Procter & Gamble’s swift action to combat inflationary pressures pays off, says GlobalData

Following today’s release of Procter & Gamble’s figures for Q3, FY2021/22; Lia Neophytou, senior consumer analyst at GlobalData, a leading data and analytics company, offers her view: “Procter & Gamble moved fast to offset rising commodity costs having announced price increases in early 2021 and it is now reaping the benefits with net sales reaching $19.4 billion. Organic sales grew by 10%, with half of this growth being driven by increased pricing while volume, not including currency fluctuations and price changes, was up 3%. The Health Care segment drove sales growth fuelled by a strong cold and flu season while other essential segments including Baby, Feminine & Family Care and Fabric & Home Care also saw high growth as demand remains elevated and hygiene-consciousness has not subsided. Relatively ‘non-essential’ categories like Beauty and Grooming saw subdued growth with price increases accounting for most of this.

“The Beauty segment, which includes the SK-II, Olay, and Pantene brands was the only segment to report a drop in organic volume this quarter, hampered by pandemic-related volume slowdowns in haircare, and declines evident in Greater China across haircare and the skin and personal care categories due to COVID-19 related lockdowns. This contrasts with L’Oréal’s Q1 FY2022 results (covering the same period) which saw impressive growth in both its Consumer Products and Luxe divisions amidst the same inflationary pressures and squeezed consumer budgets. L’Oréal’s better performance is likely driven by the stronger global presence, luxury status, and intangible value associated with many of the brands in its portfolio in comparison, which justified spend for many consumers with pent up demand for beauty products. Furthermore, Procter & Gamble’s grooming segment which includes shaving brands Gillette and Braun, saw organic sales growth of 8% but the smallest volume growth of 1% due to price increases accounting for most of this.

“Procter & Gamble has raised its outlook for this year but remains aware that further commodity and freight cost increases may become apparent. This could warrant further price increases and could risk the firm losing shoppers to retailers distributing high quality private label alternatives once consumers begin to cut back as they start to feel the true impact of the rising cost of living.”