P&G plans ‘major innovations’ as sales growth stagnates

Procter & Gamble says it will launch several major innovations early next year and continue to focus on brand equity rather than price promotion after sales growth in its most recent quarter stagnated.

PG

Net sales for the three months ended September were up 2 per cent compared to a year ago to $21.2bn (£13bn), the same growth rate as the previous quarter.

On an earnings call today (25 October), chief financial officer Jon Moeller teased a “strong slate of innovations” set for launch between December and March in areas including baby products and beauty, although he did not disclose specifics. P&G makes brands including Pampers, CoverGirl, Gilette and Olay.

Moeller admitted that it was “not atypical” to see increased promotions ahead of product launches, adding that there are “certain categories, certain items and certain competitors” where there might be an escalation in promotion in order to be competitive. However, Moeller said that P&G would “rather spend money” on innovation and promotions would “tighten” as it prepares a “slate of strong initiatives”.

“We would much rather invest a dollar in innovation or equity, those benefits are proprietary and sustainable. Promotions there is nothing proprietary about and they are not sustainable.

“It is important we be competitive, but we won’t lead on promotion escalation,” he added.

Moeller’s comments echo those of UK managing director Irwin Lee, who vowed to move away from “unsustainable” value giveaways. They are also in line with CEO AG Lafley’s long-term strategy to improve the efficiency of its marketing activity, including reviewing its ROI measurement and focusing on “value creation”, which he laid out earlier this year.

Moeller claimed that the percentage of sales that P&G moved on promotion was down 7 per cent in the quarter versus a year ago. For the rest of the industry that figure was “about flat”.

Rival Unilever saw underlying sales growth slow to 3.2 per cent year on year.

Recommended

Comments

    Leave a comment