P&G presses on with marketing efficiency drive as sales projections fall

Procter & Gamble (P&G) has pledged to continue its drive to improve marketing efficiencies after warning today that total sales would fall up to 5% over the current financial year ending June 30.

Procter & Gamble

P&G, which produces two-thirds of its sales outside the US and UK household products such as Fairy Liquid and Ariel, blamed the fall on the strengthening dollar. It also anticipates full-year net sales to fall up to 4% despite previous projections expecting them to remain flat.

“The outlook for the year will remain challenging,” conceded P&G chief executive A.G. Lafley today. “Foreign exchange will reduce fiscal 2015 sales by 5% and net earnings by 12%, or at least $1.4 billion after tax. We have and will continue to offset as much of this currency impact as we can through productivity driven cost savings.”

The world’s largest household products maker said it achieved 70 basis points of marketing efficiencies for its second quarter ending 31 December 2014. These, primarily in non-working marketing spending areas, were “more than offset by foreign exchange impacts and overhead investments”.

P&G is looking to divest up to 100 of its brands, leaving it with a portfolio of between 70 and 80 where it can focus its research, innovation and marketing budgets, as part of an on-going marketing efficiency strategy.

It said back in October that it was a quarter of the way through the initiative and has since announced plans to offload poorly performing battery brand Duracell. P&G’ Chief executive A.G Lafley says it will continue to press on with the strategy.

“While we continue to make steady progress on the strategic transformation of the company – which focuses P&G on about a dozen core categories and 70 to 80 brands, on leading brand growth, on accelerating meaningful product innovation and increasing productivity savings – the considerable business portfolio, product innovation, and productivity progress was not enough to overcome foreign exchange this time around,” he added.

For its second quarter, P&G said net sales fell 4.4% to $20.2 billion (£13.33 billion) from the previous year as categories including beauty, hair and personal care, and health, fell short of expectations. After-tax profits, meanwhile, fell 31% to $2.37bn for the Q2 period.

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