By Tonya Garcia
Procter & Gamble Co. is home to some of the biggest and most popular names in consumer goods, but in this historic inflationary environment, the company used its earnings call to talk up the value aspect of its products.
“Our superiority strategy continues to drive strong market growth and, in turn, share growth for P&G,” said Andre Schulten, chief financial officer at P&G, during the company’s recent fiscal third-quarter earnings call.
“Consumers continue to prefer P&G brands, recognizing their superior performance and value.”
P&G /zigman2/quotes/202894679/composite PG +0.73% made its case as shoppers consider the options available for stretching their budgets . One of those options is trading down to items with lower prices, like private-label goods, which have proliferated store shelves over recent years.
There have been a mountain of news stories about inflation driving up the cost of everyday goods and, simultaneously, shrinking the size of certain items as companies grapple with rising costs. From smaller bags of Doritos chips to fewer chicken nuggets in the Burger King meal deal , consumers are feeling the squeeze with no clear end in sight.
According to Deloitte’s Global State of the Consumer Tracker survey conducted on March 30, 81% of consumers are concerned about inflation, and 76% of consumers in the U.S. say they’ve noticed higher grocery prices versus the last month.
One option is trading down to a less expensive item. Historically, those have been private labels, also known as store brands or owned brands. From Target Corp. /zigman2/quotes/207799045/composite TGT -1.33% to Walmart Inc. /zigman2/quotes/207374728/composite WMT +0.0056% , Kroger Co. /zigman2/quotes/206215053/composite KR +0.14% and Trader Joe’s, there are plenty of owned brands to choose from that promise high quality at more affordable prices.
“Private label previously had not the highest perception of quality. Pandemic related stockouts forced many people to try new brands in the past few years, including private label,” Rod Sides, the U.S. retail and distribution lead at Deloitte, told MarketWatch.
But these new trials have improved consumers’ perception of these brands.
“With 8 in 10 U.S. consumers concerned about inflation, especially around groceries, there is an opportunity for retailers to showcase private label offerings as a high-quality option to alleviate inflationary pressures.”
P&G products include Tide laundry detergent, Pampers diapers, Bounty paper towels and Pantene hair care products. The company noted on its earnings call that many of the items in the company’s portfolio are “daily use products” in the “cleaning, health and hygiene categories where performance plays a significant role in brand choice.” Performance of these types of products is part of the value equation.
“Noticeable superiority is perhaps[…] most important in the inflationary environment we are potentially facing,” P&G CFO Schulten said.
P&G, like many other companies, has already raised prices , and expects to raise prices even further. The company reported fiscal third-quarter earnings last week that beat expectations and raised its outlook. The company’s sales gains were the biggest in decades, according to The Wall Street Journal .
P&G stock is down 2% for the year to date but has advanced 22.2% over the past year.
“Pricing was a sequentially stronger contributor to top-line growth in the third quarter and will continue to be a driver again in the fourth quarter as we get the full effect of increases taken over the past few months,” Schulten said.