The consumer goods company expects marketing spending to rise when it recovers to pre-pandemic levels, after spending an additional $130 million in the quarter. On its fiscal Q1 2022 earnings call Tuesday, Procter & Gamble reported that its marketing spending has nearly returned to pre-pandemic levels.
Pre-pandemic, marketing volumes were around 33% of overall spend, according to Andre Schulten, P&G’s chief financial officer. Currently, marketing spend accounts for almost 30% of total spending, up to $130 million from the previous year.
As long as P&G can “generate a good return on investment,” Schulten told investors, marketing spending will continue to rise in the future. P&G defended its decision to increase marketing spending in the face of doubts from investors.
The firm stated it will raise prices in nine out of ten product categories, including beauty, baby products, skincare, and grooming, to offset rising expenses due to supply chain challenges, freight costs, and the pandemic’s ongoing effects.
E-commerce is becoming a bigger priority for P&G as it invests more in marketing. Internationally, the CPG behemoth’s e-commerce division climbed 16 percent year over year, accounting for roughly 14 percent of total sales globally and 11 percent of overall sales in the United States. Due in part to modified pricing, P&G forecasts overall sales to climb between 2% and 4% in fiscal 2022.
While investors may anticipate P&G to continue to expand marketing program investments to counter cost challenges, spending will vary each quarter, according to Moeller. “It may seem counterintuitive, but the more efficient and effective our marketing expenditure becomes, the more appealing it becomes to make those investments,” Moeller explained.
Despite increased marketing spending, P&G is still dealing with the pandemic’s long-term effects. Gross margins fell by 4% as a result of supply chain challenges, rising commodity prices, freight costs, and a tight labor market. P&G will continue to be volatile this fiscal year, according to Schulten, as these challenges persist.
“These costs and operational issues are not unique to P&G, and we will be affected,” he said. While P&G has already altered the prices of several items, Schulten stated that the cycle is “still early” and that the business has not noticed any significant changes in consumer behavior.
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