The Procter & Gamble Company (NYSE:PG) Q3 2023 Earnings Call Transcript - Page 6 of 7 - InvestingChannel

The Procter & Gamble Company (NYSE:PG) Q3 2023 Earnings Call Transcript

It’s a strategy that follows the consumer and is grounded in what the consumer needs and wants over time, so if we get more stress, that just means we need to double click on the type of innovation and investment we need.From a consumption standpoint, as pricing goes into the market, we generally see consumers reacting with what you’ve described. If there are pantry inventories available, they, for a period of time, draw down those inventories. And recall coming out of the pandemic, I think Jon mentioned this earlier, there were increased pantry inventories available across multiple categories. So, I think that’s part of the effect that we’ve seen. I wouldn’t expect any major restocking, because I think we’re just returning to our normal levels.

As supply stabilizes, it’s kind of the COVID pandemic goes more into the past, I think consumers return to their normal behaviors.The other element we’re seeing is more careful usage. If you’re overall made aware of inflation in everyday media, every day, you look twice before you use another paper towel et cetera. And partially, that’s part of our value communication, right? When we talk about Charmin rollback because the product is more absorbent and has more strength, we explicitly talk about the ability for consumers to use less.So, it’s really driven in those elements. Again, I think the job that we have as market leaders in many of our categories is to drive volume growth back to sustainable levels. And there’s many levers. We still have huge household penetration opportunities around the world in many of our categories.

We can create new usage occasions, create regimen use across many of our categories. Those are the things we’re focused on.Operator The next question comes from Nik Modi of RBC Capital Markets. Please go ahead.Nik Modi Yeah, thank you. Good morning, everyone. I just wanted to follow-up quickly on China. Jon, maybe just given that you were there recently, just on the ground, consumer behavioral insights, like what are they going through right now? Are they just hesitating? And it’s kind of like a choppy, “Hey, maybe I’ll check out, you know, outside and see if I get sick?” I mean, just any perspective on kind of how the consumers actually behaving on the ground?Jon Moeller Yeah. You can imagine with what many of them have been through. There’s a bit of a whiplash aspect to — for three years, I was told that going outside was dangerous.

And now I’m being encouraged to reemerge. I’m living probably in a relatively small dwelling, many times with multi-generations, and I don’t want to negatively impact my family. So, there is a degree of hesitance and questioning. On the same time, there’s an overwhelming feeling, at least as I experienced it, of liberation, of hope. And I was in Beijing one sunny Saturday afternoon, and the streets were packed. It was absolutely wonderful and joyous.So, I continue to hold on and believe in the mid- and long-term opportunities that China presents us with. It’s certainly — plus 2 is a lot better than a negative number that we had in the last couple of quarters. So there is clear improvement. But I think it’ll be a little bit choppy. And all it will take is a little bit of nervousness to stop the reacceleration of the growth.

But I would — my takeaway, Nik, is a positive one, but with near-term caution.Operator Our final question comes from Edward Lewis of Atlantic Equities. Please go ahead.Edward Lewis Yes. Thanks very much. I guess, I’ll just cover a little bit of ground, but I’d be interested just on the enterprise market performance. Just looking in particular at Latin America, I think you said Andre somewhat 30% growth this quarter. And I think that’d be an acceleration around 20% in the first half. Assuming there’s a healthy element of price behind that, but I’d just be interested here what’s driving this improved performance in that region.Andre Schulten There is a very healthy element of pricing there like in every other region, because we’re pricing not only for commodities but also pricing for foreign exchange rate exposure in all of these markets.

I think the positive effect is the volume is holding much better than in some of our focus markets. The consumer strength is there. I think the overall strength of the brands is better than we’ve ever seen. In-market execution is better than we’ve ever seen. Retail partnerships are better than we’ve ever seen. So, all of that I think is contributing to a strong price component with a positive volume component and that drives the 30% results of Latin America.Jon Moeller Yes. Just for perspective, in our two largest markets in Latin America, Brazil and Mexico, as Andre is saying, we’re seeing volumes high single digit. So, I don’t want you to take away that all of the sales growth, as Andre has already said is pricing. It’s a healthy combination.

And I also need to give a nod to the team in Latin America who’s just doing a fantastic job.Listen, I want to close-up with just a couple of comments and reflections. And the first relates to what we’ve been through and what I think it portends for the future. And then, I’ll come in and talk a little bit more about the quarter that we just completed.But if we had a conversation three or four years ago, and you told me, “Look, here’s what’s going to happen. We’re going to have this thing called a global pandemic. People are going to die. Borders are going to be closed. You aren’t going to be able to get to your largest markets and they aren’t going to be able to get to you. You’re going to have difficulty getting your colleagues into manufacturing facilities, innovation centers, sales offices.

But don’t worry, that’s not all. We’ll have the largest land war in Europe since World War II. The combination of foreign exchange and commodity cost inflation is going to wipe out half your earnings. You’re going to see dramatic channel shift in some of your largest markets in terms of where consumers are doing their shopping. And when all that’s over, you’re going to find that it’s difficult to get people to come back to work. How do you think you’re going to do?”And my answer to that three or four years ago would be that, “Wow, do you think you can grow top-line, bottom-line, deliver cash and return that to shareholders through all that?” Without taking you through the details, what you know very well, that’s exactly what this team has done.

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