P&G’s agency cull begins to pay off as it reveals media spend to increase by ‘double digits’
Procter and Gamble’s decision to offload 40 per cent of its agency in a major cost-cutting drive last year seems to be paying off as the owner of Gillette and Pantene reported a 35 percent jump in second-quarter profit.
The FMCG business made the cull in 2015 as part of a wider cost saving mission to focus more on its profitable brands and to do more for less with its marketing.
Speaking today on a call with analysts P&G’s chief financial officer Jon Moeller said that the company saved $370m in agency related costs and expects to save an additional $200m this fiscal year, which P&G will invest in advertising and trials of its consumer-preferred products such Pantene and the new Gillette Fusion Flex Ball razor.
“We’re staying focused on big opportunities in our control, executing what is the largest transformation in our company’s history, step changing productivity, transforming our portfolio and strengthening category business models, and innovation plans. This transformation strategy is fundamentally a growth strategy,” he said.
Media spend will hit “double digit” growth as P&G looks to digital channels to offset the lower spend.
A focus on ecommerce is afoot and the business is now building partnerships with etailers to ramp up online sales and repeat the success it has seen since the launch of Gillette Shave Club last June, which has to date doubled online consumption of razors.
Overall net sales fell 9 per cent to $16.9bn blamed on foreign exchange impacts. Organic sales increased two percent as a three percent pricing benefit more than offset a two percent reduction in organic shipment volume.