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3.3.2011 P&G and Colgate to Raise Prices, Marketing Spending in US

As rising commodity prices pressure margins, packaged-goods marketers are vowing to raise prices, cut price promotion and maintain or hike advertising support. Food companies, hit by the first wave of agricultural commodity cost increases, are already taking price increases, while household and personal-care players, more affected by oil prices, are preparing to do so soon. The U.S. Department of Agriculture last week projected food prices will rise 3.5% in the U.S. this year and possibly as much as 5%, as retailers appear to be open to passing along price hikes.

Procter & Gamble Co. Chief Marketing Officer Jon Moeller told the Consumer Analysts Group of New York that the company will begin announcing price increases within a month to make up an estimated $1.5 billion in increased commodity costs this year. He pulled down guidance for operating margin to reflect rising costs and said the world's biggest advertiser won't "back off on investments," including marketing, simply to hit the top range of earnings estimates.

Colgate-Palmolive Co. Chairman-CEO Ian Cook said Feb. 25 that the company is banking on inflation in short- and long-term planning as it hasn't in more than a decade, and believes price hikes "will not be a barrier to consumers staying with our brands and categories." As a result, Colgate plans continued increases in marketing support.  The confidence about price increases and marketing spending sounds like what marketers said amid another cost squeeze in 2008. Yet price hikes didn't come fast enough to prevent margin squeezes that led marketers, including P&G, to cut ad spending even before the financial crisis.

B.L. 3.3.2011