P&G’s Results Show Coronavirus Has Given The Upper Hand Back To Traditional CPG Giants

Coronavirus has sent consumers panic buying and hoarding on groceries and other household staples and made the world in united germaphobia. It looks like it may also be tilting the power pendulum back in favor of traditional CPG giants against upstarts that had been beating them at their game. 

On telling sign, consumer products giant Procter & Gamble
PG
reported on Friday a better-than-expected 6% increase in organic sales, which exclude acquisitions and other items, in the fiscal third quarter that ended March 31. 

Organic sales surged 10% in US, its largest market. In contrast, the Commerce Department on Wednesday reported that March retail sales plunged 8.7% from February, as increased online orders and a 27% surge in grocery store sales weren’t enough to offset plunges at non-essential retailers including clothing stores, department stores, and furniture and home furnishings outlets that had been ordered by many local governments to close. 

P&G, which makes anything from Tide detergent and Dawn soap to Bounty paper towels and Swiffer wipes, saw its fabric and home care unit sales surge 10% while health care items rise 9%. Demand for Pampers diapers and other baby, feminine and family care items rose 7%. 

“Consumers in the US are doing more laundry loads per week and washing more garments after wearing them just once,” said Jon Moeller, P&G’s chief operating officer and chief financial officer, on a conference call Friday, adding the company also has seen “a spike in demand for Tide Antibacterial Spray. “More loads are being done with unit-dose detergents.” 

Doing dishes also has increased as families eat more meals at home and are more concerned about the hygiene of their dishes, glasses and silverware, he added, adding consumers now favor “a disposable cleaning solution.” That pattern has contributed to increased use of Bounty, Swiffer and Mr. Clean. 

P&G, which also makes Vicks vaporizers, also has picked up market share on many in-demand items, including respiratory products, Olay moisturizers, Oral-B electric toothbrushes, Tide, Dawn, Cascade dish detergent, Crest toothpaste, and Gillette blades and razors, he said. 

“Consumption of our products is not likely to dissipate,” he said. “The relevance of our categories in consumers’ lives potentially increases. We will serve what will likely become a forever-altered health, hygiene, cleaning focus…. There is potential for increased preference for established reputable, dependable brands that solve newly-framed problems better than other alternatives, potentially less experimentation.”

He may be right. Surveys have showed consumers have begun to significantly cut back on discretionary spending as 22 million Americans have filed for unemployment benefits in the past four weeks. 

Hunkering down at home and stocking up on pantry items also has sent consumers back to shopping the center aisle of supermarkets and buying items from Campbell soup to beans. In my store visits, an interesting contrast also was observed repeatedly: empty shelves of soaps and sanitizing wipes and other products with antibacterial claims next to still well-stocked counterparts with natural ingredients that had not long ago been seen as more desirable.

“Several years ago, many big brands were under assault due to the rise of startup disruptor brands,” said RBC analyst Nik Modi in a report this month, adding that had forced big brands to reinvent themselves pre-coronavirus to stem share losses. “We are seeing this trend continue/accelerate as consumers flock to big brands across virtually every category we follow.” 

Why? Consumers want brands that they know will offer “the experience” they seek because they don’t want to risk wasting money, according to Modi. Another key reason? Bigger brands have “supply chains that enable better availability,” he said. 

That, at a time when toilet paper, sanitizing wipes and other household items can still be hard to find, may prove those points just right.

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