Strategic Movements March 2021
Price Check on Procter & Gamble Household Goods
IRI data indicated a growth in sales of premium products from soap and household cleaners to paper towels. Proctor and Gamble was positioned to cash-in. During the pandemic, research demonstrated that cleaning and hygiene took on a higher priority for many households. They shifted purchases from private label and value-oriented goods towards premium and super-premium household products. For Procter & Gamble, this enabled an 8% increase in organic sales for Q4 2020. Net sales went from $68 million in 2019 to $71 million in 2020. Profit increased from $32 million in 2019 to $37 million in 2020. Home care alone posted a 12% increase. Contributing factors to Procter & Gamble’s profit success cited in investor reports were increases in research and development and advertising expenditures and a reduction in employment costs. Conspicuously absent are any mentions of increases in discounts and promotions.
Price Check on Kimberly-Clark
Kimberly-Clark, maker of Kleenex, Cottonelle, Huggies, Depends, and Kotex, achieved 6% sales growth in Q4 2020 over same time last year. How did they do it? Although the pandemic left industrial sales down, it pushed home sales up. Sales for consumer tissues were driven with 11% higher prices through lower promotional expense. However, advertising, marketing, and research expenses increased by 16%.
Price Check on McCormick
McCormick, supplier of spices and flavorings such as French’s Mustard and Frank’s RedHot sauce, achieved a 10% increase in net sales for 2020. How did they do it? Loss of sales to restaurants and packaged foods customers hurt, but the consumer division did well and that division accounts for 64% of the company’s sales. McCormick increased advertising expenditures by 16% to keep the consumers coming both during and after the pandemic. They also increased spending on new product development and mergers and acquisitions. Conspicuously absent are any mentions of increases in discounts and promotions.
CPG CEOs: Listen Up
Consumer Packaged Goods (CPG) CEOs: you have a choice to increase either promotions or brand advertising. Procter and Gamble, Kimberly-Clark, and McCormick all demonstrated that new product development coupled with brand advertising can deliver strong profits. Well done David S. Taylor, CEO of Procter & Gamble, Michael D. Hsu, CEO of Kimberly-Cark, and Lawrence E. Kurzius, CEO of McCormick.
Price Check for Sonoco
Sonoco announced a price increase of 8% for crystallized polyethylene terephthalate and polypropylene thermoformed plastic trays and bowls on February 22, 2021. Food packaging is expected to grow at 6.7% CAGR for the next 7 years. When what you are selling is in demand, it is time to raise prices and profit from your ability to solve customer needs with your brand, not lower them to accelerate category growth. Well don Robe Tiede, ex-CEO of Sonoco. Keep it up Howard Coker, current CEO of Sonoco since February 3, 2020.
Price Check on Candela Boats
Candela launched a new e-boat: the Candela 7. How much would you pay for an electric boat that seats six and comes with hydrofoils that both conserve battery energy and enable speeds up to 30 knots? Candela is asking $322,000. Note: a conventional ski of about the same size can usually be found for around $20,000. “Battery powered” is a premium watercraft feature to the segment that cares.