P&G Q4 23: pricing power remains, but volumes are slipping

Procter & Gamble, the FMCG heavyweight, saw increased sales propped up by hefty price increases over the last year; volumes, meanwhile, appear to be slipping.  

Why P&G’s results matter

FMCG companies like P&G and Unilever, which also reported results this week, are major advertising spenders because many of the products they sell are substitutable. This means that they need to drive a perception of trust, quality, and performance so that buyers are willing to pay more.

Over the last year, as inflation has pushed costs up, companies have been able successfully to raise prices, which indicates that their efforts were working. Now, however, while value sales continue to rise there are worrying signs that some of its global consumer base is beginning to tire.

It’s telling therefore that the company has needed to increase marketing and overhead investments by “470 basis points”, contributing to a 13% year-on-year increase to total selling, general and administrative expenses, under which marketing falls. It continues a trend explained in previous announcements from P&G.

The volume issue

In the final quarter of P&G’s financial year, reported here, the company described a “very strong” finish to the year, with the April-June quarter yielding:

• Net sales up 5% year on year
• Pricing up 7% year on year
• Volumes declined 1% year on year

The company ascribes this decline to slightly lower demand in healthcare, home-care, and fabric divisions. Globally, the firm is experiencing weak demand for its products in China, similar to other major multinationals.

Speaking to the Wall Street Journal, CFO Andre Shulten, noted the pullback in certain areas but emphasised that the company believes that “consumers are returning to the same or higher consumption levels” as before.

Sourced from P&G, WARC, Wall Street Journal