P&G CEO Jon Moeller Heads to Paris Post-Earnings Call Amid Olympic Marketing Surge and China Challenges

Procter & Gamble (PG, 170.08 USD per share, market cap 400.9 billion USD) Chairman and CEO Jon Moeller, having just concluded the latest fiscal year’s earnings call, promptly flew to Paris on July 30. P&G has been a global Olympic partner for 12 consecutive years, and Moeller is set to meet with various retail partner CEOs at the Olympics to draft future plans.With the boost from Olympic marketing, P&G recently reported its best results in nearly a decade for FY2024, ending June 2024, with net sales of 84 billion USD (approximately RMB 600 billion). Despite the impressive financials, P&G faces underlying challenges: its global product sales have remained stable, but revenue growth is driven by price hikes. The sustainability of these price increases is uncertain. Specific segments, such as beauty and the Chinese market, also pose growth challenges.As global consumer confidence wanes, P&G’s financials reveal how a consumer goods giant is adapting. Moeller stated during the call, "We have faced incredible challenges over the past few years, including the COVID-19 pandemic, inflation, and geopolitical conflicts. Business growth isn’t linear… Challenges exist, but I don’t believe they will dominate us."The financial report indicates that P&G’s net sales for FY2024 were up by 2% from the previous year, reaching 84 billion USD, with organic sales up 4%. Net income attributable to shareholders was 14.9 billion USD, an increase of 2%. This resurgence in sales to 84 billion USD came after a decade of fluctuations, bottoming at 65.1 billion USD in FY2017 and then gradually rebounding.Segment-wise, P&G’s beauty, grooming, health care, fabric & home care, and baby, feminine & family care divisions reported varying growth rates of 1%, 4%, 5%, 4%, and 0% respectively. The fabric & home care division saw the highest net profit growth at 18%, followed by baby, feminine & family care at 13%. In contrast, the beauty division faced a unique challenge, seeing a 7% decline in net profit.During the earnings call, CFO Andre Schulten remarked, "Achieving 4% organic sales growth following a year of 7% is a testament to our six-year streak of achieving over 4% growth. Despite a challenging market, eight out of our ten product categories saw organic growth."P&G’s growth has been propelled by price hikes. The company mentioned that higher pricing contributed 4 percentage points to organic sales growth, with shipment volumes and product mixes remaining constant. Over recent years, P&G has incrementally increased prices across various product lines to counter rising costs from the pandemic and inflation.However, price increases appear to be a short-term solution as their contribution to organic sales growth has diminished from 9% last year to 4% this year. Andre Schulten acknowledged that a balance between volume and price contribution is anticipated, with the market expected to stabilize at a sustainable 3% to 4% growth rate.The Chinese market, representing 9% of P&G’s business, has notably struggled. Moeller mentioned that the weakness in China’s market was offset by strong sales in North America and Europe. Schulten highlighted a 9% decline in China’s organic sales, significantly affected by the SK-II brand’s challenges. Despite multiple reassurances, SK-II has been impacted by geopolitical issues concerning Japan’s water discharge, leading to a 34% sales drop in early FY2024.P&G has been focusing on revitalizing the SK-II brand in China by upgrading store counters and launching new endorsements. Schulten expects market trends and dynamics related to SK-II to improve over the next few quarters.Consumer behavior shifts and fierce competition from local brands are significant factors contributing to P&G’s challenges in China. Local skincare brands have rapidly gained ground, challenging high-end international brands with their effective marketing and competitive pricing.Schulten stressed that P&G’s strategy in China hinges on creating new consumer categories and increasing purchase frequency. This approach aligns with P&G’s broader "category growth leadership" strategy introduced last year.As P&G strives for recovery and sustainable growth, Moeller remains optimistic about the company’s innovative capabilities. Despite ongoing challenges, P&G’s consistent strategic execution has driven growth in sales, profit, and market value over the past few years, affirming the robustness of its strategies in the face of adversity.