Procter & Gamble’s U.S. hair care business returned to market share growth in March with a one percent gain, but it was not enough to keep beauty sales from falling in the quarter.
For the January to March third quarter period, P&G said its net beauty sales slid 2% to $4.76 billion or a 1% organic sales decline (excludes foreign exchange and acquisitions and divestitures). Both consumer hair care and skin care segments were down due to competitor pressure and higher promotional spending, while organic sales of salon professional products grew. However higher pricing, manufacturing savings and a lower effective tax rate enabled beauty earnings to rise 2%.
A strong launch program across its hair care spectrum was credited with bolstering the U.S. business, according to Jon Moeller, P&G’s chief financial officer. Success is coming from two Pantene Expert Collection lines – Age Defy for aging hair and Advanced Keratin Repair that boasts new conditioner technology. “Early results in the Expert collection have been very good and have been at or above plans,” said Moeller. Pantene Expert products are now expanding to Latin America beginning in Brazil. Meanwhile the Vidal Sassoon Pro Series hit the U.S. in the quarter and is “quickly approaching a 2% value share, with shipments double what was expected,” said Moeller. The line is priced in the `salon affordable’ value segment.
In professional, sales of Wella’s Illumina Color, called the brand’s biggest innovation in 20 years with claims to light hair from within, “have been outstanding,” in both the U.S. and Europe, said Moeller. Sales have exceeded initial launch commitments by more than 50%. A global rollout was completed in the quarter with the addition of New Zealand and Australia.
However, skin care continues to have “a drag” on the business with market share down from last year, acknowledged Moeller.
To recharge the category in the U.S., P&G has focused on the introduction of Olay Regenerist Micro-Sculpting Cream, Fresh Effects and Total Effects CC Cream. Meanwhile, China is getting new skin care counters, a restaged Olay brand including the launch of a Olay Pro-X whitening product. There is also a new mid-tier skin care line coming. “China beauty shipments grew double digits this quarter,” commented Bob McDonald, P&G’s chairman and CEO, stressing the company’s advancements.
McDonald said P&G’s cosmetics share has improved sequentially over past two quarters driven by CoverGirl’s Clump Crusher mascara, Outlast Stay Brilliant Nail Gloss and the Outlast Stay Fabulous 3-in-1 foundation.
McDonald expects the new beauty products to positively impact its future financial performance.
“Innovation is the primary way we attract consumers and grow our business,” said McDonald. Without giving details, he added, “We have more `bigger change’ innovation coming in the future. I expect performance of the beauty organization to improve quarter to quarter.”
Along with innovation, he said the company will invest in marketing, including an increase in digital spending.
Companywide, P&G net sales grew 2% or 3% organically to $20.58 billion, with earnings per share up 5%. Although within targets, the market expressed disappointment, sending the stock down circa 5% in morning trading. In other news, P&G revealed a new financing program to ease the payment system with suppliers.