Personal health care drives P&G sales higher in Q2

With market share growth in nearly every category, the company expects its variety will help retain inflation-wary consumers.
P&G

Organic sales for P&G’s personal health care business increased about 20% as a stronger flu season led to a rise in demand for respiratory products in Q2.

The company reports overall net sales rose to $20.95 billion and that its better-than-anticipated 6% jump in quarterly sales helped offset forecasted increases in annual freight and commodity costs.

P&G is also reporting that sales in its fabric and home care unit, the company’s biggest segment with brands like Tide and Mr. Clean, climbed 7% in the quarter as consumers filled pantries with cleaning staples.

“We like our current portfolio,” P&G’s CEO Jon Moeller said in Wednesday’s earnings call, adding that the company is growing market share in nine of 10 product categories. “All parts of it are working.

And the company reports it’s “committed to strong investment in its brands” overall, according to CFO Andre Schulten, who said ad spend increased year-over-year in Q2. This is despite the fact that selling, general and administrative expense as a percentage of sales decreased 150 basis points compared to a year ago, with overall marketing spend as percentage of sales decreasing 80 basis points.

The portfolio is focused on daily use categories essential to the consumer, versus discretionary categories, the first to “lose focus” by the consumer.

The other headwind P&G may be facing is inflation making consumers more price-conscious, especially for everyday purchases. But Schulten says that the company has built strong price ladders and offerings for consumers at different price points over time, giving consumers choice.

This is true across categories, but he cited babycare as an example, which is bouncing back from previous weakness. What’s more, according to Schulten, some consumers are also switching to higher premium products. Consumers are trading up, and he thinks it’s a sustainable behaviour.

Moving forward, the company benefits from the organizational redesign for much faster and clearer decision making, and more diligence in terms of where to take pricing, country, brand and SKU level. The strength of its innovation pipeline is also helping in the current environment.

Schulten says the team is focused on near-term priorities and long-term strategies and that it’s “doubling down efforts to delight consumers.” Company priorities include insuring health and safety of colleagues, maximizing availabilities of products related to cleaning health and hygiene, and supporting people on front lines of the pandemic.

The CPG reports it expects fiscal 2022 organic sales to rise 4% to 5%, compared with its prior forecast of a 2% to 4% increase.