British packaged goods manufacturer Reckitt is slimming down its array of products and focusing on what CEO Kris Licht calls “power brands,” in the latest example of a trend taking over the consumer packaged goods industry.

For decades, large CPG companies that make everything from toothpaste to deodorant and condoms built empires with disparate product ranges as a way to compete with rival conglomerates. But these organizations are now narrowing their focus by shedding mature, low-margin businesses.

"Brands are our lifeblood," Licht, a Dane who took over as CEO last year, recently told Fortune at Reckitt's headquarters in Slough, a hamlet near London's Heathrow airport. "What is a power brand? It's when you have a very large brand that enjoys very high levels of trust."

Such brands offer higher profit margins at a time when some categories have become so crowded that companies have lost a lot of their pricing power. But a power brand is also one that still has a lot of runway left, and can grow in new markets. That spares CPG companies the expense of acquiring a brand, or building one from scratch.

In the first half of 2024, Reckitt's comparable sales rose just 0.8%, adding urgency to the need to focus on faster growing brands. But the company’s renewed focus on its best-performing products is also a response to activist investors pressuring its peers to slim down their offerings. Eminence Capital took a small stake in Reckitt last May, seeing the potential in higher margins but stopping short of pushing for a management shakeup. These investors are likely guided by the success of more focused portfolio companies in different sectors, like L'Oréal in beauty or Danone in food.

“I don't think we were always clear enough about what exactly it takes for something to belong or not belong,” Licht says about the company’s offerings. “And I think being clear and being disciplined is really important, because that's how we should allocate capital and how we maximize the value creation for the company.“

Culling the weak brands

Reckitt's power brands include Mucinex cold remedy, Durex condoms, Dettol and Lysol. Those star players have been growing about 7% per year. Last week, Bloomberg reported that Reckitt is looking to offload homecare brands such as Airwick air fresheners and Cillit Bang cleaners, in a sale Bloomberg estimates could yield almost $7 billion.

The company is also looking to shed Mead Johnson, the infant formula business it bought for $17 billion in 2017, and for which it has already taken a $5 billion write-down.