We Are Going To Raise Prices, But Always Linked To Product Innovation

Procter & Gamble, the giant of consumer products with brands such as Oral B, Gillette, Ausonia, Fairy or Ariel, has been holding even prices in the face of unstoppable cost inflation. The president of the company in Europe, Luis Tossel, now admits that, always linked to the innovation of the products, they will have to revise them upwards.

P&G announced on October 19 that despite the 13% rise in its prices, it only contributed 1% to distribution. Are you worried about the situation?

The first thing to say is that P&G has actually accelerated its gross revenue growth before the start of the crisis, during the pandemic, and also now, as we begin to exit. We have gone from registering a growth of 3% to between 5 and 6% in this new fiscal year. And, following the same trend, in Europe we continue to have a very strong performance.

The European business is contributing 50% of the growth in the categories where we operate. It is true that the entire industry is facing a significant increase in raw materials, packaging, energy costs … It is something that started six months ago and it is a challenge that we all face.

But … will prices go up?

We have been in the market for 184 years, so it is not the first time that we have not faced something like this. We will continue to invest in the launch of products with more and more added value. We will take actions regarding prices but always linked to product innovation and product improvements, both in Spain and in the rest of Europe.

It does not depend then on the cost of raw materials, but on innovations …

That’s it. The aim is to always link prices to innovation, to product news, packaging, to make an attractive proposal for the consumer. In the end, in any case, the final price for the consumer is set by the retailer.

Are they having problems with the supply chain?

Yes, we are having challenges in this regard. Some of the products that we have to import come by sea and we are experiencing delays of between 2 and 3 weeks as a result of the Covid. All the experts point out that this difficulty will continue until the summer of 2022. This is when the industry expects a recovery.

Our commitment is that our supplies are as reliable as possible. We don’t pretend to look perfect, but if we do commit to deliver on a date, we expect to do so with 97-98% reliability. We have distribution centers and carriers trying to ensure that. In any case, as an industry, although as an industry we face the challenge of increasing production to satisfy demand in a balanced way.

And with the costs of raw materials, will the same happen?

Yes, it is estimated that it will last at least until the summer of next year. It is a part of the challenges facing the industry.

“The problems in the supply chain will continue until summer of next year”

Are you confident of a recovery in consumption?

Europe will grow in terms of GDP between 3 and 4% this year and probably between 2 and 3% next year. That is why it is so important to invest in products with increasing added value, increasing the capacity of our plants. This will allow us to grow and gain market share.

Will consumption then return to pre-pandemic levels next year?

Absolutely. Before the crisis, our sector grew at an annual rate of 2% throughout Europe and by the end of 2022 we will have recovered that same rate.

Are you considering increasing the capacity of your factories, both in Spain and in Europe?

We are already increasing the capacity of our plants throughout Europe. In fact, part of the investment we are making is to increase your productivity. Our goal is to have a new plant in Europe every three to four years, which is very significant.

“We will open a new factory in Europe every three or four years to increase production”

And in Spain, are they also going to open new factories?

Our Spanish plants are located in Jijona (Valencian Community), where diapers and sanitary towels are manufactured, and Mequinenza (Aragon) where wipes are made. We are investing in modernization and digitization to increase production. For now, we have enough with these factories.

Are you still thinking about launching new products?

Yes. We are innovating in products that are significantly better every time, more premium. We have developed, for example, improvements to existing categories, such as our Oral B electric toothbrushes, and have launched completely new products, such as Gillette’s for people with beards or mustaches.

But we also launched equally important innovations based on sustainability, under the green umbrella. As are the Tampax with 100% organic cotton.

Sustainability is key …

Sustainability is a consumer demand, but it also has the support of distribution and there is also legislation that is being developed throughout Europe. We test new products and packaging, like shampoo in an aluminum bottle.

How many innovations do they launch?

Probably 15-20 innovations each year. If they had asked me the question 5 years ago, I would have said that the average is below ten. But we have doubled that number.

How much do they invest in innovation?

About $ 1.9 billion each year, which is a very significant part of our resources, but it is performing well for us.

But in Spain it is not easy to introduce innovations …

I am absolutely sure that consumers like innovations and trying new things and we have a good relationship with distributors.

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