Beyond Tide and Downy: P&G's Fabric Empire Expands

Management claims to generate nearly 70% of laundry growth in America.

Photo by Annie Spratt on Unsplash

Procter & Gamble (P&G), a stalwart in the consumer goods sector, kicked off FY 2024 with impressive results, largely driven by its Fabric Care segment. "It's driven by strong innovation, strong superiority and doubling down on consumer-relevant communication and in-store support," CFO Andre Schulten told investors last week.

P&G's overall sales for the quarter amounted to $21.9 billion, marking a 6% increase from the previous year. This growth comes alongside a surge in gross margins attributable primarily to price increases (but helped by lowered commodity costs and productivity initiatives).

However, it's the story of Fabric Care that truly captures the limelight this quarter.

Fabric Care is the Company's Crown Jewel

P&G dominates the fabric category. It captures about 25% of every dollar the world spends on laundry detergent. It’s perhaps most famous for premium brands Tide and Downy, but it really dominates each price point. Gain and Era are for folks looking to spend less. Dreft controls the premium baby market.

This quarter, the U.S. Fabric Care segment saw an uptick in value and volume share, with volume share growing by 1.6 points. This comes at a time when U.S. laundry consumption is at an all-time high. A lot of this can be attributed to the rise of fabric enhancers—little balls people throw in to make their laundry smell better and feel softer. The Ohio-based giant more or less invented the sub-category and is fueling almost all of its growth. “We're driving 70% of the category growth in laundry,” Schulten said. "I fully believe that this will only accelerate."

Still Looking to Invest

Management said it isn't deterred by raising interest rates and is looking to make investments across three primary avenues - innovation, better marketing, and strengthening supply resilience. 

• Innovation: "Ninjamas" a nighttime bedwitting product, essentially created a new market, with P&G driving 60% of the categories growth. 

• Marketing: The company is keen on leveraging advanced targeting across global media to boost ROI, reach, and frequency. 

• Supply chain resilience: Further investments in productivity and capacity across suppliers.

Pricing Growth will slow

• Pricing is expected to start lapping in the second quarter, leading to a projected drop of 3 to 4 points.

The China Problem

P&G's overall stellar performance comes with a caveat: excluding China, the results would paint an even rosier picture. Executives believe volumes would have been up slightly--despite the price increases--had it not been for China.

They Said It: 

Andre Schulten on volume vs value growth

We expect the market to return to a lower, more sustainable growth rate, more in line with historical growth at around 4%. That will have a stronger contribution on the volume side. We would expect that to be around 2% -- 1% to 2% of pricing and maybe 1 point of mix impact. That will occur over the next few quarters. And as always, P&G is intending to grow ahead of the market.