Strategic Movements March 2021


Tim J. Smith, PhD
Founder and CEO, Wiglaf Pricing

Published March 19, 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.

CPG giants drive growth during COVID with new product development and brand advertising

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 have a choice to make between either increased promotions or focused brand advertising

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.

Candela launches new eBoat that seats 6 and reaches 30 knots for a price of $322k

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.

About The Author

Tim J. Smith, PhD, is the founder and CEO of Wiglaf Pricing, an Adjunct Professor of Marketing and Economics at DePaul University, and the author of Pricing Done Right (Wiley 2016) and Pricing Strategy (Cengage 2012). At Wiglaf Pricing, Tim leads client engagements. Smith’s popular business book, Pricing Done Right: The Pricing Framework Proven Successful by the World’s Most Profitable Companies, was noted by Dennis Stone, CEO of Overhead Door Corp, as "Essential reading… While many books cover the concepts of pricing, Pricing Done Right goes the additional step of applying the concepts in the real world." Tim’s textbook, Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures, has been described by independent reviewers as “the most comprehensive pricing strategy book” on the market. As well as serving as the Academic Advisor to the Professional Pricing Society’s Certified Pricing Professional program, Tim is a member of the American Marketing Association and American Physical Society. He holds a BS in Physics and Chemistry from Southern Methodist University, a BA in Mathematics from Southern Methodist University, a PhD in Physical Chemistry from the University of Chicago, and an MBA with high honors in Strategy and Marketing from the University of Chicago GSB.