Procter & Gamble's New Look for Old Spice
Apr 10th 2013 4:30PM
Updated Apr 10th 2013 4:38PM
Old Spice is getting some new digs. Procter & Gamble just unveiled a line of bar soaps aimed at freshening up the 75-year-old grooming brand.
Already the leader in body wash sales for men, P&G is hoping its new product will appeal to the 40% of guys who prefer to use bar soap but don't have many options as far as "manly scents" go.
It sure could use a sales spark. The company has been suffering through a slump lately. Sales increased by just 3% last year, while earnings fell by 7%. Profits were down, too, with gross margin slipping by 1.6 percentage points in 2012 after a 1.4-percentage-point drop the prior year. Worse yet, the company's sales volumes didn't improve over 2011, which left price increases as the sole engine for revenue growth last year. P&G blamed the weak global economy for helping to keep consumers away.
Still, competition had more than a little to do with P&G's losses. Unilever notched a much stronger 7% rise in sales last year. And the company managed solid volume growth of better than 3%. Ditto for Colgate-Palmolive, which grew revenue and sales volumes by more than 2% last year.
P&G has since clawed back a bit of the market share it lost to rivals, and cost cuts have also helped boost P&G's profits recently. However, it won't get the serious business improvements it needs without rising sales volumes.
And that's why innovation is critical to the company's goals this year. It saw success with Tide brand Pods, which quickly grew into a disruptive sales leader in the laundry category. P&G says it has more of those types of "discontinuous innovations" in the pipeline, of the kind that "obsolete current products and create new categories and new brands."
So investors can expect P&G to make a few more product announcements like this in the quarters ahead. Heavy spending on marketing is also in the cards, as the company looks to support all the new product rollouts. P&G has said that it expects big sales growth in the second half of the year. It's time to start delivering on that goal.
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The article Procter & Gamble's New Look for Old Spice originally appeared on Fool.com.Fool contributor Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Procter & Gamble and Unilever. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.