Procter & Gamble boosts sales view as price hikes impact volume sales

Cash-strapped consumers turning to cheaper, own-label alternatives continued to hit volumes at Procter & Gamble during its third quarter as the company reported a 7 per cent increase in organic sales.

The maker of Pampers diapers, Pantene shampoo and Oral-B toothpaste raised average prices across its categories by 10 per cent during the quarter, and saw overall volumes fall just 3 per cent.

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.

Shrinking consumer wallets in the face of high inflation – particularly in Europe, which P&G said is a “high pressure environment” – have fanned concerns of how much longer shoppers will tolerate rising prices before switching to cheaper, private-label brands. Private label competitors are “delaying price increases,” Chief Financial Officer Andre Schulten said in a conference call.

The decline in P&G’s volumes sold is “obviously driven by pricing,” Schulten said.

“We see consumers being a bit more careful with dosing and drawing down inventories over time,” he said. He later added that shopper behavior is returning to normal, and that he does not anticipate consumers stocking up their pantries like they did during the pandemic.

P&G saw the biggest volume fall (-5 per cent) in its Fabric & Home Care division, although organic sales climbed 9 per cent. The Baby, Feminine & Family Care unit saw a 4 per cent volume decline, grooming slipped 1 per cent, and beauty was unchanged. The only division to see a volume rise was Healthcare, up 1 per cent, driven by product innovation and a strong cold and flu season.

The company said it now expects organic sales growth for its 2023 fiscal year to come in at around 6 per cent, compared with its previous forecast for a 4 per cent to 5 per cent 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,” reports quoted Jon Moeller, Chief Executive at P&G as saying.

“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.”