P&G TO CONTINUE MARKETING INCREASE

Sales up 5% at $11 Billion for Fiscal Second Quarter

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CINCINNATI (AdAge.com) -- Procter & Gamble Co. reported sales of $11 billion, up 5% from a year ago, for its fiscal second quarter ended Dec. 31 and said it will continue to increase marketing in the current quarter, especially behind hair and skin-care lines.

The packaged goods giant said marketing increased in the second quarter, particularly in its beauty-care business, behind such brands as Tampax Pearl, Pantene and Clairol and that it expects to increase ad spending in the third quarter behind several hair-care initiatives and Olay Regenerist, a new high-end skin-care line.

Cost cuts fuel profits
P&G reported earnings per share

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up 14% to $1.06 despite increased marketing spending, as cost cuts that included headcount and other overhead reductions following the Clairol acquisition helped fuel profits. The company guided its earnings forecast higher for the third quarter to an 11% to 13% increase, excluding restructuring charges, from low double digits and said sales would increase in the mid-single digits.

Excluding acquisitions and divestitures, P&G's sales were up less than 5% in the third quarter. Favorable foreign currency effects added about one percentage point of growth, P&G said. P&G's unit volume was up more than 8%, as price cuts and promotion behind such brands as Cheer, Pampers, Pert, Aussie and Crest Whitestrips accounted for the difference between volume and sales growth.

P&G's baby and family-care business, which includes diaper and tissue products, showed its strongest results in several years, with sales up 7% to $2.53 billion from the same period last year on a volume increase of 8%, with earnings up 21% to $276 million. The results contrasted sharply with rival Kimberly-Clark Corp., which on Monday reported flat global sales for last quarter.

Long-term marketing strategy
Chairman-CEO A.G. Lafley attributed some of P&G's recent success in new products to a shift toward a longer-term marketing planning and support behind new products. He contrasted the new long-term outlook to the "launch 'em and leave 'em" approach common in the past with P&G and the rest of the industry, which concentrated all marketing approach in year-one of a launch.

That approach has contributed to an 80% failure rate for new products, defined as products that have no retail distribution two years after launch, he said.

The longer-term approach has been used in fabric and home care and health and beauty care, aiding such brands as Swiffer and Crest Whitestrips, Mr. Lafley said.

"This approach has been critically important where we have new to the world technology ... requiring consumer behavior change," he said.

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