P&G boosted its marketing spend in Q1

The CPG giant is delivering on its plan to "reinvest" cost savings as sales spiked in nine out of ten product segments.

Tide-Eco-box

Ongoing demand for trusted brands and household products led Procter & Gamble to grow it sales with a largely homebound consumer base in Q1, helped along by sticking to its commitment to invest in its brands.

The company is reported that organic sales increased by 9% for the quarter ending Sept. 30. The manufacturer of brands like Bounty, Tide, Crest and Old Spice, is also raising its outlook and earnings growth expectations for fiscal 2021.

The company has aimed to seek efficiencies and focus on what’s working, including in marketing. In Q1, P&G saved approximately $200 million due to lower media and agency expenses – as well as overhead and manufacturing costs – in Q1, but the 110 basis points of savings from overhead and marketing expenses were partially offset by 110 basis points of marketing reinvestments, which ended in an increasing in marketing spending to the tune of roughly $100 million.

“We’ve made investments to strengthen the long-term health and the competitiveness of our brands,” said P&G vice chair, COO and CFO Jon Moeller, in an investor call. “And we’ll continue to invest to extend our margin of advantage and quality of execution, improving options for consumers around the world. The strategic need for this investment, the short-term need to manage through this crisis and the ongoing need to drive balanced top and bottom line growth…underscore the importance of ongoing productivity.”

P&G’s portfolio was focused on daily use products and “categories where performance plays a significant role in brand choice,” Moeller said, adding that he does not see any reason it should not be able to sustain strong results going forward, thanks to shopping behaviours adopted during the pandemic.

“There is just a heightened need for products that deliver against health, hygiene and clean home concerns,” he said. There is also “willingness to spend just a little bit more to ensure that I’m using a product that I know and trust and believe will work for me and for my family,” something that at least partially puts to rest fears about more conscious consumers turning to more private-label products.

The company reported that nine out of the ten product categories it operates in grew organic sales, with its Home Care segment up more than 30%, Oral Care up by the mid-teens and Family Care up by double-digits.

While the Personal Health Care segment is up by the high singles, Moeller says it’s a very attractive field of play, as it is still in the process of integrating the OTC portfolio of Merck in Germany, combined with P&G’s own brands, like Vicks.

Grooming is up mid singles, as women are maintaining their grooming regimens, even though fewer men are shaving. Moeller attributes the results in part to the success of a lineup of products under the Gillette brand “that are designed to serve men who choose to maintain facial hair, so everything from trimmers to beard wax to conditioners.”

However, the Baby Care segment, which includes the Pampers brand, is down low singles, and Moeller would provide no further update other than that the category is “a challenge.”

Finally, P&G is reporting e-commerce sales are skyrocketing, up approximately 50% for the quarter. However, Moeller cautions that sales on that platform are now “probably 11% to 12%” of its total sales.

“We want to serve consumers in a superior fashion wherever they choose to shop,” Moeller said. “We prefer to be channel-agnostic and let the consumer make that choice. And as long as we’re very well-positioned with a superior product, a superior package that’s relevant for the channel, communication that’s relevant to the channel and have the right value, if they choose to shop in e-commerce, we’ll win. If they choose to shop in brick-and-mortar, we’ll win. If they choose a hybrid shopping experience like click and collect, if we’re appropriately positioned, we should do very well.”

Moeller added that DTC will clearly play in a role in that, and offers an opportunity to get an even better understanding of its customers, but plans to increase its DTC presence will not come at the expense of any other channel or trade.