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Don’t waste another dime on bloated channel reporting and vanity metrics.
The CPG bellwether sees more uncertainty ahead in 2023.
Tide Laundry Detergent | Tide Laundry Detergent, Proctor and… | Flickr (www.flickr.com)
At Procter and Gamble, uncertainty is continuing into 2023.
The Cincinnati-based consumer goods company, which is one of the world’s largest, reported earnings for the quarter ended Dec. 31 on Thursday that indicated rising costs and resulting price increases were continuing to create a complex environment. Key results include:
P&G’s earnings are a snapshot of the health of the maker of brands like Tide, Gillette and Pampers. Given the size of the company, its presence across multiple consumer categories, and the fact that P&G reports earnings early in the cycle, they are also closely watched as a bellwether for the economy, and health of the American consumer. Here are a look at three takeaways from executives’ earnings call with analysts:
With margins under pressure, brands must evaluate their marketing spend. While CFO Andre Schulten said that P&G's current media investment is “sufficient” in reach and frequency, he said the company increased marketing spend by $140 million on a quarterly basis.
P&G has also recognized opportunities to change how it executes media and advertising. In the baby care category, the business grew by 10% over the last year. This was aided by a 20% increase in reach and top-of-mind awareness by 26%, while saving 15% on media spend.
“They have completely shifted the way they run their media,” Schulten said of baby care. “...The equation here really allows for sufficiency at lower cost.”
With baby care, P&G is aiming to reach a relatively narrow demographic by its measure, as households with babies that are diapering age is about 3-4% of the population. But innovation has also been effective for categories that seek to go wider.
“The fabric care team in the U.S. has brought their media planning and buying in-house, developing proprietary algorithms to better place ads during the TV programming, for example, and that in and of itself has allowed $65 million of savings in one year, while increasing frequency,” Schulten said.
When asked about the macroeconomic picture for 2023, CEO Jon Moeller sought to push back against any narrative that the shocks of the last three years have subsided. COVID vaccinations are more widespread and the supply chain is clearing up, but plenty of challenges remain. Here’s the response in full, which illustrates the environment before CPGs:
The world seems to want everything to be better as do I. That's really not reality though. There's an incredible amount of uncertainty that remains. None of us, I think, globally really understand what the recovery rate in China is going to be, as an example. And nobody really understands what the new policies and practices are going to mean in terms of consumer confidence in that context. You have the war in Eastern Europe. You have the highest inflation rates in 40 years. You have continued volatility in both the currency markets and the commodity markets. And importantly, that currency exposure for us is not a simple dollar exposure. There's a lot of cross rate exposures within that, which I realize makes it difficult to penetrate. But for example, the cross rate between the British pound and the euro has a significant impact on our bottom line.
So all that put together, while I'm extremely happy with the progress the organization is making, [and] I'm extremely confident that the strategy that we have is the right one that's going to continue to serve us well, it's just not an easy time to be taking up guidance to the top range of possibility.
In the U.S., P&G is watching closely to see whether consumers opt for private label products following price increases. Schulten said the rates of this happening have been “relatively steady” in the last six months, and doesn’t see change coming.
Overall, the company has continued to hold its existing market share. Globally, 27 of 50 categories grew or held share in the quarter, and aggregate share was even with the previous year. In the U.S., share grew 0.5% from the prior year.
“If past behavior over the last six months, nine months is any indication, I think the consumer is relatively steady in the U.S., which gives us great confidence,” Schulten said.
LadderUp is aiming for 50% LGBTQ+ and BIPOC participation. Shopify will provide access to its platform.
LadderUp will include an 8-week ecommerce course. (Courtesy photo)
Shipt is launching a new accelerator program designed to provide ecommerce tools for local retailers.Called LadderUp, the program is centered on equity. Target-owned delivery owned Shipt said conversations with business owners have revealed that local entrepreneurs face “gaps” in technology, but they also want to participate in ecommerce platforms. The COVID-19 pandemic was especially difficult for Black business owners, who saw earnings drop between 11-28% in 2019-2020, as compared to the earnings decrease of 5-17% for the rest of the population.
With the new program, the company’s goal is to reach at least 50% LGBTQ+ and BIPOC participation in the program.
Shipt is aiming to serve businesses in Atlanta, Birmingham, Alabama, Detroit, Houston and Washington, D.C.
Target categories include: grocery/beverage, health, beauty, and floral/gifts retailers.
“Working with small businesses to build up their capabilities is a key part of our commitment to help create healthier, more resilient and equitable communities,” said CEO Kamau Witherspoon. “We recognize the unique role that we can play in both combating hunger in under-resourced communities and boosting small, local retailers that are so vital to communities across our country.”
Education: Business owners who are selected will receive an 8-week course with industry leaders that covers business-building topics including finances, efficiency, marketing, ecommerce 101, the basics of using Shipt, and legal knowledge.
Funding: Upon completion, retailers will provide $5,000 for businesses to invest in ecommerce.
Shopify access: Shopify, which is partnering with Shipt, is also providing to its access for a limited amount of time to help business owners build an online storefront and manage inventory. The program will also provide technical assistance.
Applications are open Feb. 6- March 6.