P&G sees volumes fall as consumers shun premium products

Posted by Isobel Drake on 6th August 2009

Procter & Gamble, the maker of some of the world’s most well-known consumer brands, has booked a rise in full-year profit despite a decline in market share.

The company admitted that pressure on beauty and snack brands had been intense, leading to an 11 per cent decline in fourth quarter sales.

“In fiscal 2009 and particularly in the fourth quarter, P&G faced one of the most difficult macroeconomic environments in decades,” A.G. Lafley, Chairman of P&G, said. “We made choices to focus on cash and cost discipline, maintain investments in long-term growth opportunities and to protect the structural economics of our businesses around the world. We delivered strong free cash flow – the financial lifeblood of the business – while also delivering organic sales and earnings-per-share results that balanced short-term returns and long-term investments.”

Chief Executive Officer Bob McDonald acknowledged that their premium products were not well suited to the current trading conditions, but said that innovation would help turn sales around.

“In fiscal 2010, we will accelerate investments in innovation, portfolio expansion and consumer value to grow our core business and to serve more consumers in both developed and developing markets,” he advised. “We will also continue to drive simplification efforts and leverage P&G’s scale to increase productivity, improve execution and lower costs.”

Their Snacks and Pet Care division, which includes the Pringles brand, recorded a three per cent decline in sales over the year as retailers reduced their inventory levels.

“Snacks volume decreased high single digits due to lower merchandising activity, reduced trade inventory levels and a high base period, which included the Rice Infusion, Extreme Flavors, and Stix product launches,” the company advised.

The maker of Gillette said they expected sales to be flat, at best, in the coming quarter and would be keeping a closer eye on market share – hopeful they can boost their share without slashing margins.

“We will be tracking and reacting to it, focused on the goal of building market share profitably, and we have the tools to do that,” Mr McDonald concluded.