Procter & Gamble Pulls Back on Marketing Spend

After many months of companies dealing with higher costs and consumers struggling with inflated prices for everyday goods and services, Procter & Gamble trimmed its marketing spend during its most recent quarter. “Absolute dollar advertising spending is down,” P&G chief financial officer Andre Schulten said during a call with reporters. The company, one of the world's largest advertisers, remains committed to investing in not only reaching more consumers but doing so at an effective frequency, he noted. “We’re shifting more and more spending to digital, which is helping us to do that productively." How Procter & Gamble Plans to ‘Widen the Screen’ for Black Creators and Media Companies P&G now allocates more than 50% of its media spend to digital, where the manufacturer is using its first-party data to deliver tailored ads with more efficiency. The company has also increased its investment in advertising by $1.2 billion between 2019 and 2022. Schulten stressed during an earnings call with analysts that if a persuasive marketing campaign is the goal, the amount of money spent on the activity is an outcome rather than the determining factor in its success or failure. "It is difficult to describe media sufficiency in dollars, especially when we are actively shifting our spending from linear, non-targeted TV into programmatic and into digital spend that is a lot more targeted and a lot more precise in terms of delivering reach and quality of reach where we need it," he said. The Cincinnati-based maker of Gillette razors, Tide laundry detergent and Charmin toilet paper reported organic sales growth of 7% during the three-month period ending Sept. 30 compared to the same time in 2021. This result was largely due to charging shoppers higher prices. Volume was down 3%. The U.S. inflation rate, minus food and energy, hit 6.6% in September. Compared to a year ago, it was the largest annual spike in four decades. Prices for housekeeping products from paper towels to dish soap to garbage bags were up 11.9%, according to the Bureau of Labor Statistics. Nevertheless, P&G expects organic sales growth of 3% to 5% for its 2023 fiscal year. Infographic: How People Want to Shop This Holiday Season Balancing higher costs with higher prices remains a difficult task for CPG companies, as many consumers seek ways to beat the rising cost of living, which includes turning to private labels. Meanwhile, Swiss packaged-food giant Nestlé reported organic sales increased 8.5% during the first nine months of 2022. Growth, however, was driven by a 7.5% price increase and 1% rise in volume. Price increases were highest in North America, where they surged 11.1%. “The challenging economic environment is a concern for many people and is impacting their purchasing power,” Mark Schneider, Nestlé’s CEO, said in a statement. “That's why we aim to keep products affordable and accessible while considering the interests of all our stakeholders.” In September, IPG's Magna noted in a report that CPG brands “are especially at risk as they are forced to increase product prices and face the possibility of consumers trading down in favor of cheaper brands.” Based on a weakened economic outlook, the global media investment and intelligence company reduced its 2023 ad spend forecast from 5.8% growth to 4.8%. It expects below-average growth in advertising for the CPG industry next year.