Procter & Gamble ad spend down but recovering, and tampon ads could help

Procter & Gamble Co. cut media spending as a share of sales last quarter but is still putting more money into advertising overall, and may have more reason to put money behind ads for Tampax and other brands soon. Those were among takeaways from P&G's quarterly earnings report and management calls Thursday, when the consumer packaged goods giant reported organic sales growth of 5%, though unit volume dropped a precipitous 6% on 10% price hikes. P&G stock was down around 1.5% in afternoon trading, as the volume impact was sharper than expected, and operating profits and earnings per share were slightly below consensus expectations, said Deutsche Bank in a research note. Ad Age events Sign up for events and awards Learn more here P&G raised the low end of its sales guidance for the year and said its market shares globally were broadly in line with a year ago. U.S. organic sales rose 6% last quarter, while China, hit by a COVID-19 outbreak, saw sales plunge 7%. Price hikes and volume declines were focused the most on markets such as Turkey and Argentina, whose currencies have plunged against the dollar. Here are some of the key marketing takeaways from P&G's fiscal second quarter, which ran from October through December. Marketing spending falls but trends up In the second quarter, P&G's marketing spending fell 0.9 percentage points as a share of sales (around $187 million), and ad spending, a narrower measure, fell 0.5 percentage points (around $100 million) from a year earlier. But in absolute terms, P&G’s ad spending increased by $140 million in the recent second quarter from the fiscal first quarter, Chief Financial Officer Andre Schulten said on a media call. P&G is the world's fourth-largest advertiser, and its worldwide advertising spending fell 3% in fiscal 2022, according to data from the Ad Age Datacenter Reason to expect spending upturn Cutting into P&G’s profit margin last quarter was spending to increase manufacturing capacity, including for tampons, which have been in short supply in the U.S. the past year in part because Tampax ads featuring Amy Schumer that ran through late 2021 were successful, said Schulten. With more capacity in place, P&G has more reason to spend on marketing for tampons and other businesses with new capacity in the quarters ahead, he told investors on a later call. Efficiency moves continue Unlike prior quarters, P&G didn’t specifically mention savings and efficiencies in media spending or agency fees in its earnings release. But the company hasn’t run out of savings opportunities and continues to improve impact per dollar spent with a higher mix of digital spending, Schulten said during the media call. He went into more detail when speaking to investors, saying P&G has improved effectiveness, for example, by better targeting diapering households with Pampers ads. But it’s been the opposite in fabric care, a category everybody uses, where P&G’s in-house media planning and buying has found ways to reach more people at lower cost, he said. “The fabric care team here in the U.S. has brought media planning and buying in house, developing proprietary algorithms to better place ads,” Schulten said. “That in and of itself has allowed $65 million of savings in one year, while increasing frequency.” Both the diapering targeting approach and the fabric care broader reach at lower cost models work, Schulten said, and P&G still has room to apply them to other categories and geographies.Related news: Downy teases its first Super Bowl commercial Uncertainty reigns Chairman-CEO Jon Moeller repeatedly focused on how much uncertainty P&G faces, in terms of the possibility of recession, how consumers will respond to further price hikes and how well and quickly China will bounce back from its Covid outbreak. Based on its experience with its own facilities across China, P&G estimates the infection rate is “up to 80%,” Moeller told investors. “And we’re sitting here the week before Chinese New Year, when all the traveling occurs, and at the same time we have a government and a populace who desperately wants things to get better.” ~ ~ ~CLARIFICATION: This story has been updated to further reflect that P&G Chairman-CEO Jon Moeller was referring to the company's operations in China when discussing the infection rate. Check out the latest Ad Age events and award programs

Procter & Gamble ad spend down but recovering, and tampon ads could help

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