Procter & Gamble Says Consumers Not Trading Down Despite Higher Prices

Consumers are generally not trading down to generic brands of everyday items, despite rising prices.

Procter & Gamble — the maker of brands like Crest, Tide and Pampers — said Friday (July 28) during its quarterly earnings call that the only products seeing some trading down are those in which its premium brands gained share due to product shortages during the pandemic.

“Private-label shares in aggregate are actually flat in the U.S. at about 16%, so not really growing sequentially,” Procter & Gamble Chief Financial Officer Andre Schulten said during the call. “But if you compare versus previous quarter, as we have mentioned before, there is some volatility, especially in family care, some in baby care, where we would expect as private label and smaller brands return to the shelf, some of those record shares will decrease, and that’s partially what we’re seeing.”

The impact of inflation can be seen in Procter & Gamble’s results for the quarter ended in June. Organic sales increased 8% even as shipment volumes decreased by 1%, according to a Friday press release. The firm said higher pricing accounted for 7% of the increase in organic sales growth.

Prices were up across the company’s product categories, from a low of 6% in the healthcare and the fabric and home care categories to a high of 9% in the grooming category, the release said.

Volumes were flat or down, with the beauty and the baby, feminine and family care categories remaining unchanged, and the healthcare category seeing the biggest drop, at 3%, per the release.

Looking ahead, Procter & Gamble said it expects organic sales growth in the range of 4% to 5%, according to the release.

CEO Jon Moeller said during the call that the company is focusing on offering “superior performing products at a superior value” among the products that consumers use every day.

Schulten said during the call: “Structurally, the business is in a very good place, and we think we are well positioned to continue our journey on driving market growth and thereby expanding our share premium, which by the way [is] included in our guidance where we said the market is going to grow 4%, and we’re going to grow ahead of the market.”