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Despite growth, Procter & Gamble is worried about the price rise

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According to the maker of Pampers diapers and Tide detergent, Procter & Gamble (P&G), the company is expected to experience the slowest sales growth yet.

The company announced the biggest increase in sales in the last 16 years due to an increase in prices on things such as toothpaste, toilet paper, and everything in between.

P&G organic sales increased by 7% for the year that ended June 30, 2022. This is the largest increase since 2006.

However, customers seem to be buying fewer products due to mounting inflation. According to the company executives, the consumers are either spending the products they stockpiled during the pandemic, or are not replenishing their supplies. In the last quarter, sales decreased by 1%.

P&G is predicting a 3% to 5% sales growth for the current year which is the lowest since 2019.

Jon Moeller, the Chief Executive of P&G said in an interview that consumers are buying cheaper private-label alternatives. Moeller however believes that sales growth will remain steady due to high employment levels and healthy household balance sheets.

Moeller informed that there is no inherent reason why people are just going to stop buying modestly priced consumer products, daily-use essentials where performance matters and that looking elsewhere is required to get signals of consumer stress.

P&G is not the only company to announce this as Coca-Cola Co., McDonald’s Corp, and Kimberly-Clark Corp reported increased sales due to higher prices and consumers turning to cheaper brands or decreasing the quantity they purchase.

Compared to last year, P&G lost share in the four-week period that ended July 16, 2022. This marked the first loss after more than four years of market-share gains. Callum Elliott, a Bernstein analyst informed after analyzing the data that losses are in every category except for beauty. He said that while prices spiral, the consumer also continues to adjust to the new reality.

P&G is gaining market share according to Moeller with its organic sales being up by 7% and prices being higher by 8% on average. The company attributed the 1% sales decline to numerous pandemic-related shutdowns in China as well as intentional downscaling of its business in Russia due to the ongoing war in Ukraine.

P&G reported a 3% quarterly revenue increase compared to last year to $19.5 billion and diluted net income per share increased by 7% to $1.21.

As a result of an anticipated $3.3 billion loss to foreign currency rates as well as increased prices of materials and transportation, the company expects diluted net earnings per share for the fiscal year to be between flat and up 4%.

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