Procter & Gamble's recent strategy of cutting less successful brands to focus on its core businesses appears to have rejuvenated Wall Street's confidence in the consumer products company, spurring a 17% spike in its share price in the third quarter.

P&G's stock rose 9.75 to close the period at 67, bringing the issue to a level probably more reflective of the firm's worth. The renewed investor confidence is a marked change for the firm, whose shares slipped 30% earlier in the year.

Immediately following a Sept. 28 conference call in which President and CEO A.G. Lafley reiterated the company's brand refocusing and cost-savings strategy, P&G's stock climbed 8.4%.

Of the 15 analysts tracking the firm, one rates the stock a "strong buy," seven a "moderate buy" and seven a "hold," according to data from Zack's Investment Research.

As part of its plan to focus resources on its top 10 brands, P&G recently dealt the Chloraseptic throat spray line to Prestige Brands International, and has put the Clearasil anti-acne franchise on the sales block.

Conversely, by introducing Crest Multi-Care Advanced Cleaning and Crest WhiteStrips, P&G has begun leveraging the Crest name as part of an attempt to reclaim the lead in the oral care market. The company also seems committed to its Vicks Nyquil/Dayquil franchise, having just launched a new ad campaign for the line.

Looking ahead, P&G's stock could receive another sharp push with its agreement to market AstraZeneca's Prilosec heartburn medication should the proton-pump inhibitor switch OTC. AstraZeneca's NDA for the $6 bil. drug (omeprazole) will be reviewed by FDA's Nonprescription and Gastrointestinal Drugs Advisory Committees Oct. 20.

Rival Colgate-Palmolive did not fare as well during the three months, with its stock dropping 21.2% to 47.2. According to Zacks, of the 18 analysts following Colgate, seven rate the issue a "strong buy," six a "moderate buy" and five a "hold."

Deutsche Bank Alex. Brown rates the stock a "buy" and raves in an Aug. 3 report "there is no other company in our group that compares to Colgate in terms of earnings consistency and quality of earnings....Recent weakness provides an attractive buying opportunity."

Although Merrill Lynch analyst Heather Hay Murren assigns Colgate a "neutral" rating, she expresses confidence in the firm in a July 26 analysis due to its "new product intros...and continued market share gains."

In a Sept. 6 report, J.P. Morgan states Colgate's recent launches of a new 2in1 toothpaste/mouthwash and Colgate Sensitive Plus Whitening toothpaste should "lead to further improvement in the numbers." Colgate said at the beginning of the year it planned to introduce 19 new products by the end of 2000.

Chattem also expects to expand certain product lines to help stem the continuing decline of its stock, which fell another 30.1% to 9.56 in the quarter. The firm, which recently divested Ban antiperspirant to Andrew Jergens, plans to introduce new Icy Hot and Gold Bond extensions.

Private labeler Perrigo enjoyed an 8.4% increase in share value to 6.84 in the period despite an August announcement it would postpone indefinitely the launch of extended-release acetaminophen. The firm's decision to delay the launch came after an FDA inspection in July uncovered quality control problems at Perrigo's Allegan, Mich. plant.

On the whole, "The Tan Sheet" Consumer Products Index rose 4.9% in the third quarter, the only one of the four components tracked by "The Tan Sheet" to post an aggregate gain.

Taking a page from P&G's book, Bristol-Myers Squibb announced Sept. 28 it would narrow its focus to its OTC and Rx drug businesses and sell off its Clairol cosmetics and Zimmer orthopedics operations.

While BMS' stock saw relatively little movement - the issue dropped 1.9% to 57.13 - pipeline concerns and upcoming patent expirations have made investors wary, which led to the decision to divest its non-core businesses.

Bristol also has attempted to add to the marketing exclusivity of some of its products. FDA reviewed an NDA for an OTC version of BMS' cholesterol drug Pravachol on July 14.

Merrill Lynch analyst Wayne Holman, MD, applauded the planned divestitures of Clairol and Zimmer in a Sept. 29 report, complimenting the decision to concentrate on the remaining Rx and OTC businesses. Holman also predicted recently-approved Vaniqa facial hair remover "may turn out to be a real sleeper" when it hits shelves.

Moving in the opposite direction strategically, Pfizer's shares reflected the first full quarter since it completed its acquisition of Warner-Lambert. The issue fell 5.7% to 44.59, but Holman called Pfizer "the best-positioned company in the industry" in a Sept. 20 report.

The modest decline might be due, in part, to the laborious restructuring process following the acquisition. Pfizer's merged consumer products division has not performed well of late, with Zantac 75 sales sliding as private label competition steadily grows. In addition, consumer group president Morgan Morton has announced he will leave the company Nov. 1.

McNeil Consumer Healthcare parent Johnson & Johnson also slipped during the period, dipping 7.8% to 93.94. However, Zack's reports positive overall analyst recommendations, with nine rating J&J a "strong buy," 13 a "moderate buy" and five a "hold."

Deutsche Bank Alex. Brown commented Aug. 4 that the launch of Motrin Migraine Pain and the arrangement with Takeda Chemical Industries to market Tylenol in Japan would be "new growth drivers." McNeil also launched Children's Motrin Cold liquid in the third quarter.

In a July 24 report, Morgan Stanley Dean Witter predicted "improved growth for J&J's consumer products," particularly Benecol, Clean & Clear and Neutrogena. McNeil's stanol ester spread received FDA approval for a coronary heart disease health claim Sept. 8, which likely will bolster sales of the struggling line. McNeil recently pulled Benecol bars and salad dressings, opting to focus on the flagship margarine-alternative.

Carter-Wallace, which improved 21.4% to 24.44, recorded the highest gain in the Pharmaceuticals/Diversified component of "The Tan Sheet" Index. Overall, the segment slipped 2.4% in the quarter.

In the Dietary Supplements/Nutritionals category, Weider produced the largest gain, leaping 66.7% to 5. The company finally seems to have completed a series of organizational changes and is concentrating on branding efforts and new promotional programs.

The unification of its sports nutrition products under a single Weider brand was designed to clarify its product offerings by eliminating redundancies and marketing the category under a common flag. The firm also negotiated a smooth transition in the second quarter when it changed the name of its successful joint care supplement from Pain Free to Move Free, as the product's sales continue to rise.

In addition, increased advertising and promotional spending has resulted in a sponsorship deal with the popular World Wrestling Federation and a co-promotion with ESPN Magazine.

Weider also has assured Wall Street that Royal Numico's acquisition of rival Rexall Sundown, and the resulting synergies between Rexall and Numico's GNC operation, will not affect Weider's relationship with GNC, one of its top-three retail outlets. Nevertheless, Zack's reports the two analysts following Weider both rate its stock a "hold" heading into the fourth quarter.

The third quarter saw Twinlab drop below Weider in share price with a 31.4% decline to 4.38. Ongoing marketing efforts, including ads featuring tennis star Andre Agassi, have not encouraged investors, and the firm has experienced supply problems with GNC. Twinlab attributed a $10 mil. decline in sales to GNC to the specialty retailer's desire to sell-through unsold Twinlab items it purchased in the previous quarter.

The entire Supplements/Nutritionals category saw mixed success in the period. While the segment fell 4%, six of nine companies in the segment experienced gains. Large declines by Twinlab, IVC Industries (down 32.6% to 1.88) and Natrol (down 25% to 2.44) offset improvements seen by firms such as Natural Alternatives International, whose stock rose 19% to 2.16.

E-commerce issues continued to slide in the third quarter. Although drugstore.com remains the most highly valued of the Internet companies in "The Tan Sheet" Stock Index, it also posted the biggest drop: 55.2% to 3.38.

MotherNature.com's issue declined 35.9%, falling to a paltry .78. Analysts' reactions to the company's new Commercial Services Division e-commerce platform hosting business remains to be seen, but the firm envisions the operation as a significant revenue source by the second quarter of 2001.

In sum, "The Tan Sheet" Index declined 1.5% for the third quarter, practically mirroring the S&P 500, which closed the quarter down 1.2%. In contrast, the Dow Jones Industrial increased 1.9% over the three months.

P&G Brand Refocusing Meets With Wall Street Approval, Stock Rises 17%

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