P&G Says Gas Prices Limiting Consumer Spending

Procter & Gamble says economic pressures have consumers focused on smaller pack sizes and promotions.

The consumer packaged goods company released earnings Wednesday (July 29) showing sales up 3% for its most recent quarter and 1% for the year.

Speaking to analysts during an earnings call, Chief Financial Officer Andre Schulten pointed to the price of gas having a “specific impact” on consumer spending.

“I think it’s a general impact where you see the consumers that are well off, continue to behave as they’ve behaved before, [choosing] larger pack sizes to find value,” he said.

“The more pressured consumer that will be more impacted by gas prices or incremental $100 of gas cost per week, they continue to look for smaller pack sizes. They continue to be very affected by promotion patterns. None of that has changed.”

Despite these pressures, CEO Shailesh Jejurikar noted the company’s user base skews toward households earning over $100,000, describing current trends as a “discernment by consumers” rather than an “inability to buy.”

In the U.S., a notable disconnect appeared between “sell out” (actual consumer consumption) and “sell in” (retailer orders), with sell out or consumption up 2% and sell in down 1%. This was driven by retailer inventory reductions and the shift of major events like the earlier Amazon Prime Day, which impacted the timing of merchandising spending.

Meanwhile, eCommerce sales ticked up 6%, and now account for 20% of Procter & Gamble’s (P&G) total sales. This digital growth is especially pronounced in Greater China, where P&G is winning across both traditional eCommerce pure-plays and social commerce platforms.

“Coming out of COVID, it was a depressed market, it was a tough competitive environment, and the results were not great,” Jejurikar said. “We are now growing in China for the first time in 15 quarters, driven by fundamental changes we made similar to what we’re doing in the company.”

Other consumer-focused companies have reported similar pressures this month. For example, grocery chain Albertsons forecast slightly weaker sales amid more cautious lower-income consumer spending.

The company lowered its guidance for the fiscal year, projecting decreases of 1.5% to 0.5%, as shoppers switch to private label products.

“We’re seeing a shift to value packaging, trade-downs,” CEO Susan Morris said during an earnings call. “I think we’ve talked about this before in certain commodities, and again, it’s a very bifurcated situation. Lower-income customers are shifting more to cheaper proteins, as an example.”