Articles

6.8.2010 Procter & Gamble to boost adspend

Procter & Gamble Co. boosted ad spending by $1 billion in the just-closed fiscal year, about $750 million of that in the fourth quarter alone, which helped the consumer-goods behemoth return to share and sales growth. But investors weren't impressed, sending shares of the company down 4% in early trading as P&G reported earnings today. Or, perhaps they were more impressed by a 2-cent miss on analysts' consensus earnings per share projections (though P&G handily met its own earnings range) and 2 percentage-point decline in operating margin for the quarter ended June 30.

It was a steep price to pay for 4% organic sales growth, which rival Colgate-Palmolive Co. matched (if rounded up from 3.5%) despite cutting ad spending last quarter as it hiked promotion to defend against increasingly aggressive moves by P&G in overseas oral-care markets, and which Reckitt Benckiser beat with 5% growth despite a far-smaller uptick in ad spending and tougher year-ago comparisons.

P&G's 8% volume growth was much greater than sales, though. The company attributed the disparity mainly to growth of lower-priced products sold in developing markets rising 12% while volume growth in developed markets such as the U.S. and Western Europe came in at 5%.

P&G said it grew market share on brands and in countries representing 60% of its sales, up from 30% a year ago.

That $1 billion increase in ad spending should bring P&G back near the record $8.6 billion level it posted in fiscal 2009, just before a global financial crisis.

Just maintaining this year's ad and promotion spending levels could be ambitious, given that P&G faces commodity-price increases rather than the reductions it saw last year. And while P&G got financial latitude to spend more from a weakening dollar much of last year, it faces European rivals such as Unilever, L'Oreal and Henkel with added financial leeway to spend this year thanks to a weakened euro.

Driving much of the year-end spending spree for P&G were campaigns for Gillette Fusion ProGlide razors, the second restage of Pantene shampoo in the past three years and the launch of Pampers Dry Max. P&G gained 4 points of share in men's shaving and a half point in U.S. shampoo. Pampers, which had a slight downturn in share for the quarter in Symphony IRI data, rose 1.5 points in all channels in the quarter.

B.L. 6.8.2010