P&G reported a strong second quarter, reflecting pandemic-driven demand for its brands. Although there is a degree of uncertainty and volatility associated with its expectations for the second half, the business is confident that it will benefit from shifts driven by the COVID-19 pandemic.
Sales guidance raised despite second half uncertainty
Second quarter sales increased by 8%, driven by volume gains, pricing and mix. The performance was broad-based, with all 10 global categories growing sales. While the business is confident for its prospects in the second half, there is a high degree of uncertainty with regards to the next six months. Despite the roll-out of vaccines in many countries, the number of COVID-19 cases remains high, and it’s unclear when higher unemployment levels may start to fall. Government economic support packages also vary by country, while social unrest and economic distress can impact category growth and product supply. However, it has raised its guidance for organic sales growth of 5-6% for the full year and remains optimistic for the post-pandemic era.
1. Changed consumer focused on cleaning, health and hygiene
The prolonged nature of the crisis suggests that new habits have been formed which will remain even as the pandemic eases. It does not expect behaviours to snap-back to pre-crisis levels. To capitalise on this, it is innovating with new product development to better meet consumers’ cleaning, health and hygiene needs, modifying packaging to clarify product benefits, including science-backed claims and switching the emphasis of its marketing to be more educational.
2. Spending more time at home
P&G expects consumers to spend more time at home post-crisis. In part this will be driven by higher levels of working from home. This will drive more meals being eaten at home, with related consumption impacts in several of its core categories. P&G noted cleaning and sanitizing frequency up 30%, dishwashing frequency up 15%, air freshening frequency up 20% and in-home paper towel usage up 15%.
3. The flight to established brand names
This has been one of the defining elements of the pandemic. Consumers have indicated a preference for brands that guarantee the power of performance. P&G noted that retailers are reflecting this, and the declining share of private label in many markets, as they continue to rationalise their ranges. This leaves the business well-positioned as the crisis eases.
4. A shift to ecommerce
Ecommerce sales increased by around 50% in the quarter, taking penetration to 14% of global sales. P&G had developed well-established capabilities in with pureplay and omnichannel retailers prior to the pandemic which have underpinned its performance over the last 12 months. At an aggregate level, its online market shares are marginally ahead of its store-based shares, with margins similar. This leaves P&G agnostic to channel growth and will follow customer demand.
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