Emily Tan
Apr 27, 2017

P&G plans $2 billion more in marketing cuts as sales fall

Company eyes $500 million in additional savings from reduced agency fees and ad production costs, and the same amount for in-store costs, direct-to-consumer and sampling.

P&G hailed SK2's 'change destiny' as a model campaign.
P&G hailed SK2's 'change destiny' as a model campaign.

P&G's net sales for the third quarter of 2017 dropped by 1 percent versus the prior year, to $15.6 billion.

The FMCG giant blamed the decline on a slowdown in market growth, continued geopolitical disruptions and foreign exchange challenges.

Meanwhile, organic sales increased 1 percent, driven by a 1 percent increase in organic shipment volume.

"Against this backdrop, we delivered modest organic sales growth and double-digit Core EPS growth, and we increased the quarterly dividend for the 61st consecutive year," chairman, president and chief executive David Taylor said in a statement.

P&G aims to improve its performances by raising the standards on its products and communications as well as saving a further $7 billion over the next five years, in addition to the $10 billion in savings it outlined last year.

Of the $7 billion, P&G intends to save more than $2 billion in marketing spend.

"Half of that amount will come from media rates and eliminating media supply chain waste," chief financial officer Jon R Moeller said during the earnings call earlier today. "We see about half a billion more in savings in reduced agency fees and ad production costs, and we see about half a billion dollars savings in in-store costs, direct-to-consumer and sampling. All while strengthening our overall programme, increasing reach, increasing continuity and improving effectiveness."

In January, P&G announced that it was reviewing its media accounts in UK, Ireland and four other European nations.

Until the results are announced, Starcom handles the bulk of the UK account alongside MediaCom, which oversees press.

Carat handles P&G’s media in a cluster of southern European countries.

During the earnings call, Moeller also expounded on a new corporate standard of 'irresistible superiority', another key component in P&G's strategy to turn things around.

Moeller discussed new ways of measuring P&G's products against this new standard. "Currently we earn a passing grade against this new benchmark about 30% of the time."

He also outlined the standards by which the company's advertising would be measured against this benchmark: "Campaigns must drive awareness and share growth by a full-year. Some campaigns that measure up against this are Always 'Like a girl', Tide 'If it's gotta be clean, it's gotta be Tide', Dawn 'One drop of Dawn, grease is gone', and SK2's 'Change destiny'."

Moeller added that P&G's efforts to lead the market in media transparency was part of this new benchmark.

Bringing more of its offerings up to the new 'passing grade' will take "more investment, into reformulation, packaging and advertising, all while achieving savings," Moeller said.

Campaign UK

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