Procter & Gamble said the economic downturn had done little to hit global demand for its premium household products as consumers stuck at home go through more of its paper towels, tissues and dishwasher tablets.
Shares in the US-based consumer goods bellwether behind Fairy washing up liquid and Pampers nappies hit a new high, giving a market capitalisation of $323bn, as executives argued the pandemic was leading to lasting changes in consumer habits.
The results are the latest sign that changes in behaviour during the crisis are helping the makers of long-established consumer brands, which had been on the back foot in recent years. P&G produced revenues of $17.7bn in the three months to the end of June, a rise of 6 per cent from a year ago on an organic basis.
Sales of packaged foods have also jumped. Kellogg, maker of the eponymous cereals, on Thursday reported a 9 per cent rise in organic sales to $3.57bn.
However, in a reminder of the challenges facing the industry, Kraft Heinz took another round of writedowns that pushed it to a $1.65bn quarterly loss, despite a 7.4 per cent rise in organic net sales. Shares in Kraft Heinz dropped 5.8 per cent.
Kraft Heinz said the impairment charges, totalling $2.9bn, in part reflected lower expected growth rates at its food service business due to Covid-19 and expected margin compression at its Oscar Meyer meats business.
The biggest beneficiary of the upheaval in consumer behaviour during the crisis was P&G’s fabric and home care division, whose brands include Ariel detergent and Mr Clean sprays. Organic sales surged 14 per cent.
Jon Moeller, chief financial officer, said that as well as being more focused on hygiene during the pandemic, the extra time consumers were spending at home was leading them to wash clothes more often and use more toilet paper, among other household products. They also wanted to keep cupboards well stocked during the health crisis.
“We really haven’t seen a retreat from the [initial] stock up,” he said.
David Taylor, chief executive, said: “We expect to grow through this crisis and come out even stronger on the other side.”
Before the pandemic, premium household brands had been losing market share to cheaper alternatives, especially supermarkets’ own products. Mr Moeller argued the crisis was leading consumers to reappraise the value of trusted brands.
Each of P&G’s five divisions produced year-on-year increases in organic sales apart from grooming, which was down 1 per cent. Men with no need to go to workplaces are shaving less, weighing on sales of Gillette razors. Its baby, feminine and family care division, by contrast, saw organic sales up 5 per cent.
P&G produced net earnings of $2.8bn compared with a loss of $5.23bn in the same period one year ago.
Mr Moeller said it was “certainly possible” that consumers become more price sensitive as the recession drags on, but that there was little sign so far of a “trade down” to cheaper brands. P&G was able to push up prices 2 per cent in the quarter without sacrificing volume, which rose 3 per cent.
Shares in the company, which had a similarly strong performance in the previous quarter, have rebounded from a period of underperformance and were up 2 per cent at midday in New York at $131.
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