BATAVIA, Ohio (AdAge.com) -- Cuts in marketing spending and a light new-product schedule hit the top line of Procter & Gamble Co., which missed its own and analysts' organic sales growth forecasts with a 1% decline last quarter, lagging almost all its publicly traded competitors who've reported so far.
But the marketing giant signaled a renewed focus on market share in the year ahead, setting up what could be a bruising battle with competitors, nearly all of which have signaled a desire to maintain or rekindle growth.
P&G still beat its earnings-per-share target by a penny at 80 cents on cost cuts. Chairman A.G. Lafley said the focus last year was on cash preservation and maintaining "investment grade" industry pricing structure through increases to compensate for rising commodity costs and a strengthening dollar.
Sales unadjusted for currency fell 11% to $18.7 billion, while net earnings fell 18% to $2.5 billion.
Things will be different, however, with the new fiscal year that began July 1, executives said. Noting that P&G had tolerated some share losses in the interest of shoring up prices last year, CEO Robert McDonald said that "isn't something we will accept this year." He also indicated acquisitions in higher-growth, higher-margin businesses, in addition to expansion into emerging markets and supporting P&G's core businesses will be pillars of his long-term growth strategy.
Mr. Lafley acknowledged that the just-concluded quarter was light on innovation, the primary driver of marketing spending. And the company acknowledged it had cut marketing spending -- without making the claim, as it had in prior quarters, that reductions in media costs were sufficient to still allow an increase in consumer impressions.
Changes next year
Both those things will change with the new fiscal year, though possibly not by much in the current quarter, when P&G projects organic sales -- adjusted for acquisition, divestiture and currency effects -- to be flat to down 3%. For the full fiscal year, P&G expects organic sales to rise 1% to 3%.
While Mr. Lafley said P&G had maintained value market share in most of its categories, Chief Financial Officer Jon Moeller said organic sales growth in P&G's categories was flat, compared with P&G's 1% decline.
While Mr. Lafley noted a host of beauty categories -- including hair, skin care and fragrance -- in which P&G maintained or gained share globally, the 3% decline in the organic sales of the P&G unit was worse than that for the beauty and personal-care units of every competitor to report quarterly earnings so far, including L'Oreal, Johnson & Johnson, Colgate-Palmolive Co., Henkel, Beiersdorf, Alberto-Culver Co. and Energizer Holdings.
Mr. Lafley singled out the snacks, battery, blade and razor and North American oral-care businesses as ones where share results were disappointing.
P&G is getting help on two fronts that will allow it to hike spending on marketing, Mr. Moeller said. Those include commodity costs, projected to be about $1 billion less companywide this year, as well as relief from the effects of a stronger dollar. Foreign exchange is now expected to reduce P&G's net sales by zero to 1% next year, vs. prior projections of 2% to 3%.
P&G's increase in brand support next year will be evenly spread among increased marketing support for existing brands and products, stepped-up new-product launches and reducing competitive price gaps, Mr. Moeller said.