P&G has pledged to continue investing in marketing despite ongoing supply chain pressures driving up business costs and, as a result, product prices.
Speaking on an investor call today (19 October) detailing the company’s results for the first quarter of its 2021/22 financial year, chief operating officer and incoming CEO Jon Moeller highlighted P&G’s positive results and said “this is the time to step forward, not back” when questioned on whether marketing investment would be sacrificed to offset the rising prices.
The company is raising prices on its grooming, oral and skin care products as it expects headwinds in commodity and product transportation, which are expected to land the FMCG giant a bill of $2.1bn and $200m respectively over the year.
Nevertheless, P&G increased marketing spend by $130m over the first quarter.
Chief financial officer Andre Schulten added: “We believe this is a temporary bottom line rough patch to grow through, not a reason to reduce investment in the business. We’re sticking with a strategy that has been working well before and during the Covid crisis.”
A squeeze on the supply chain is affecting all FMCG firms, due to rising Covid-19 cases in Asia and a shortage of labour in the US.
Efficiency breeds effectiveness, effectiveness breeds spending, and that all drives the market and the business.
Jon Moeller, P&G
Overall, the first quarter of the financial year saw P&G achieve net sales of $20.3bn (£14.6bn), a 5% year-on-year boost.
Moeller noted premiumisation is an ongoing trend in the FMCG space, with the pandemic spurring consumers to spend on quality brands, even in the categories seeing a price increase.
“Consumers through the pandemic have shifted their consumption in those categories towards trusted performing brands. You see that even in what’s happening with private label market shares as an example, [which are] down in the US over the past six to 12 months, [and] down in Europe over the same period of time,” he said.
“None of that is a guarantee for the future, but we start in a very good position, with a strong superiority profile, [and] a strong innovation and investment programme to continue that work.”P&G and Coke’s pandemic performances prove it: You don’t cut ad spend in a crisisAlthough the FMCG company will not be cutting investment into marketing, it will aim to optimise its marketing strategy by ramping up digital media spend in all markets.
“We estimate there’s still significant opportunity to optimise our ability to reach consumers more broadly and more effectively at significantly lower cost,” Schulten said. He added the company is getting better at targeting customers with relevant messages in digital marketing.
“[We will] increase the percentage of digital media around the world, as we continue to optimise our own algorithms to target messaging to consumers.”
Moeller added: “It might seem an odd dynamic, but the more efficient and effective we can make our marketing spend, the more attractive it becomes to make those investments. In an odd way efficiency breeds effectiveness, effectiveness breeds spending, and that all drives the market and the business.”
Elsewhere, ecommerce now represents 14% of P&G sales and this includes sales through retail partners such as Target and Walmart, who play a “significant role” in the growth of the company’s digital sales.
Schulten explained the company is “well-positioned” in ecommerce for multiple reasons such as its strong brand portfolio which proved popular as premiumisation ramped up under Covid, which in turn helped its brands show up on the first page of search engine results.