Unlocking P&G's Growth Potential: Strategic Price Increases Drive Volume Recovery
Consumer goods giant P&G focuses on product superiority to drive price increases and regain volume growth, as it remains committed to its strategy of raising prices
During this quarter, P&G achieved a 7% increase in sales compared to the same period last year, reaching a total of $21.9bn (£18.03bn). Despite a slight decrease in volumes, the business managed to compensate through implementing a 7% price increase. Moving forward to the second and third quarter, it is predicted that volumes will show positive figures, contributing to around one to two percent points of sales growth, as Schulten forecasts. Although overall volumes are expected to return to positive figures, P&G will continue to raise prices to further drive sales growth.
Pricing has been a fundamental driver of our growth for 18 out of the last 19 years, and we anticipate this trend to persist," he remarked. He further stated that he anticipates a modest single-digit sales growth in the upcoming quarters due to price contributions.
Despite implementing a 7% price hike during the quarter, the company experienced growing volumes in key European markets. The company attributes this success to the exceptional quality of its brands.
Schulten emphasized today that the company's strategy of combining price increases with innovation has yielded even greater confidence in its ability to drive superiority and deliver value to consumers.
The company’s innovation strategy also allows it to avoid reliance on promotion, it claimed.
“We don’t see significant need to drive price promotion,” he said.
When the business engages in price promotion, it aims to encourage trial or facilitate the development of consumer habits, such as incorporating a haircare product into their daily routine. This strategic approach proves beneficial in increasing overall consumption for the company.
Nonetheless, P&G's focus on innovation often generates sufficient instore support without the need for price promotions. Schulten emphasized the company's preference for leveraging the product itself to attract customers, rather than relying on price promotions.
‘No correlation’ between funds and level of investment
Schulten has previously outlined P&G’s “100% ROI-driven” approach to its level of marketing spend.
During this quarter, there was an escalation in marketing expenditure, leading to a rise in overall selling, general, and administrative costs for the company. However, the specific amount by which the marketing spend increased was not disclosed.
Schulten emphasized that the continuity of this heightened spending would hinge not on the gross margin achieved by the company, but rather on the outcomes observed by the business.
"There is no direct relationship between the availability of funds and investment levels," he declared. "If we observe a consistent positive response to the increased marketing expenditure implemented in the first quarter, there is a compelling motivation for us to maintain that level of investment."
