China Fund News reporter Ivan
On January 19, EST, world consumer goods giant Procter & Gamble (P&G) announced that its top ten categories of products – including fabric care, baby care, women's care, adult urinary incontinence, home care, home care, hair care, beauty, oral care and skin care – will all raise prices.
Procter & Gamble did not give a specific price increase, but said that the price of fabric care products will be raised from February 28 this year, while the price of other personal health products will be raised from April. Procter & Gamble said the price increase will also affect international consumers, not just U.S. consumers.
(Some of P&G's products are displayed Source: boldbusiness.com)
The reason for this full-line price increase is attributed to the rise in transportation, materials, labor and other costs during the epidemic and the increase in raw material prices caused by global inflation.
Andre Schulten, P&G's chief financial officer, said: "The recent surge in COVID-19 cases and the resulting lockdowns increase the risk of additional downtime for our or our suppliers' operations. ”
Some foreign media commented that this is a typical pass-on of the cost rise to consumers.
Price increases are higher than costs Revenue and profit in the fourth quarter both exceed expectations
The market capitalization rose by nearly 85 billion overnight
While inflation is on the head and supply chain issues are on the go, P&G revenue doesn't seem to have been affected much.
Procter & Gamble announced its fourth quarter (note: the company's fiscal second quarter of fiscal 2022) before announcing the big price increase.
According to the financial report, as of December 31, 2021, Procter & Gamble's net sales in the fourth quarter reached $21 billion, an increase of 6% year-on-year, exceeding market expectations of $20.35 billion; fourth-quarter net profit was $4.223 billion, up 10% year-on-year, exceeding expectations of $4.22 billion.
(P&G net sales by category Source: P&G FY2022 2nd Quarter Financial Report)
In terms of specific categories, health care and textiles and home care products showed the best organic growth, both up 8%. Among them, the net sales of health care products were 2.976 billion US dollars, representing the cold relief drug brand Shikeshu, and the net sales of textile and home care products were 6.972 billion US dollars, representing the works of Tide, Bilang and so on.
Toiletry products and baby, women's and home care products followed suit, with organic sales up 5%. Among them, the net sales of washing products were 1.811 billion US dollars, representing products such as Gillette razors, etc.; the net sales of infant, female and home care products were 5.116 billion US dollars, representing products such as Bang Bao Shi and Hu Shu Bao.
Cosmetics performed the worst, with organic sales up nearly 2 percent, with net sales of $3.926 billion, representing olay, SKII, and other products.
(Organic sales growth of P&G products in various categories Source: P&G FY2022 2nd Quarter financial report)
P&G also raised its full-year guidance for fiscal 2022 and announced a $9 billion to $10 billion buyback program. Procter & Gamble forecasts a 3% to 6% increase in core earnings per share for the full year, a full-year core earnings of $5.83 to $6.00, and a 4% to 5% increase in full-year organic income, all higher than previous market forecasts.
Due to the good profit, after the release of the earnings report, Procter & Gamble jumped 4.6% in the intraday yesterday, the largest intraday increase since April 2020. By the close, growth narrowed, closing at $162 per share, up 3.36 percent, with a total market capitalization of $392.03 billion (about 2.49 trillion yuan), up $13.2 billion (about 84.4 billion yuan) overnight.
Price increases have been raised for several consecutive quarters
It is worth noting that this price increase is not the first time that P&G has raised prices. In fact, this is the second consecutive quarter in which P&G has raised its inflation forecast.
Last fiscal quarter, P&G had raised its cost forecast, after expecting to spend $2.1 billion, or 10.5 percent, on the cost of transportation and raw materials such as resins for the entire fiscal year ending June.
High inflation has indeed become a headache for FMCG giants. At the earnings report, Procter & Gamble said that pricing in the latest quarter has risen by an average of 3%, and the revenue from price increases accounts for half of total revenue, while the other half comes from increased sales. The increased revenue helped offset soaring prices for raw materials, labor and goods transportation, as supply chain woes continue to weigh on almost every industry.
But P&G appears to be betting that consumers will be willing to continue buying price-increasing goods. At the end of October last year, P&G announced price increases for some of its beauty, oral and shaving products, when Andre Schulten, the company's financial director, said: "We have not seen any substantive reaction from consumers. In view of this, we are satisfied with our relative strength. He also said that his brand consumers are very resilient, and even set their sights on the brand's more high-end products such as First Aid Beauty or Native deodorant.
(P&G's First Aid Beauty skin care brand product promotional map, most of the brand's products are 90-300 yuan, has entered the Chinese market Source: Sephora)
Inflation is high
Price increases have become the consensus of major brands
In the face of high costs, passing it on to consumers may be the easiest solution, and because of the high demand driven by the home policy brought about by the epidemic, major consumer companies around the world have raised prices "without fear".
P&G's price increases began in April 2021. At that time, Procter & Gamble said that it would raise the price of baby products, adult diapers and women's care products from September of that year, with an increase of 5% to 9%, the largest increase in P&G products in 33 years. In October, P&G announced a price increase for oral and shaving care products.
In addition to Procter & Gamble, paper manufacturer Kimberly-Clark also announced price increases in 2021, saying that it would increase the price of the company's baby and child care, adult care and Scott bathroom tissue products from the end of June of that year, also between 5% and 9%.
In terms of food, Nestlé, the world's largest packaged food processor, also officially announced price increases. Even "Happy Water" Coca-Cola officially announced a price increase again in April 2021 after 2018, after a gap of three years. Its rival PepsiCo executives also publicly stated at last October's earnings conference that they would discuss the possibility of price increases in early 2022.
Inflation, the "culprit" of these brand price increases, continues to sweep the globe. Last week, the U.S. Bureau of Labor Statistics released data showing that the CPI, a key inflation data for the United States, rose 7.0% year-on-year in December, accelerating again, the fastest increase since June 1982, and 6.8% higher than the previous value.
(US CPI Index Tracking Chart Source: Wall Street Insights)
Guan Tao, global chief economist of BOC Securities, said in a previous interview that the global inflation risk was "underestimated", and in the medium and long term, I am afraid that the global inflation center will rise to a higher level in the future.
Deutsche Bank's forecast is also not optimistic, noting that inflation has widened and will take longer to clear. But with supply chains repaired, labor supply returning, and commodity prices remaining below peak, inflation should fall back near target levels by 2024.
EDIT: Captain
Copyright Notice
Big positives! Just now, the central bank announced the LPR interest rate cut, million mortgage monthly saving 30 yuan! A large plate outbreak, 20% of the stop, 100 billion white horses fell to a stop! Evergrande has new news