Procter & Gamble posted a surprise drop in fourth-quarter sales, as the company's efforts to reel in years of steep price hikes failed to win over price-conscious consumers who snubbed the company's pricier Charmin toilet paper and Pampers diapers, reports Reuters.
Rivals including Nestle and Unilever also reported first-half sales growth below expectations. PepsiCo missed sales expectations earlier in July, with executives saying that consumers of all incomes were feeling squeezed financially.
"(There is) a hole in the consumer sector ... it is getting more difficult to pass on price increases," said Don Nesbitt, senior portfolio manager at F/m Investments, which has a stake in P&G.
"The consumer is becoming more discerning on their purchases, especially the lower-end consumer," he said.
P&G has been spending heavily to launch new products across its laundry business, including its Tide Evo detergent tile, and lower-cost Luvs Platinum Protection diapers, aiming to woo customers looking for cheaper and more environmentally friendly options.
Executives said supply constraints delayed the introduction of the new Luvs. P&G's key diaper business saw sales declines because it lost market share to competitors.
The company has been increasing promotions and offering discounts, resulting in lower prices for some of its products and taking a toll on organic or self-generated sales at its largest division, fabric and home care, which includes Tide detergent.
"P&G's sales (figures) support the theme that you can only push price so far until consumers push back," said Brian Jacobsen, chief economist at Annex Wealth Management.
"If they use promotions and discounts to get the attention of consumers, that could help volumes, but that comes at a price."
