Procter and Gamble FY 1Q16 Earnings Call Notes

Market growth rates decelerating in value and volume thanks to developing markets

“We do continue to operate in a challenging and volatile macro environment. Market growth rates on both a volume and value basis are decelerating, due mainly to slower growth in developing markets.”

Our competitors aren’t having to deal with the same currency fluctuations

“The relative strength of the dollar has made it tougher for us than our euro and yen functional currency competitors. We’re facing, for example, a 40% devaluation in Russia, while our euro functional competitors are facing half of that. Each of these items are realities, not excuses, and many of these dynamics will continue.”

INnovating with Gillette online

“We’re also innovating online. With more men purchasing their blades and razors through e-commerce, it’s critical that Gillette establishes itself as the online leader. Gillette’s online Shave Club launched in June and is off to a very good start, with e-commerce share of blades and razors up four points since launch. We’re building partnerships with e-tailers and retailers. We’re offering our shoppers subscription tie-ins for the Gillette Shave Club. Gillette is now consistently number one in paid search and has gone from number 50 to number two in organic shave club search. Importantly, Gillette’s product is significantly consumer preferred over any and all shave club competition, winning on closeness, smoothness, comfort, and 18 other attributes tested, including importantly, overall better shaves.”

Challenging environment

“So it continues to be a challenging environment. Against this backdrop, we continue to improve productivity, to transform our supply chain, to focus our portfolios, and to invest in superior consumer preferred brands and products. ”

We haven’t had premium products in China and that’s hurt us

“China, our second largest market, so it makes a significant difference both from a top line and bottom line standpoint, we have not fully accessed the opportunity that the market is presenting in terms of growth in the premium price tiers as consumers look for better, more differentiated solutions, and frankly, higher product quality. We are bringing those items to market now, but our absence in those price tiers has, frankly, hurt us fairly significantly.”

Earn a return on marketing dollars

“yes, we expect marketing to increase this year on both an absolute basis and a percentage of sales basis. By marketing, I mean working dollars, so we’re going to continue to fund increases in spending that matters with reduction in spending that doesn’t. And look, if I was asked to spend an additional $1 billion tomorrow, I could obviously do that, but that’s not the question. The question is can we earn a return on that and create value through that investment.”

Promotion is not our game

“We will not, in most cases, be looking to promotion as a way to strengthen our business. We will be competitive where we need to be, but that is not going to be something that we proactively increase. We may increase trade spending at any point in time as a mechanism of adjusting price, but generally that’s not our game.”

We’d rather establish superior value equations

“We’d much prefer to establish superior value equations with superior products that are adequately supported. And that’s also the reason why maybe the top line isn’t turning as quickly as certainly we would like or understandably as you would like because we’re not going to spend money just to spend money. We’re not going to spend money in ways that are not sustainable in terms of generating growth in a profitable way on our business.”