A move to premium products and Gillette recovery help boost P&G

Procter & Gamble’s (P&G) focus on innovation is paying off as consumers increasingly switch to premium products and new products in areas including shaving helped to boost growth.

The FMCG giant has struggled in recent years amid mounting competition and shifts in consumer behaviour in key sectors such as male grooming. However, organic sales at its grooming business were up 4% year on year in its second fiscal quarter quarter. That is an improvement on the 1% growth seen a year ago, although grooming still lags behind other parts of the business including beauty (where sales were up 8%) and health ( up 7%).

P&G has boosted growth through a focus on innovation, launching products that tap into new areas such as reducing skin irritation and beard maintenance. It has also invested through acquisition, buying direct-to-consumer female razor brand Biillie earlier this month.

Speaking to analysts today (23 January), P&G reiterated its commitment in developing new products across all categories as it tries to appeal to new consumers. CFO Jon Moeller noted that a strong innovation pipeline is core to the company’s strategy to increase market share across all categories, with a particular focus on how to capitalise on advancement in robotics.

These new innovations will require an increase in ad investment he said, adding: “When you have an innovation that’s noticeably superior you need to, want to and should be communicating that superiority and those performance benefits and their value to consumers.”

Despite the bright spots, P&G’s quarterly revenue fell short of estimates for the first time in five quarters. Its performance was impacted by a stronger dollar and a struggling baby segment, which includes Pampers diapers, because of a lower birth rate in the US.

Despite this net sales in the quarter came in at $18.2bn, up 5% versus the prior year. 

Moeller noted that P&G is trying to improve its organisational structure to be more “effective and efficient”. It is also adapting to changes in advertising markets, taking a lead on calls to clean up the digital media supply chain and make it more efficient.

The company’s chief brand officer, Marc Pritchard, has been in Davos at the World Economic Forum launching, along with other marketing leaders who are part of the Global Alliance for Responsible Media, a new strategy to elimiate harmful content and ensure “bad actors” do not have access to ad money.

“It’s time to create a responsible media supply chain that is built for the year 2030. Imagine a media supply chain that operates in a way that is safe, efficient, transparent, accountable, and properly moderated for everyone involved, especially for the consumers we serve,” he says in a blog post.

The strategy is focused around four pillars: content quality, transparency, civility and data responsibility.