Procter & Gamble makes buyers pay

The dynamics are playing out in the consumer products industry, as more affluent consumers are doing better in this recession than those with lower incomes and cleaning and hygiene are given a higher priority in all sections of society during the coronavirus pandemic.

“Consumers are sent to products where they can say, ‘I know it will deliver for me and my family,'” said Jon Moeller, chief operating officer of P&G.

Consumer spending on food and household products is considered premium or super premium, has risen more than spending on regular, value-oriented and private label products, according to data from market research firm IRI, which looked at online and grocery purchases for the 12-week period ended October 4, compared to a year earlier. According to the study, premium soaps, household cleaners and paper towels grew the most.

A shift towards higher products particularly benefits P&G, which is usually among the more expensive items in the grocery store. This has hurt the company in the recent recession.

Now, armed with extra cash after years of downsizing and solid sales, P&G has developed a range of high-quality items, including detergents, designed for extra-large washing machines and a special range of Gillette shaving products.

The Cincinnati company’s organic sales rose 8% to $ 19.75 billion in the quarter ended Dec. 31. P&G increased its estimates for organic growth throughout the year to between 5% and 6%, compared to the previous range of 4% to 5%.

The company also warned of a possible slowdown and greater uncertainty, as dynamics in both the economy and the pandemic could change dramatically. Continued blocking and another round of US stimulus payments, for example, will provide good sales benefits in many of P & G’s largest categories. A return to normalcy or a deepening recession can slow growth.

“Accepting difficulty is difficult,” he said. Moeller said. “If anything, the level of security today is less than it used to be” at the beginning of the pandemic.

The strongest growth in the most recent quarter was in P & G’s unit for materials and home care, which achieved a sales profit of 12%. The unit’s brands include Tide, Mr. Clean, Dawn dish soap and Cascade dishwasher. Sales in P & G’s care unit, which includes Gillette razors, increased by 5%. Sales in P & G’s healthcare unit, which includes dental care and medicine, increased by 9%.

Mr. Moeller said P&G was able to spend more on new products and advertising, while also increasing margins. The company underwent a year-long restructuring in which it reduced jobs, cut billions of dollars in annual costs and revamped its management structure.

Sales volumes increased along with price increases, offsetting the pandemic-related sales losses. Although many trends regarding Covid-19 have boosted sales for P&G and other household manufacturers, the pandemic has taken a few hits, from the closure of retail that harms sales of some beauty products, to the fact that men shave less than their work Moeller said.

The sales profit builds on the momentum that started before the pandemic, when P&G had the sales profit higher than their counterparts.

For the second fiscal quarter, P&G generated net income of $ 3.9 billion or $ 1.47 per share, compared to $ 1.41 per share a year earlier.

According to S&P Global Market Intelligence, analysts expected net income of $ 1.48 per share and sales of $ 19.98 billion.

Write to Sharon Terlep by [email protected]