Led by advertising efficiencies, P&G post another solid quarter
Procter and Gamble delivered fine earnings for the fourth quarter of 2022. The company behind Tide, Pampers, and Head and Shoulders shampoo earned $19.5 billion in the last three months, an increase of 3% from last year. Like most CPG companies, the big sales driver was price. P&G used an 8 percent price increase to compensate for a 1% decrease in volume.
From a profitability perspective, gross margin decreased by under 4 percent for the quarter. The primary culprit was an increase in commodity and freight costs. The company predicted about $3.3 billion in additional costs for the next year for the two. “We’re working to mitigate the impact of these cost headwinds,” CFO Andre Schulten said. The company will use “a combination of innovation to create and extend the superiority of our brands, productivity in all aspects of our work, and pricing.”
Advertising efficiency at Procter and Gamble
One hidden area of productivity is advertising spending. According to management, P&G has been incredibly successful at generating more impact without increasing spend. “We have delivered significant productivity over the past years,” Schulten said. Since it’s P&G one of the strongest brand managers in the world, the company took the efficiency savings and reinvested them in more advertisements. The composition of the spending is also telling. P&G revealed that “more than 50% of our advertising is in digital.” In 2021, P&G spent $8.2 billion on advertising. More than $4 billion was once earmarked for television, radio, and print and is now spent with Facebook, Google, and Amazon.