P&G raises outlook as it hails focus on brand ‘superiority’

CFO Andre Schulten says it would not be smart for P&G to be drawn into a price war with private label competitors.

P&GProcter & Gamble has raised its outlook for sales this year thanks in part to the effectiveness of its focus on the “superiority” of its brands and not being drawn into a price war during the cost of living crisis.

The company, which owns brands such as Head & Shoulders, Pampers and Ariel, raised its sales expectations for its 2023 financial year. It now expects sales to grow by 1%, versus its previous forecast of a 1% decline.

The upgraded forecast comes despite a 3% organic volume decline in the three months from to March 2023. Europe is proving to be a particularly tough market for the company with volumes declining at around 7%.

“The European consumer is trading into private label,” chief financial officer Andre Schulten told investors on a call today (21 April). He said the price differential between private label and branded products from the likes of P&G had continued to grow.

However, the FMCG giant is sticking to its strategy of appealing to consumers from its product “superiority”, rather than being drawn into a price war.

“I don’t think that trying to eliminate the price differential [to private label brands] is a meaningful and helpful strategy for us,” Schulten said.

“We need to create products, packaging, innovation, communication strategies  and in-market executions that are able to provide value to consumers and retailers. That’s what we’re focused on,” he added.

P&G: Communicating brand ‘superiority’ has been key to weathering price increases

While volumes were down, net sales in the company’s third quarter grew by 4% versus the same period in 2022 to $20.1bn (£16.2bn). This is an improvement from last quarter when the company reported its first sales decline in five years.

Profits were also up by 7% to $9.7bn (£7.8bn) in the three months to the end of March.

CEO Jon Moeller told investors the company’s successful execution of its strategy is paying off.

“Our team’s strong execution of our strategies and our progress through three quarters enable us to raise our fiscal year outlook,” he said.

While continued investment behind its brands is a key focus for P&G in executing its strategy to retain consumers despite price increases, it is keenly focused on the return it gets on these investments.

Schulten said P&G is investing “in a very ROI-driven way” with a focus on cost. For example, it is targeting savings of between $400m (£323m) to $500m (£403m) per year in its media spend.

He reiterated Moeller’s assertion at an investor conference in February that the company would not “back off” its media spend in its pursuit of savings.

Driving ROI and making savings “actually makes investment in media spending more attractive” Schulten told investors today.