In This Article:
Procter & Gamble (PG) beat third-quarter earnings estimates on both the top and bottom lines. UBS U.S. Household and Personal Care Analyst Peter Grom breaks down P&G's earnings figures while looking to the greater consumer staples sector.
"One of the things that P&G has done exceptionally well has been... innovations," Grom says. "And through innovation, they have been able to drive brand choice because of performance is superior to others, and that causes the consumers to trade up, particularly if there is a perceived benefit relative to the competition."
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Video Transcript
AKIKO FUJITA: Good to talk to you today. Let's start by talking about P&G results. Sales largely driven by those higher prices that they implemented. I'm wondering if they have seen the ceiling on that. What are you seeing in consumers and their willingness to continue to pay up for these products?
PETER GROM: Yeah. Thanks. First off, thanks so much for having me today. Glad to be here. I would say to that question, I would say on list pricing, I think it's going to be harder and harder for additional increases, both from a consumer perspective, but also just from retailers pushing back more and more.
But that's not to say that consumers won't trade up. I think one of the things that P&G has done exceptionally well has been innovation. And through innovation, they've been able to drive brand choice because the performance is superior to others. And that causes consumers to trade up, particularly if there is a perceived benefit relative to the competition. So even though list pricing may become more and more difficult as we move forward, that doesn't necessarily mean consumers will not trade up looking ahead.
RACHELLE AKUFFO: And so how much upside do you think there is for P&G versus some of its competitors?
PETER GROM: Look, I think one of the key things that is going on within consumer staples right now, beyond the rate dynamic, beyond GLP1, is just more around the composition of organic revenue growth. And so what we've seen across the group over the last several years, to the point earlier, is that a lot of the organic revenue growth has been driven by pricing.
However, you know, Procter this morning might have reported a volume decline that was somewhat disappointing. But that was largely a function of weaker performance in China and their SK2 brand. And, in fact, many markets around the world-- US, Europe, even in Latin America-- they're actually seeing a return to volume growth.