P&G plans marketing push

30 October 2009

CINCINNATI: Procter & Gamble, the FMCG giant, plans to heighten its marketing expenditure over the course of the next year, as it seeks to boost the support behind both new and existing brands, according to Bob McDonald, the company's chief executive.

The Cincinnati-based firm's net sales reached $19.8 billion (€13.3bn; £12.0bn) in the quarter from July to September this year, down by 6% on the same period in 2008, largely as a result of unfavourable exchange rates.

Net income fell just 1.2%, to $3.31bn, in the same period, and, more positively, organic sales actually rose by 2%, while "price increases and positive product mix more than offset volume declines," the company said in a statement.

McDonald argued "our September quarter results give us encouragement we are making the right choices to grow market share profitably."

"We are driving simplification and improving execution while leveraging scale to create cost efficiencies that help fund these investments and accelerate growth."

Beauty sales fell 5%, to $4.9bn, in Q3 – partly due to slowdowns in sectors such as premium fragrances – but were up 2% like-for-like, with Pantene, Head & Shoulders and SK-II all performing strongly.

In the grooming sector, overall totals tumbled 11%, to $1.9bn, with Gillette and Braun, the shaving ranges, both witnessing sharp slowdowns.

Healthcare also slipped by 4%, to net sales of $3.0bn, but improved by 4% in organic terms, with increased prices helping drive this momentum.

Similarly, fabric care and homecare, P&G's most valuable area of activity, was off by 5%, to $6.1bn, although comparable sales rose 2%.

Baby and family care saw figures diminish by 5%, to $3.6bn, on a net basis, but grew 1% like-for-like, with the expansion of Pampers Simply Dry one success story from the penultimate quarter of the year.

Speaking on a conference call with investors, McDonald said the Cincinnati-based firm now plans to increase product "innovations" by 30%, and to take advantage of declining media rates as part of its communications strategy.

"The marketing spend tends to follow the innovations as we work to generate trial," he said. "Because the rates of advertising spend have been reduced due to the economic weakness, we now see that we're able to deliver more impressions for the same amount of money."

More specifically, P&G's ceo suggested he was keen to avoid any "kind of price competition to buy the consumer's willingness to use our products. I would rather think about it as supporting the innovations that we put in the market."

"In terms of marketing spend, it could be something like ... sampling, or it could be something like a multi-brand commercial innovation, or it could be something like our Pampers UNICEF program where we support the eradication of neonatal tetanus."

P&G's selling, general and administrative expenses, which includes advertising, increased by 130 basis points as a share of net revenue in the third quarter, although this was largely due to currency valuations, it said in a statement.

However, Jon Moeller, its chief financial officer, said that "media delivery" improved in this period, as the world's biggest advertiser benefited from what he termed "attractive media rates."

Data sourced from P&G, AdAge, MediaPost; additional content by Warc staff