P&G reports strong sales growth, despite cutting marketing spend by 6%
- Procter & Gamble (P&G) posted an organic sales growth of 4% for Q1 2019, its strongest performance in the past five years, even though the company spent 6% less on marketing, according to AdAge.
- Sales for the quarter, which ended Sept. 30, reached $16.7 billion. The 4% growth was ahead of analysts' projections of 1.6% growth. P&G reported $130 million in savings, about the same as last quarter, from cutting back on media, agency and production costs.
- P&G had a 4% increase in organic sales for grooming, including 10% in the U.S., due to the growth of Gillette. Nielsen data previously showed P&G's U.S. razor sales were down, but online sales weren't included in the data, and P&G's online Gillette Shave Club likely helped with the growth in the grooming category.
Sometimes, less is more. That's what P&G’s latest quarter results suggest, as the company saw organic sales increase while cutting its marketing budget. The company, one of the world's largest advertisers, has been restructuring its marketing over the past few months, including reducing the number of agencies it works with and piloting new agency models in an effort to have more control over creative, better measure campaign effectiveness and reduce agency and production costs. P&G also eliminated waste from its marketing budget by using third-party data to reduce ad frequency by 10%, reinvesting the savings to increase media reach, the company reported last quarter. Working media spend increased 4% year-over-year in Q4.
The consumer packaged goods giant's growth in the grooming market, specifically Gillette’s online sales, align with its efforts to grow its e-commerce strategy. E-commerce accounts for 6% of P&G’s sales, or $4.5 billion, and the company expects that share to grow to 30% by 2021. To build more direct relationships with consumers while also helping retailers boost store sales, P&G announced last week that it's testing the idea of Performance Marketing Retail Partnerships and asking retailers in Europe, India, the Middle East and Africa to share their customer data to help the company target ads.
P&G is not alone in rethinking its marketing strategy and looking for ways to create efficiencies. Seventy-four percent of major multinational brands are reviewing their agency arrangements, research by the World Federation of Advertisers and The Observatory International found. CPG giant Unilever has also been working to reduce waste in its marketing spend and has been bringing more marketing functions in-house. Unilever posted a 3.8% growth in organic sales last quarter, according to AdAge.