 million in the next two to three years. The statement added fuel to speculation that the group may be considering the disposal of Marmot Mountain and some other outdoor and ski brands that are more dependent than others on weather conditions.
The company put out the statement just before a presentation by its chief executive, Michael Polk, at the Global Consumer Conference organized by Deutsche Bank in Paris yesterday. Polk said there that he had noticed the “seasonality” of the performance of Marmot and the ski brands, and that he wants Newell Brands to retain especially brands that have strong equity and that are number one or two in their categories.
Newell Brands is the new consumer goods group formed a few weeks ago out of the merger between Newell Rubbermaid and Jarden Corporation. Polk said at the conference that he was giving priority to the development of the group in segments where it is particularly strong such as writing instruments, food storage and appliances.
Asked to comment on some of the brands in Jarden's former portfolio, he said he finds The Coleman Company and Pure Fishing to be “amazing,” with strong potential for further development. He said that Rawlings and Jarden's ski brands – K2, Völkl, Marker, Dalbello, Madshus, etc. – are “excellent.”
As reported, Jarden decided to take asset impairment charges of $145.4 million in its winter sports business during the fourth quarter of 2014, ahead of its merger with Newell Rubbermaid.
Before the conference, Newell Brands restated a projection that the core operations of the newly formed group will grow by between 3.0 and 4.0 percent this year, excluding planned exits from unspecified product categories. Revenues from the retained “legacy” businesses are expected to rise by between 4 and 5 percent for the former Newell Rubbermaid and by between 2 and 4 percent for the “legacy” operations of Jarden Corporation. Polk said that the impact of the weather had been factored into the guidance.
In the past financial year, Newell Rubbermaid booked a 5.5 percent increase for its core brands, while Jarden recorded organic growth of 4.8 percent. The two companies generated combined sales of €16 billion.
Polk reiterated a plan to obtain annual savings of €280 million, mainly through lower overheads, and to realize synergies of €500 million in revenues. Newell Brands' new management has reportedly started already to cut some expenses in Jarden's Outdoor Solutions segment, eliminating some jobs at Marmot.
About half of the revenue synergies will be reinvested in marketing and advertising expenses to help accelerate the sell-out. These expenses represent only 2.5 percent of the turnover at Jarden. They have grown to more than 5.5 percent of sales within the Newell Rubbermaid group, where they were headed for a 7 percent ratio. A board meeting in early August will decide on these and other investments.
Polk wants to reapply various aspects of Newell Rubbermaid's business model to Newell Brands. One of those aspects will be a more decisive intervention when it comes to the optimization of the brand portfolio. In the past five years, Newell Rubbermaid divested operations that represented between 10 and 12 percent of its sales and acquired other businesses with a similar turnover. The marketing budget has doubled.
