P&G AD SPENDING PLUMMETED $500 MILLION FOR FISCAL YEAR

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(Aug. 7, 2001) -- Procter & Gamble Co.'s advertising spending for the fiscal year ended June 30 plummeted more than $500 million, or 14%, to around $3.1 billion, Chief Financial Officer Clayton Daley disclosed during a conference call with analysts today -- the lowest spending in absolute dollars since 1995 and P&G's lowest as a percent of sales in more than a decade.

President-CEO A.G. Lafley was quick to add that overall marketing spending was down only slightly both in absolute terms and as a percent of sales for the year, though he did not specify the overall marketing spending figure. He said P&G had improved spending efficiency and shifted funds away from TV and print advertising to unspecified "alternative marketing" channels.

Mr. Daley said P&G would report advertising outlays equal to about 8% of sales for the fiscal year. While that level is well above that of many competitors, whose outlays range from 2% to 6% of sales, it's below P&G's historical range of 9% to 10%. Earlier this year, Mr. Daley had indicated P&G's ad outlays would remain at 9% or above.

A spokesman could not immediately comment on whether the decline to 8% resulted entirely from activity in the fourth quarter, during which Mr. Lafley told analysts that "we didn't have as much to advertise," citing a relatively light schedule of new product rollouts.

Several new P&G product launches are slated for the current quarter, the first of its fiscal 2002, including the bulk of ad support for Crest Whitestrips and the beginnings of launches for Swiffer WetJet battery-operated floor cleaner, Tempo paper handkerchiefs and Bounty Double Quilted towels.

Currency effects, which reduced P&G's sales by 3 percentage points, had a similar impact on ad spending. Overall, P&G reported quarterly sales down 1% to $9.58 billion, after the effect of currency and an unusual set aside of 2% of sales, or around $200 million, as a reserve to cover promotional costs from discontinuation of product lines, primarily Olay cosmetics. P&G reported a net loss of $320 million, or 23 cents a share, compared to a net profit of $516 million last year. -- Jack Neff

Copyright August 2001, Crain Communications Inc.

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