Cash-strapped consumers turning to cheaper, own-label alternatives continued to hit volumes at Procter & Gamble during its third quarter. However, the global consumer goods giant still raised its full-year sales forecast as higher prices offset the hit from fewer people buying its raft of well-known brands.
The company reported a 7% increase in organic sales to $20.1bn over the period to the end of March. However, volumes slid 3% after average prices across its product categories rose by 10% to counter higher costs.
The figures come after investment groups this week suggested that leading FMCG firms should start easing price increases as supply chain costs decline due to concerns that further hikes could hit market share and margin growth.
P&G saw the biggest volume fall (-5%) in its Fabric & Home Care division, although organic sales climbed 9%. The Baby, Feminine & Family Care unit saw a 4% volume decline, Grooming slipped 1%, and Beauty was unchanged. The only division to see a volume rise was Healthcare, up 1%, driven by product innovation and a strong cold & flu season.
The company said it now expects organic sales growth for its 2023 fiscal year to come in at around 6%, compared with its previous forecast for a 4% to 5% increase.
“We delivered strong results in the third quarter of fiscal year 2023 in what continues to be a very difficult cost and operating environment,” said Jon Moeller, Chief Executive.
“We remain committed to our integrated strategies of a focused product portfolio of daily use categories where performance drives brand choice, superiority, productivity, constructive disruption and an agile and accountable organization structure. These strategies have enabled us to build and sustain strong momentum, and we’re confident they remain the right strategies to deliver balanced growth and value creation going forward.”
NAM Implications:
- Pressure on shopper disposable income unlikely to reduce.
- Equally, some pipeline cost increases are still to emerge from the supply chain…
- …making more price rises likely.
- But it has to be said that budget O/L prices are increasing faster than brands…
- Thereby increasing the likelihood of the brand premium being reduced vs lower-priced branded equivalents.
- Meaning less switching to O/L for those brands…
- However, bigger brands are better able to force price increases through to retail.
- Thereby increasing the brand premium vs ‘finest’ O/L equivalents.
- Increasing the likelihood of brand switching.
- So perhaps this dynamic will limit the ability of big brands to raise shelf prices?
