Procter & Gamble says a double-dip recession unlikely

PROCTER & Gamble, the world’s largest consumer goods company, yesterday dismissed the threat of a double-dip recession in the US, but said it did anticipate a bumpy path towards economic recovery in its largest market.

“I think the economic recovery in the US will be uneven ... we are seeing that already,” chief executive Bob McDonald told Wall Street analysts as P&G reported quarterly and full-year results that reflected the frugal mood of many of its US consumers. But “we don’t expect a double-dip recession”, he said.

P&G said it expected sluggish growth to continue in its developed markets in the year ahead, with an increasing divide between the shopping behaviour of those with and without jobs. “In developed markets we see a bifurcation,” Mr McDonald said.

“Our new initiatives that are premium priced continue to do very well, and I would say that they appeal to the people with jobs,” he said. “At the same time we also see . . . consumers without jobs . . . trade down.”

He added: “I frankly expect that to continue.”

During the past quarter in the US, the company successfully launched new premium-priced products, such as a new Pro-Glide version of its Gillette Fusion razor, while also pursuing frugally minded consumers with lower-cost versions of its products, such as Bounty and Charmin Basic toilet paper.

P&G said it expected its global organic sales – excluding the impact of foreign exchange, acquisitions and mergers – to increase by between 4 and 6 per cent in the coming year, compared with the 3 per cent seen in its 2010 fiscal year.

But it predicted much of the growth would come from emerging markets.

Mr McDonald, who took over as chief executive last year, argued that fourth-quarter and full-year results showed that his strategy of pursuing profitable top-line growth through increased innovation and marketing was working.

Net sales rose 5 per cent to $18.9 billion during the quarter, while full-year net sales were up 3 per cent against a year ago, to $78.9 billion. Volume unit sales increased by 8 per cent, with emerging markets growing at more than twice the rate of the US and western Europe.

P&G, the world’s biggest advertiser, said it increased its advertising spending by about $1 billion during the year, to $8.6 billion, close to 11 per cent of sales.

“The reason we are growing market share on 60 per cent of our business today is that we are supporting it with advertising, as opposed to a year ago,” Mr McDonald said. – (Copyright The Financial Times Limited 2010)