P&G CEO: We've never been in a better position than now

Yahoo Finance's Brian Sozzi talks with Procter & Gamble CEO Jon Moeller about the company's better than expected earnings report as well as the impacts they are facing from supply shortages and inflation.

Video transcript

BRIAN SOZZI: Consumer products giant, Procter & Gamble is out, better than expected quarterly earnings. But the company is warning again about pesky inflationary pressures. I spoke with P&G's new CEO, Jon Moeller, about the quarter and the company's outlook.

JON MOELLER: You know, it's interesting. If you look at our business prior to the pandemic, we were growing about 6%, very strong growth in the top line. Our portfolio and strategy worked for us during the pandemic. We maintained, essentially, that same level of growth, and as you saw in the quarter that we just completed, another 6% growth quarter.

So our products are increasingly relevant to consumers across the world. They provide protection from a health care standpoint, hygiene for the home, and really help my problem-- excuse me, my family in a time of need. And we're seeing that reflected in demand across categories.

BRIAN SOZZI: What behaviors amongst consumers are you seeing really sticking? Since the last time we spoke, despite omicron, people have become more mobile. But what have you seen really stick?

JON MOELLER: Still spending more time at home. I think all of us are. And therefore, you know, more clothes to be cleaned. More dishes to be washed. More meals at home with family, need those paper towels.

I would say the other sticky change has been a pretty significant shift to products of quality that I know and trust, again, to address my family's needs in this difficult time. The data point there is what's happened with private label shares, both in the US and in Europe. They tend to be the lower priced offerings in the category. And market shares are down and continue to be down past 3, 6, 12 months, both in the US and in Europe.

BRIAN SOZZI: Are you surprised to see that P&G and a lot of your rivals have pushed through price increases. You would think consumers would be trading down a bit, no?

JON MOELLER: If I just reflect on our business, we've never been in a better position in terms of the superiority of our offerings, the efficacy of those products to do the job they're designed to do at a time of high need. So you put all that together, and price elasticities decline. We're seeing, it's still very, very early, and this is a bumpy road. So there will be bumps on this road. But to date, our price elasticities are 20% to 30% lower than we were expecting.

And as I indicated, typically at this point in the cycle, there's a shift down to private label, which we're not yet seeing. So we're going to stay on the front foot with innovation, continuing to improve products, packages, communication, our retail execution. And through that, actually despite some price increases, improving value for consumers.

BRIAN SOZZI: Within the earnings, Jon, you did raise your outlook for commodity inflation to, I believe, about $2.3 billion from $2.1 billion or so. But given the success you're having pushing through price increases, do you plan to push through more?

JON MOELLER: We've announced price increases in the majority, I think 9 out of 10 categories. Some of those price increases have not yet come to the shelf. They haven't yet come to market. So we're going to work through that before we take the next step.

BRIAN SOZZI: Do you see any signs we are nearing peak inflation, just from your standpoint in your business?

JON MOELLER: There are some commodities that are starting to modestly roll over, which is encouraging. There is capacity being added to some of the input supply chains, which is encouraging. On the other hand, in markets like labor and transportation, I don't expect any near-term decreases.

BRIAN SOZZI: There are, I can tell you, really, for the past few weeks, Jon, my Twitter feed has been dominated with photos on Twitter of empty shelves in grocery stores. Take us through what you're seeing in your manufacturing plants. Are you able to get enough product to the market right now?

JON MOELLER: Our supply organization is doing a tremendous job to keep products on shelf. If you look at the US, I believe we're at 94% of demand. So there's still work to do. And obviously, that differs by category. But we're doing everything we can to bring products to shelf and keep supply in stock to serve consumers.

BRIAN SOZZI: Are there certain categories where you just, you can't keep them in stock?

JON MOELLER: It varies over time. When we have, obviously, this will be obvious, but when there are significant surges in demand in any category versus the norm, we struggle. Now, we're working on a number of focus areas to strengthen the execution of our strategy.

One of those is supply and anticipating a wider variance in demand. So we'll get there. But we do have work to do.

BRIAN SOZZI: Have seen any worker absenteeism in the plants because of the pandemic?

JON MOELLER: We have a very dedicated group of colleagues that are dedicated to the business. They're dedicated to each other. They're dedicated to making a difference in the lives of consumers around the world.

Of course, in the middle of large COVID outbreaks in different parts of the world, there are quarantine needs. My children aren't at school and need to be cared for. I have a family member who needs to be tended to. I have difficulty securing transportation. All of those affect daily availability of people to do their jobs. But they're working through it at a very, very impressive and committed way.

BRIAN SOZZI: You know, one of the benefits, you've touched every part of your organization, COO, CFO, and now CEO. What are you seeing in terms of global growth? The consensus appears to be things will slow down this year. But from your seat, how do you see it?

JON MOELLER: Strong, at least as relates to our categories. I don't have insight into the entire economy or other categories. But we've seen no slowdown in demand.

We did see a little slowdown in the fourth quarter in China, where our growth, top line growth, was flat versus a year ago, but still 12% on a two year stacked basis, and still over 6% globally with our second largest market essentially flat, versus a year ago. And we don't look at the market as something that's handed to us. I mean, obviously, the world and what's going on does affect market growth. But we also affect market growth. And that's fundamental to our strategy to grow markets as a way to sustainably grow our business and grow share.

BRIAN SOZZI: Lastly Jon, you're now the top guy calling the shots. And in recent weeks, P&G has made some acquisitions in the prestige beauty category. Is one of the reads that, under your leadership, you're going to be a little more aggressive in growing out growth categories like this.

JON MOELLER: These are projects we've been working on for some time. The first step was consolidating our portfolio into daily use categories, where performance drives brand choice. And we've been saying, for some time, that we're committed to win in each of the 10 categories that we've chosen to compete in.

And there are a couple of categories where we would benefit from a broader portfolio in that winning endeavor. And one of those is beauty and skincare. These are projects we've been working on for some time. So I wouldn't take it, in any way, as a signal of change related to leadership. It's just a fundamental part of our strategy.

BRIAN SOZZI: And that was P&G's new CEO, Jon Moeller, on his better than expected quarterly results.