P&G directs marketing spend towards ‘expandable categories’ in pursuit of volume growth

P&G is seeking to grow the categories it operates in as it pursues volume growth, utilising its increased marketing spend to do so.

P&GProcter & Gamble is utilising its marketing investment to grow categories as it pursues volume growth this year.

The consumer goods giant, which owns brands including Febreze, Head & Shoulders and Pampers, increased its marketing spend around 14% year over year in its third quarter, which consisted of the three months ended 31 March 2024. This step-up in investment comes as P&G attempts to deliver volume growth this year.

Across the business, volume and product mix were flat in the in third quarter. Product mix accounts for the variety of sales made by P&G, with more profitable sales contributing to a higher product mix. The business saw declines in volume sales in its baby, feminine and home care category, which it attributed to consumers reacting to higher pricing.

Volume growth has been a key target for P&G’s leadership this year as inflation normalises and the impact of pricing wanes. During its quarter three results call last week (19 April), chief financial officer Andre Schulten was asked about the role of marketing investment in driving volumes this year.

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Schulten said an area of focus for the business in terms of investment is “expandable categories”. He gave the example of the business investing behind its Swiffer PowerMop, which has brought new users to the company’s Febreze plug-ins.

“Those marketing investments grow the market, and they grow our share within the market,” he said.

With many of its brands being market leaders, P&G’s goal is to drive category growth.

“Our role, as per our growth algorithm, is to be growing slightly ahead… by driving market growth, which in turn will drive share and a bigger part of us leading the market,” Schulten said.

Advertising spend plays a clear role in that, he added, but works best in conjunction with other levers.

“Great consumer insight, great product, great packaging, strong communication” works together to deliver “strong growth”, he said.

While the business has increased marketing spend as it chases volume growth, Schulten reiterated that it would remain focused on the ROI on that spend.

“We will not spend if there’s no ROI,” he stated, echoing his sentiment from last July when he claimed the business would be “100% ROI driven”.

Pairing pricing with innovation

In July 2022, as the rate of inflation began to grow rapidly, Procter & Gamble stated it would “close couple” price increases with innovation to avoid consumers trading down and out of its brands.

It has also repeatedly stated that its focus on “superiority” has acted as a shield from elasticities in its categories. The company’s quarter three results, where it saw some pricing-related volume decreases, was a confirmation of, rather than a deviation from this hypothesis, Schulten said.

“Where we’ve not been able to push the innovation out and hold the full level of superiority as we took pricing, the consumer is responding,” he said, adding that the business knew what it had to rectify this.

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The company saw 7% growth in its European focus markets, with four points of volume growth here. Schulten highlighted the region as an example of best practice on strategic pricing and executing price increases,

“The strength of the business has been consistent because of the execution of the team, strong innovation pushed out over an extended period of time as we were taking pricing, very strong productivity work in the region across every part of the P&L to limit the amount of pricing we needed to take but brilliant execution of the pricing that was taken, respecting key price points, respecting retailers and consumer constraints, and I think that’s playing out,” he said.