Tickers in this Article: PG, BARE, KO, CPB, ACV, SBH
Consumer goods company Procter & Gamble (NYSE:PG) announced in June that it was buying upscale barbershop The Art of Shaving for $60 million. The Miami-based retailer currently operates 36 locations across the country where, in addition to providing men with luxurious shaves and haircuts, it sells its own line of skincare products.

The acquisition by P&G isn't the company's first foray into retail and was a natural move given its existing relationship with The Art of Shaving; PG already produces the Fusion Chrome Collection of razors and accessories sold in the shaving company's stores. In recent years, the Cincinnati behemoth has dipped its toes in the direct-to-retail waters, opening Tide Dry Cleaning stores in Kansas City and Mr. Clean Car Washes in both Cincinnati and Atlanta. While the long-term viability of these other ventures is less than certain, its latest acquisition solidifies its commitment of getting closer to its customers. Other companies are likely to follow suit.

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A History in Retail
Manufacturers of all kinds have gotten into retail over the years with varying degrees of success. Cosmetics are a classic example. I almost need two hands to count the number of companies selling cosmetics directly to the end user, through their own retail boutiques and through traditional wholesale customers like Sephora, Ulta and QVC.

Bare Escentuals
(Nasdaq:BARE) had 94 company-owned boutiques at the end of 2008, generating $209 million of its $320 million in total North American sales. The company benefits in two ways: It is able to offer customers its broadest assortment of products while also maximizing margins. You can be sure it makes far more from $100 million in sales in its own boutiques than it does from its wholesale customers. The hard part for any consumer products company has been achieving the right balance so that everyone wins. Apparel companies like Ralph Lauren (NYSE:RL) and VF Corp. (NYSE:VFC) would surely agree. (How can you get back into the market to avoid missing market recovery gains? Find out in Riding The Bear Into A Bull Market.)

Miserable Failures in Branding
One of the greatest failures in recent history is Coca Cola's (NYSE:KO) aborted attempt to introduce its own brand of coffee (FarCoast) through its own network of stores. It opened a beautiful two-storey coffee shop in Toronto's fashionable
Bloor Street
shopping district in 2006; it was closed less than one year later due to a lack of interest.

In the grand scheme of things, the cost to shareholders was negligible, but the venture pointed out the problems associated with opening your own stores when you aren't in the retail business. Just because you make a great product doesn't guarantee you can retail it successfully.

Campbell Soup
(NYSE:CPB) realized this in early 2008 when it sold its Godiva Chocolates business, including the retail shops, to Turkish biscuit manufacturer Ulker Group, so it could focus on its other food products. The $850 million Campbell Soup got for 1.7 times sales as a premium for the chocolate business, providing a great return for Campbell Soup shareholders. It pays to know when to change course. (Take a look at how this effective ratio can be influenced by certain critical factors; read Use The Price-To-Sales Ratios To Value Stocks.)

Bottom Line
Rumor has it that Procter & Gamble might be interested in acquiring a large personal products company like Alberto-Culver (NYSE:ACV) to add to its list of beauty care brands. If all goes well with The Art of Shaving acquisition, I'd suggest that you add Alberto-Culver spin-off Sally Beauty Holdings (NYSE:SBH) to the list of potential takeover candidates. Just call it a hunch.

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