P&G attributes sales rise to increased prices and marketing

Procter & Gamble says price rises and increased marketing spend helped boost global revenue in its fourth quarter despite difficult economic conditions in the US and Europe.

The FMCG manufacturer, which also owns Gillette, Febreze and Olay, reported a 10% increase in net sales to $20.9bn (£12.8bn) for the three months to June and a 5% increase to $82.6bn (£50.7bn) for the full year.

The company says that price increases accounted for the majority of the 5% organic growth for the fourth quarter.

P&G increased its marketing spend by $700m (£430m) to $9.3bn (£5.7bn) for the year or 11.3% of net sales, most of which was invested in advertising.

It also spent $2bn (£1.2bn) on research and development – which it claims is 60% more than any competitor spends – as part of its strategy to drive growth through innovation.

The company is reducing its spend on promotions as part of a strategy to balance price and volume growth.

Speaking to analysts on the results, P&G president and CEO Bob MacDonald says that price increases are “necessary” and admitted that being one of the first companies in the market to raise prices and reduce promotions could put its brands at a “consumer value disadvantage”.

“We’ll make sure we remain competitive … We won’t put our brands at a long-term disadvantage so if we see that this happens we will take action … and could rescind price increases,” he says.

Jon Moeller, chief financial officer, adds that the company is investing in its brands long-term future: “Promotions win quarters but innovation wins decades – we’d rather spend $1 on innovation than on promotions.”

P&G also said that it expects to see high sales growth around the London 2012 Olympics as a result of its Proud Sponsor of Mums campaign and says that the same activity around the Vancouver Winter Olympics in 2010 resulted in the highest return on any marketing activity the company has ever done.

Yesterday, (4 August) Unilever reported its best quarterly performance since 2008 thanks to more efficient use of its marketing budget and price increases.

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