Procter & Gamble sure sounded confident in the face of a tough economy for a while there. Back in January 2022, the company—which owns Crest, Tide, Pampers, Gillette, Ivory, Charmin, Bounty, Tampax, Pantene, Febreze, and dozens of other brands—said its prices would be going up throughout 2022, and that consumers would react by simply paying more.

“The consumer is very resilient and very focused on these categories of clean home and health and hygiene,” P&G finance chief Andre Schulten told The Wall Street Journal at the time.

And for some months, it looked like this bullish prediction was on the nose. In its third quarter earnings reports, which came out in April 2022, P&G announced that its net sales were up 7 percent, beating Wall Street’s expectations. Even with higher prices, P&G’s more expensive premium products were selling especially well, particularly in the categories of health care, grooming, laundry, and baby care. The company went so far as to raise its outlook for fiscal year 2022 from 3 or 4 percent, to 4 or 5 percent, over the previous year.

Well, no one needs to tell you it has been a long, hard year, financially speaking. And now Procter & Gamble knows that as well as anyone. In July 2022, P&G announced quarterly earnings that missed estimates. The company also forecast lower sales growth, and the reasons its cited might sound familiar: increased transportation and commodity costs, shoppers cutting back, and retailers’ reluctance to raise prices.

“Nobody is pleased about the continued inflationary trends that we’re seeing,” Schulten said on a call, while P&G Chief Executive Officer Jon Moeller admitted that the company is expecting to continue to face “headwinds,” going into 2023. But Moeller still sounded surprised, perhaps even baffled, two months later, when discussing how, in the face of the highest inflation in 40 years, consumers continued to turn away from premium laundry detergents in favor of more affordable suds. “I won’t deny at all that certain consumers will make changes on the margins,” Moeller said. “It’s hard for me to understand how superiority in these categories becomes irrelevant.”

Discussion Questions:

  1. Would you expect consumers to switch away from premium detergent brands during a recession?
  2. Is “superiority” in laundry detergent irrelevant, in today’s economy, or is it one factor among many that guides purchasing decisions?
  3. How would you advise Proctor & Gamble to attract new customers and more spending, given consumers’ current challenges?

Source: Niamh Carroll, “P&G: Communicating Brand ‘Superiority’ Has Been Key to Weathering Price Increases,” MarketingWeek, April 20, 2022; Parkev Tatevosian, “Procter & Gamble’s Pricing Power Is Stronger Than Ever,” The Motley Fool, May 21, 2022; Mitchell Hartman, “Higher-Income Consumers Sticking with Premium Brands, like P&G’s, Despite Price Increases,” Marketplace, April 20, 2022; Sharon Terlep, “Procter & Gamble Says Prices Will Keep Going Up,” The Wall Street Journal, January 19, 2022; Amelia Lucas, “Higher Prices Ahead for Tide Detergent and Other Procter & Gamble Products as Costs Climb Higher,” CNBC, January 19, 2022; Daniela Sirtori-Cortina, “P&G Falls after Warning as Inflation Hits It Worse Than Rivals,” The Spokesman-Review, July 29, 2022; Uday Sampath Kumar and Jessica DiNapoli, “Tide Maker P&G Misses Earnings, Forecasts Lower Growth as Consumers ‘Scrimp,'” Reuters, July 29, 2022; Sharon Terlep, “Inflation Tests Tide Maker’s Laundry-Detergent Dominance,” The Wall Street Journal, September 4, 2022; “P&G Announces Fiscal Year 2022 Third Quarter Results,” pginvestor.com, April 20, 2022