BATAVIA, Ohio (AdAge.com) -- Package-goods sales are holding up well in some surprising places despite a downturn that's cut broadly into volumes and ad spending by key players.
Consumers were surprisingly willing to trade up for some of the industry's priciest products last quarter, such as Fusion razor blades and Always Infinity, priced at a 60% premium to regular Always products.
And last quarter turned out better for the industry at large than had been expected after Procter & Gamble Co. said in December it would miss its targeted 4% to 6% organic sales growth number. P&G's organic sales came in at 2% when the company reported quarterly earnings Jan. 30. The company took the additional step of reducing top-line guidance for the full year to 2% to 5% range, which sent its stock down 4% in early-day trading.
Yet several competitors came in with much better organic top-line results -- including 9% for Colgate-Palmolive Co., 9.5% for Alberto-Culver Co., 5% for Kimberly-Clark, 4.2% for Beiersdorf and 7% for the consumer businesses of Johnson & Johnson.
Those gains are coming largely -- sometimes entirely -- from price, as volumes have been hit by more frugal consumers drawing down their pantries. Retailers, who stocked up heavily in advance of price hikes, drew down their inventories as well.
And the relative resilience of sales isn't necessarily reflected in marketers' media buys, as price hikes still haven't fully offset rising commodity costs or the profit pressure on U.S. multinationals from a strengthening dollar.
Colgate was forthright in saying it had cut media spending globally last quarter. TV rates may not have come down in the U.S. yet, but Colgate CEO Ian Cook said on a Jan. 29 conference call that he is seeing reductions from "mid-single digits to north of 25%" in some countries. Competitors pulling back spending also helped Colgate "stay very healthily competitive," he said, "but at a lower cost."
In a conference call Jan. 30, P&G Chairman-CEO A.G. Lafley said his company, too, is getting deals on media in much of the world, but he denied that P&G cut media or marketing outlays last quarter. He did say P&G had shifted funds to such things as in-store marketing and couponing, with themes about value permeating all communication.
TNS Media Intelligence data indicate P&G pulled back significantly on measured U.S. media spending last quarter, as it had in the prior two quarters, with TV and print-media spending down 10.6% to $606 million in October and November compared with the same months the prior year.
While consumers are also pulling back in many cases, they're sometimes splurging on pricey products while cutting back on basics.
Kimberly-Clark Corp. Chairman-CEO Tom Falk said last week that toilet paper volume declined 5.5% last quarter as consumers and retailers used up inventories, yet sales of Alberto-Culver Co.'s Nexxus hair-care products at prices north of $10 rose double digits.
A similar pattern emerged within the same brand at P&G. Mr. Lafley said Tide, which lost share last quarter, did so from base-brand consumers moving to value brands. But recently launched Tide Total Care and other newer products at higher prices fared much better. Total Care alone has sold $100 million to $150 million in about four months.
Some of P&G's priciest products, including Always Infinity and Fusion razors, the former with a 6% share after six months and the latter with shipments up 20% last quarter, also have thrived. And Mr. Lafley is betting new products such as Olay ProX and Crest Advanced Seal Whitestrips, each priced north of $40, can still find consumers despite a recession. "It's really hard to generalize across a mass consumer audience," he said, because "a mass consumer audience doesn't exist anymore."
A few other paradigms may be changing as well. P&G and competitors have been shifting focus toward faster-growing developing markets in recent years, but the growth that lured them to developing markets has evaporated of late. P&G Chief Financial Officer Jon Moeller said sales growth in P&G's categories was in the 3%-4% range last quarter in North America, compared with 5% to 6% in developing markets, which had been seeing double-digit growth until recently. Western Europe and Japan, meanwhile, were flat to up 1%.