By Sabrina Sanchez
Procter & Gamble has increased its marketing spend nearly to pre-pandemic levels, the company said on its fiscal Q1 2022 earnings call Tuesday.
According to Andre Schulten, chief financial officer at P&G, marketing volumes were running at approximately 33% of total spend pre-pandemic. Currently, marketing volumes are back up to approximately 30% of total spend, an increase of $130 million year over year.
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Schulten told investors to expect marketing spend to continue to increase moving forward, as long as P&G can “create good return on investment.”
“As we increase digital reach, we are getting better at targeting,” Schulten said. “We can both increase reach and quality of reach, and therefore, offset some of the incremental spend.”
P&G defended its position to spend more on marketing against skeptical investors questioning its efficiency. The company said it will increase pricing across nine out of 10 product categories, including beauty, baby products, skincare and grooming, to mitigate increased costs caused by supply chain issues, freight costs and continued pandemic impacts.
“As we bring more media spend into our optimized targeting pools [and] increase the percentage of digital media around the world [as well as] optimize our own algorithms to target messaging to consumers, there continues to be a significant opportunity,” said Jon Moeller, vice chair and incoming president and CEO of P&G, effective November 1.
As P&G invests more in marketing, e-commerce is a growing focus. The CPG giant’s e-commerce business grew 16% year-over-year globally, and now represents approximately 14% of its total sales globally and 11% of total sales in the U.S. P&G expects total sales to grow between 2% and 4% in fiscal 2022, due in part to adjusted pricing.
Moeller said that while investors can expect P&G to continue to increase investments in marketing programs to offset cost pressures, spending will vary by quarter.
“It might seem kind of an odd dynamic, but the more efficient and effective we can make our marketing spend, the more attractive it becomes to make those investments,” Moeller said.
Despite increasing marketing spend, P&G is still struggling with ongoing impacts of the pandemic. Supply chain issues, higher commodity prices, freight cost and a tight labour market led to a 4% decrease in gross margins.
Schulten said that P&G will continue to experience volatility this fiscal year as these issues persist.
“These costs and operational challenges are not unique to P&G, and we won’t be immune to the impact,” he said.
While P&G has already adjusted the prices of some products, Schulten said it is “still early” in the cycle and the company has not seen notable changes in consumer behaviour.
