Procter & Gamble CEO: We see ‘a healthy business’ despite ‘significant headwinds’

Procter & Gamble CEO Jon Moeller speaks with Yahoo Finance’s Brian Sozzi about earnings, consumer resilience, the likelihood of a recession, foreign exchange headwinds, and more.

Video transcript

BRIAN SOZZI: Procter & Gamble shares are on the move after the company beat earnings and revenue estimates in the latest quarter, as higher prices offset lower demand for its products. I had a chance to speak with CEO Jon Moeller about the quarter. Take a listen.

JON MOELLER: Strong core business. I mean, very strong top line growth. Organic sales up 7%. Growth in 10 out of 10 categories in almost every market. And we're dealing with the significant headwinds from the combination of commodities, foreign exchange, transportation and warehousing.

That had a 32% impact negative on earnings in the quarter. We offset 30 of those 32 points through the combination of strong top line growth and a very strong productivity focus. So I think it speaks to a very healthy business that has bright prospects going forward.

BRIAN SOZZI: Jon, are you surprised a little bit by the resilience of your categories? You did push through price increases. Prices were up at each segment, but volume did not fall off a cliff.

JON MOELLER: That's exactly right. If you take Russia out of the equation, volume was essentially flat versus year ago. So we've held volume with what is effectively 9% price increases. The consumer is resilient. We see that also in the mixed component of top line growth with mixed up a point, in addition to the price increases.

But we're working hard, Brian, to communicate the value that our products offer in a time of stretched household budgets. If you use Cascade Platinum in an EverStar rated dishwasher, for example, you can save $130 a year on your energy bill and save 140 gallons of water per week. So helping consumers understand those benefits has enabled us to be a positive value force in their lives.

BRIAN SOZZI: I was joking with the Yahoo Finance team, Jon. Dawn without a cap, that is innovation. And that is stuff you pay more for. I have done so. So what other-- as you look towards next year, take us through that product innovation roadmap. What brands are you really keying in on, and what might innovation look like last year? Because as, to your point, that innovation will help you push through higher prices.

JON MOELLER: Again, you're absolutely right. Value is not just price. Value is found at the intersection of price, performance, and user experience, which is what you're speaking to with the product that you've bought, and thank you for doing that. And we're bringing innovation to market across the categories, across markets. Our intent is to build our business by growing markets, and not by taking business from competition.

And to grow markets, you need to innovate. And so from a spending standpoint also on innovation, we're stepping in forward, not back. It's crucial that we do that, in addition to the smart communication, et cetera, and meeting consumers where they are, having price points and value propositions that are relevant for them.

BRIAN SOZZI: How is the messaging to consumers likely to change in coming months? How do you communicate this value? When they walk into a Target store, a Walmart store, there's a lot of choices out there, and the prices are up. Are you expect more advertising spend? Do you change the messaging at all?

JON MOELLER: We move a little bit towards what we refer to as performance-based value messaging. So I gave you an example with the automatic dishwashing detergent. Another example is Tide Cold Water. If you use Tide Cold Water in cold water-- so you turn the dial on your washing machine to cold, you receive better cleaning performance than the next best brand in warm water.

And you save all that money in heating the water, essentially paying for the detergent itself. So another example is on Charmin' where we have advertising that talks about roll it back, meaning you don't need to pull as much off the roll.

BRIAN SOZZI: Sometimes you do, Jon. Sometimes you do. I'm just going to put that out there.

JON MOELLER: Let's not go there.

BRIAN SOZZI: But, you know, let's-- in terms of the markets, look, the volume did come down in all the businesses, except grooming. And I guess that's the consumer being a little more cautious on pricing and given everything they're dealing with in their economic and-- circumstances. But, you know, anything in these numbers that would suggest we're going into a recession here in the US in the next six months?

JON MOELLER: Not necessarily. I don't know how to answer that question definitively because, as you're well aware, there are lots of variables that go into that. But if we look at consumer sentiment-- and one measure of that is tradedown to private label brands-- we're seeing very little movement. So in North America, past three in six months, private label brands increased share by only 30 basis points. On a 12-month basis, they're flat. Same general situation in Europe.

So purely from a consumer demand and willingness to spend standpoint, we wouldn't predict a recession. But again, I'm not saying there's not going to be a recession. There are many things that go into that.

BRIAN SOZZI: These currency swings are wild, Jon. In many respects, I haven't seen them in my career, and I'm about almost 20 years into this gig. Because of this FX volatility, do you have to raise prices even more to offset that?

JON MOELLER: Really, for currency, we're focused on productivity offsets. And we had huge productivity gains in the quarter. And that's because most of our competition is internationally domiciled. Think of L'Oreal, Henkel, Beiersdorf, Unilever. And they don't see that negative impact from the dollar strength. So we have to find other ways to offset it, which we are.

BRIAN SOZZI: Lastly, Jon, I believe you're coming up on your one-year mark officially as CEO of P&G. If you look back, what is your biggest lesson that you've learned over these past 12 months?

JON MOELLER: The power of people. And what our organization has been able to accomplish in a very challenging time is whether it's with a war, a pandemic, the highest inflation in 40 years. They're delivering and they're focused on continuing to serve our consumers, our customers, each other, society and shareholders.