Procter & Gamble trims ad spending again, but still beats forecasts

Procter & Gamble Co. trimmed marketing spending for the second straight quarter in the face of rising costs and price hikes, but company executives said its marketing effectiveness remains undiminished. Shifting spending to digital and doing more of that digital buying in-house have contributed to the efficiency, they said. And P&G’s fiscal first-quarter results seemed to confirm that, coming in ahead of analyst expectations on the top and bottom lines. P&G’s shares rose nearly 2% in afternoon trading on its relatively rosy revenue, earnings and full-year forecast. Ad Age Next: CMO Get your tickets for the Dec. 7 event in New York Register here P&G, the maker of products such as Gillette razors, Pampers diapers and Tide detergent, was the third-largest U.S. advertiser in 2021 with spending of nearly $5.08 billion, according to the Ad Age Datacenter. While P&G didn’t disclose total marketing spending in its quarterly report, it did indicate its roughly $200 million in overhead and marketing efficiency savings last quarter hadn’t been spent back into media, which was generally the case in prior years until recently. “We continue to invest in reach and quality of reach,” Chief Financial Officer Andre Schulten said in a media briefing call. “The absolute dollar advertising spending is down, but that is driven by multiple sectors and flowing productivity through instead of fully reinvesting after we’ve invested more than $1.2 billion incrementally in advertising over the past three years.” Shifting more money to digital was part of that efficiency, and in the company’s earnings call later, Chairman-CEO Jon Moeller addressed analyst questions about how it’s maintaining impact despite more restrained spending. Moeller said he and Schulten met with North America executives earlier this month to talk about marketing spending. “They had prepared perspectives by category on dollar spend versus a year ago, and I walked into the room and said, ‘This isn’t helpful,’” Moeller said. “What we need to understand is what our reach objectives are and are we sufficiently spending to achieve those objectives? What are our objectives in terms of the number of weeks on air achieving that reach? Ultimately, he said executives showed they were hitting the numbers they needed. “We’re spending a fair amount of time on this,” Moeller said. “I’m sure it’s frustrating because you don’t have visibility to all of that, you just have visibility to the dollars, which I completely understand.” Besides improving efficiency by moving money from linear TV to digital channels, Moeller said, “the other dynamic is we’re moving a lot of the marketing activities in-house.” When that happens, Moeller said, what used to show up on the books as outside spending with agencies to buy media instead goes into the overhead budget. Advertising Week 2022 Updates and analysis from the annual event Read more here P&G’s organic sales—adjusted for currency, acquisition and divestiture effects—rose 7% to $20.6 billion last quarter, boosted by a 9% increase in prices. Unit volume declined 3%, but two percentage points came from a reduction in the portfolio of products the company sells in Russia. Broadly, P&G said its market shares were even with a year ago. The company still expects organic sales to increase by 3% to 5% in the current fiscal year. “The consumer remains resilient and has largely accepted higher prices,” said Edward Jones analyst Brittany Quatrochi in a research note. “P&G is seeing some consumers move to its lower-priced brands or products, but is not seeing a large shift to store-branded products.” The company did lose some share in the North American laundry business, but that was due in part to supply chain issues in recent quarters which have since reversed, with shares bouncing back in recent weeks, Schulten said on the company’s earnings call.

Procter & Gamble trims ad spending again, but still beats forecasts

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