P&G, Reckitt Benckiser Earnings Show Coronavirus May Have Changed Our Habits For Good

Months after the start of the coronavirus outbreak sent stay-at-home consumers panic buying and hoarding on antibacterial soap and other household staples, the latest results from consumer products giant Procter & Gamble and rival Reckitt Benckiser suggest consumer behavior may have been changed permanently, at least for the foreseeable future. 

P&G, maker of Tide detergent, Dawn soap and Swiffer wipes, and Bounty paper towels, said sales in the quarter that ended Sept. 30 rose 9%, led by a 14% increase in its fabric and home care segment. Higher consumer demand for cleaning products increased P&G’s home-care organic sales by more than 30%.

Consumers also favored doing laundry with unit doze detergent even when they cost more, P&G said. Other segments also saw increased demand. For instance, North America skin and personal care products sales rose in the “mid-teens” percentage, helped by P&G’s rollout of Safeguard hand soap and hand sanitizer. Globally, personal cleansing items grew over 30%. 

“Consumer habits, once they’re established in our categories, are rarely reversed,” Jon Moeller, P&G’s chief operating officer and chief financial officer, said on a conference call Tuesday. “We do expect that there’s some stickiness to new habits that are being formed.” 

Reckitt Benckiser said its “like-for like” sales, which exclude the impact of acquisition and other items, rose 13%, led by a nearly 20% jump in demand for hygiene products including Lysol disinfectant items, Finish dishwasher detergent and Air Wick freshener. Other products like Airborne supplements and Dettol antiseptic disinfectant also were popular, the company said.

Both companies raised their outlooks after reporting better-than-expected quarterly results. 

“The pandemic has heightened the societal importance of hygiene,” Reckitt Benckiser said in a statement. “We expect structurally higher levels of demand to persist longer term as new consumer cleaning and sanitation habits become engrained….As consumers have sought to embrace self-care for themselves and their families, we have seen growth in preventative treatments, such as vitamins, minerals and supplements.”

More consumers staying at home also lifted demand for items like Air Wick and Finish, the company said. 

There’s also an willing to pay more for name brand items over cheaper store brands, both companies noted. 

“There is just a heightened need for products that deliver against health, hygiene and clean home concerns and a willingness to spend just a little bit more to ensure that I’m using a product that I know and trust,” P&G’s Moeller said. There’s a “whole reconfiguration of the consumer budget.”

As consumers aren’t spending as much on travel, entertainment, a meal at a restaurant, or on apparel, he said they “have some flexibility” to “redirect” their spending even against the economic uncertainty. U.S. private-label market share in the last three months has declined more than the prior three-month period, he said. 

Reckitt Benckiser also observed consumer “preference for trusted heritage brands.” 

“Private label is generally losing share across CPG categories to branded offerings,”  Stifel analyst Mark Astrachan said in a report on Oct. 15. “ We view this as favorable to the largest share brands, particularly as retailers have prioritized the largest brands on shelves at the expense of smaller share participants.”

Stifel’s  U.S. consumer survey has found that there’s a “decreased appetite” to buy store brands across key consumer staples categories, including food, beverage, household products, and personal care/beauty products. 

It’s not just private labels that may have lagged. Analysts have said coronavirus may also have tilted the power pendulum back in favor of traditional CPG giants against upstarts.

At a time when many restaurants and non-essential products and services sellers are still struggling while grocers and the likes of Amazon
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are booming, these CPG giants’ results paint yet another reminder of the sharp divide wrought by Covid-19.

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