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Leading consumer brands
There are not many companies that can boast a host of market-leading brands in their portfolio. PZ Cussons (LSE: PZC) can, though. These include Imperial Leather, Original Source, Carex, and Sanctuary Spa.
Despite being home to a suite of top brands, this is a company that has struggled to make itself relevant against much larger competitors, including Procter & Gamble and Unilever.
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Since peaking at 400p in 2014, its share price has fallen ever since. Today, I can pick them up for 80p; a whopping 80% decline.
But it isn’t the past that matters but the future.
Hyperinflation in Nigeria
Compounding the company’s woes has been economic turmoil in Nigeria, one of its biggest markets. Hyperinflation and a currency devaluation has left the Nigerian consumer struggling.
The devaluation of the local currency, the naira, was a major contributor to a 20% slump in revenues in FY24. The company found itself with far too much local-denominated currency that it could not repatriate, due to difficulty obtaining US dollars.
Often, an existential crisis forces a business to re-evaluate its strategy and attempt to reinvent itself. PZ Cussons is doing just that. It has put in motion steps that could lead to the partial or full sale of its African business.
Despite being able to trace its roots to Nigeria, that sale of its African business would be a positive move, in my opinion. No business can expect to thrive when its profit and loss (P&L) account exhibits wild volatility swings. That is no way to create long-term shareholder value, either.
Reinvigorating its UK business
One of the criticisms I have long had with PZ Cussons is the sheer complexity of its UK portfolio. A bloated organisational structure with far too many layers of management has resulted in duplication across its supply chain.
Earlier this year, management took the decision to merge its Personal Care and Beauty divisions. Although too early to tell, the combining of these two businesses should provide significant cost savings.
But for me, cost savings is not enough. Out of the merger I want to see greater levels of commercial acumen as well as product innovation.
One advantage that it has over its rivals is its size. Being smaller should provide it with agility in a fiercely competitive market. As a cost-of-living crisis continues, brand positioning will be a critical enabler of success.
Speaking anecdotally, over the past year I have noticed many of its top brands such as Carex and Original Source taking prominent positions at major retailers. But I have also seen a greater deployment of its products in new places such as discounters and pharmacies.
There are undoubted risks of taking a position in a company whose share price has been declining for so long. But it wouldn’t take much of an improvement for sentiment to quickly change. As it trades at levels not seen since the early 2000s, I added more of its shares to my SIPP.
