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Why P&G’s Fabric Care Business Earnings Grew in Fiscal 2Q16

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Fabric care and home care’s fiscal 2Q16 results

Procter & Gamble’s (PG) fabric care and home care segment includes some leading products in the global market. The fiscal 2Q16 sales figure for this segment came in at $5.3 billion, the highest among all segments. However, the segment saw a 7.4% decrease in sales compared to fiscal 2Q16 due to the stronger US dollar, which resulted in an 8% decline in sales.

The net earnings for fabric care and home care rose 9.6% to $0.7 billion in fiscal 2Q16 compared to fiscal 2Q15. Organic sales increased 2% versus a year ago on pricing benefits and a favorable mix while organic volume was unchanged.

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Brand penetration

Leading fabric care brands such as Tide, Gain, Ariel, and Downy in the fabric care segment showed significant growth in developed markets like the US. However, growth fell in developing markets, and new compact liquid detergent launches were more than offset by customer inventory adjustments and declines due to the de-prioritization of less profitable brands.

According to Kantar’s Brand Footprint report, Downy is the 9th fastest-growing FMCG brand, and it attracted 11 million new shoppers in 2014, up 23%. Colgate-Palmolive (CL) and Dove (UL) attracted 19 million and 14 million new shoppers, respectively.

Stronger new regime innovations

With the continuing growth, the US laundry detergent category is up four points on a value basis across all outlets over the last three-month to six-month periods. Like Clorox (CLX) and UL, P&G continues to innovate to be the leader in fabric care.

For example, in North America, P&G will introduce new Tide and Downy products that address odor problems common to athletic wear. The Odor Defense collection eliminates odors from athleisure clothes.

Also, the company plans to launch better-performing and more profitable new compact liquid detergents in Russia, Turkey, Mexico, Brazil, and China.

P&G makes up ~3%[1. Updated on January 27, 2016] of the iShares MSCI KLD 400 Social ETF (DSI). We’ll look at P&G’s baby care segment’s volume decline in the next part of the series.

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