P&G Demands Better Advertising as Q1 Earnings Down

31 October 2001

Alan G Lafley, president/ceo of Procter & Gamble, warned he wanted a better return on advertising expenditure, as he unveiled a drop in earnings for the consumer goods giant’s fiscal Q1.

P&G saw earnings decline 5.1% to $1.1 billion, after restructuring costs offset a rise in operating profits, with sales staying flat at $9.77 billion. However, Lafley stood by earlier earnings forecasts for the year.

The group is keeping adspend at a similar percentage of sales as last year, but wants more from its investment. “We no longer tolerate advertising that’s not building market share profitably,” warned Lafley.

Thirteen of P&G’s fifteen leading brands, he revealed, have ads that scored in the top range of its pre-market testing system. “The other two,” he averred “will get better advertising soon.”

Lafley added that P&G was facing a strong challenge from private-label goods. Market shares for such brands over the last four years have stayed flat in drug and supermarket channels, but have risen from 11% to 14% in mass merchandise. In addition, private labels claim much higher share in food sectors than elsewhere.

However, he announced that P&G should be able to see off the competition, either maintaining or increasing its market share. “There is room for leading national brand growth and private-label growth at the same time,” he declared.

News source: AdAge.com