CONSUMERS HAVE not balked at price increases for Procter & Gamble products in the past three months, according to the world’s biggest consumer goods group by sales, which reported moderate gains in quarterly sales and profits.
Bob McDonald, P&G chief executive, acknowledged that consumers in developed markets were under economic strain but said: “We’ve not seen dramatic changes in consumer behaviour over the last few months that’d be markedly different from what we’ve seen before.”
P&G said price increases introduced to offset higher commodity costs had added three percentage points to organic sales growth of 5 per cent, which excludes the impact of foreign exchange effects and acquisitions and divestitures. Net sales grew 10 per cent to $20.9 billion.
Its results were still marked by a familiar divide between stagnant developed economies and high growth emerging markets.
Commenting on the outlook for P&G’s new financial year, which begins this quarter, Mr McDonald said: “We’re expecting essentially no growth in developed markets on a volume basis, with any value growth driven by higher pricing.”
Many of P&G’s products – which include Tide detergent and Pampers baby products – are essential items that are not affected when consumers rein in discretionary spending, although P&G can lose their business to rival manufacturers.
As P&G did not pass on the full impact of high commodity costs to consumers, they also eroded its gross profit margins in the past quarter.
Nonetheless, net earnings rose 15 per cent to $2.5 billion for the three months. Diluted net earnings per share from continuing operations increased 18 per cent to $0.84.
Mr McDonald said one of his concerns was whether its competitors would follow suit in raising prices to the same extent.
“If the competition doesn’t follow the price increases, then there might be a small volatility in our [market] share … That’s what we’re following closely,” he said.
– Copyright The Financial Times Limited 2011
