P&G to enter new product category

Procter & Gamble is set to enter new product category as it steps up innovation efforts as it looks to ‘move the needle’ on slow sales growth.

PG

Speaking at the Deutsche Bank global consumer conference in Paris yesterday (18 June) chief financial officer Jon Mueller said that while it was too early to provide details of the category, it would be looking to introduce a “new and far superior” product that addressed a “chronic consumer issue”. The move highlights P&G’s “commitment to innovation”, which Moeller said is key for creating value for consumers, retail partners and shareholders.

“The entry into a new category and creation of new categories is a way to build the business, this is a constant desire not a one off.

“When you enter a new category, you’re typically investing a fair amount of money. That’s something you wouldn’t be doing unless you expected to be able to move the needle,” he said.

P&G currently splits its brands into four global units – beauty, global health and grooming, family care and home care. Of those, home care saw the biggest growth in the third quarter, with organic sales up 6 per cent.

Moeller believes consumers are willing to pay more for product innovation, saying it is a matter of the “value equation” – a combination of pride, product efficacy and the consumer usage experience.

“Innovation creates value, offers us a cumulative advantage, combats commoditisation and leads to higher sales and profit per unit.

“Our innovations are premium priced but consumers who buy our products are spread across income levels. This is because our products offer significant value that is worth paying a little bit more for,” he said.

He also said ecommerce now accounts for $2.5bn worth of P&G’s $85bn in total sales, equal to almost three per cent. That is behind the wider market FMCG market, where ecommerce accounts for 3.7 per cent of sales, according to Kantar Worldpanel.

However’ P&G’s sales are growing at a faster rate, which are increasing by between 30 and 40 per cent according to Mueller where the rest of the market is expected to see annualised growth of around 23 per cent over the next two years. Mueller said he sees ecommerce as an opportunity and is hoping to increase its market share in digital to the same level as its market share in physical stores.

“We want to be relevant wherever consumers decide they want to shop, this is not an ‘or world’ its an ‘and world’,” he added.

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