P&G looks to innovation and value

06 August 2009

CINCINNATI: Procter & Gamble, the FMCG giant, plans to focus on innovation, expanding its brand portfolio and increasing value for consumers as it seeks to reverse the overall decline in sales it recorded during the last 12 months.

Over the year to June, P&G's net sales fell by 3%, to $79.0 billion (€55.9bn; £46.5bn), although organic sales rose by 2%, and profits grew by 11%, to $13.4bn, largely as a result of the sale of its Folgers coffee business.

By category, beauty revenues were down by 4%, to $18.8bn, with grooming off by 9%, to $7.5bn, and healthcare by 7%, to $13.6bn.

Snacks and pet care also shrank by 3%, to $3.1bn, with fabric and homecare seeing an annual loss of 2% to $23.2bn, although baby and family care was up 1%, to $14.1bn.

Over the same period, the company said that expenditure through its "selling, general and administrative expenses" arm – which includes marketing – decreased by 6%, to $24.0bn.

Relative to net sales, this equated to a contraction of 80 basis points year-on-year, and was a direct consequence of "lower marketing costs and the impact of foreign currency transaction gains".

In Q2 2009 – the final quarter of P&G's fiscal year – net revenues fell by 11%, to $18.7bn, alongside a 1% slide on a like-for-like basis, as earnings dropped to $2.5bn from $3bn a year earlier.

During this three-month timeframe, the Cincinnati-based firm reported that there had been a slowdown in "discretionary categories and some share loss in developed regions following price increases."

Its selling, general and administrative expenses division also posted a further drop of 30 basis points, "primarily due to a reduction in marketing costs including lower media rates."

AG Lafley, former ceo and current chairman of the consumer packaged goods company's board, said that in the last year, and particularly the quarter to June, "P&G faced one of the most difficult macroeconomic environments in decades."

"Despite $4 billion in price increases, we basically held global value shares across the majority of our categories, which is a reflection of our brand strength with consumers and retail customers," he added.

Bob McDonald, P&G's new ceo, added that it will "accelerate investments in innovation, portfolio expansion and consumer value to grow our core business and to serve more consumers in both developed and developing markets."

It is also aiming to "increase productivity, improve execution and lower costs" in order "to improve more lives more completely in more parts of the world and deliver sustainable long-term growth."

Jon Moeller, the company's cfo, added it will be "increasing marketing support on our core brand portfolio and we'll be expanding the portfolio horizontally as we bring new products into adjacent segments."

Data sourced from Procter & Gamble; additional content by WARC staff