P&G expands marketing 7% amid higher demand for household brands

Dive Brief:

  • Procter & Gamble increased its spending on marketing by 7% a year in the most recent quarter as the consumer packaged goods (CPG) giant saw higher demand for brands like Tide, Mr. Clean, Dawn and Cascade. Sales rose 8% to $19.7 billion in the quarter ended Dec. 31, particularly on the strength of its household and healthcare brands during the pandemic, per a quarterly earnings announcement.
  • Jon Moeller, vice chairman, COO and CFO of P&G, described the company’s increased marketing as “appropriate” with its sales growth, saying in a conference call, “I would not want to dial those back by any means, but I expect they’ll pretty much move in line with sales with some efficiencies potentially available to us.”
  • In a reflection of how P&G has been able to meet changing shopping behaviors during the pandemic, Moeller said the company’s e-commerce sales jumped 50% from a year earlier, making up more than 14% of its global business. P&G also raised its full-year estimate for overall sales growth to 5%-6% from a prior range of 4%-5%.

Dive Insight:

The pandemic led to broad, increased consumer demand for household products and significant growth in e-commerce sales, two trends P&G expects to persist amid public awareness about health and safety. The CPG giant sees itself as well positioned to meet consumer demands along these lines, in part because many of its brands are established offerings. This legacy positioning along with its more optimistic forecast for the year suggests that P&G’s marketing spend will remain stronger.

During a conference call with analysts, Moeller expressed his optimism that several macro trends will work in P&G’s favor going forward.

“There may be a continued increased focus on home, more time at home, more meals at home with related consumption impacts,” Moeller said. “The importance of noticeably superior performance, potentially gross, there’s potential for increased preference for established reputable brands that solve newly framed problems better than alternatives, potentially less experimentation, potential for a lasting shift to e-commerce, both e-tailers and omnichannel.”

P&G’s fabric and home care category, which includes Tide detergent and Dawn dishwashing soap, saw a 12% gain in sales on 7% growth in volume — a gap that suggests its brands have strong pricing power. Its healthcare products, which include its Oral B line for dental hygiene, expanded sales by 9% on a 4% gain in volume, another significant driver of growth for the company. Sales of beauty, grooming and baby, feminine and family care brands also grew, but not as fast as the company’s total sales.

P&G’s pricing power is a sign that consumers see value in its brands even as they shop online, where consumers can find a broader range of lower-priced private-label brands. P&G is among the companies that saw a surge in e-commerce last year as homebound shoppers boosted their spending, but a key test will be the company’s ability to sustain sales growth and pricing power.

“I’ve always viewed this channel and the development of this channel as being big established and preferred-brand-friendly — not an adverse situation but a conducive situation for growth,” Moeller said about e-commerce sales channels. “In categories where performance drives brand choice, we should continue to do well.”

P&G’s increased marketing spending comes as the company also looks for efficiencies in its media planning and buying. The company handles about 80% of its U.S. media planning in-house, and all of it internally in China, its second-biggest market, Chief Brand Officer Marc Pritchard said last week at the Consumer Electronics Show, which was virtual this year.

P&G unveiled several electronic devices at CES, a sign that the company expects to see more growth from gadgets like its Oral B products that drove a 20% jump in electric toothbrush sales during the December quarter. The products on display at CES included EC30, a cleaning swatch made with no water or plastic packaging, and Microban 24, a disinfectant spray that rolled out last February.

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