Good morning. For nearly two centuries, Procter & Gamble, home of Dawn dish soap, Tide detergent, Pampers diapers, and Gillette razors, has sold consumers the same basic promise: its products are worth a premium. The pitch has always been that better performance justifies a higher price.
However, after years of cumulative inflation, consumers are more price-sensitive, more willing to compare, and less reflexively loyal. Against that backdrop, P&G’s message is evolving.
“I don’t think we’ve lost pricing power,” P&G CFO Andre Schulten said on the company’s fiscal third-quarter earnings call on Friday. “I think pricing power has to be earned—and the way to earn it is to combine pricing with a truly delightful experience for the consumer.”
For the past few years, large consumer goods companies were able to push through price increases with limited resistance. That window is narrowing. From tariffs to commodities, costs are still rising, but consumers are no longer absorbing those increases as easily. The result is more of a balancing act: How do you protect margins without pushing shoppers away?
P&G, No. 51 on the Fortune 500, is emphasizing innovation over across-the-board price hikes. “Consumers respond well if we give them a truly better proposition in the categories we are in because they see there is upside,” said Schulten, who led the earnings call discussion and handled analyst questions.
That looks different depending on the product. For Tide, P&G recently introduced what it described as the biggest formula upgrade in 25 years, holding the price steady while improving performance. The result was mid-teens growth in one of its largest U.S. businesses, Schulten said. For other brands, that could mean two options for consumers: “either pick the innovation with a bit of pricing and the promise of better performance, or stick with what they know,” he said.
P&G’s results suggest the approach is working, so far. For the quarter, the company reported net sales of $21.2 billion, a 7% increase versus the prior year and well above Wall Street’s estimate of roughly $20.5 billion. Organic sales grew more than 3%, with gains across all 10 product categories and in every global region. Adjusted EPS of $1.59 topped the analyst consensus of $1.56.
But beneath the headline numbers, Schulten was candid about the tension P&G faces. Tariffs, higher commodity costs, and increased investments are expected to create a roughly $0.25-per-share headwind, pushing full-year EPS toward the lower end of its flat-to-4% growth guidance range. That cost pressure, he noted, is affecting the entire consumer goods sector. Schulten also warned that surging oil prices tied to the Middle East conflict are expected to create a roughly $150 million after-tax earnings hit in the fiscal fourth quarter and could balloon to about a $1 billion annual headwind in fiscal 2027.
The broader bet for P&G is that the fundamentals haven’t changed: trust, once earned through product performance, still translates into pricing power. But consumers now decide that one purchase at a time.
Sheryl Estrada
sheryl.estrada@fortune.com
Leaderboard
David Duckworth was appointed interim CFO of Acadia Healthcare Company, Inc. (Nasdaq: ACHC), effective May 1. Duckworth succeeds Todd Young, who is departing from the company to pursue a CFO role at a private equity-backed animal health company. Young will remain with the company through April 30. Duckworth, a former CFO of Acadia, will serve in the interim role at least until the completion of the previously announced search for a permanent chief executive officer, which remains ongoing.
John Spaid, EVP and CFO of National Health Investors, Inc. (NYSE: NHI) will retire effective July 1. Todd Siefert will become EVP of corporate finance, effective June 1, and he will succeed Spaid as CFO upon his retirement. Siefert brings more than 25 years of experience. He most recently served as CFO of Hillsboro Residential and before that as SVP of corporate finance and treasurer at Ryman Hospitality Properties, a publicly traded REIT.
Big Deal
The average health benefit cost per employee is expected to top $18,500 this year, according to Mercer. The firm's CFO Perspective on Health report is based on the perspectives of finance chiefs on the cost of health care.
About three-fourths of CFOs indicated health care costs are at least a top-five concern relative to other operating costs, and for 33%, they rank in the top three. Among smaller employers (fewer than 500 employees), 44% say health benefit cost is a top-three concern.
Only about one in four CFOs said that their organization was able to absorb the cost increases over the past two years without any of these business impacts. CFOs in the largest organizations (those with 5,000 or more employees) were only slightly more likely to report that health benefit cost growth has not impacted their business (33%).
The findings are based on a survey of 161 CFOs and other finance professionals, with 77% at companies with up to 4,999 employees, 18% at companies with 5,000–19,999 employees, and 7% with 20,000 or more employees.
Going deeper
"John Ternus, Apple’s new CEO, inherits a rebounding China business—and some messy headaches" is a Fortune article by Nicholas Gordon.
Gordon writes; "John Ternus, Apple’s senior vice president of hardware engineering, takes over as CEO on Sept. 1, ending Tim Cook’s 15-year tenure at the top of the world’s most valuable consumer technology company. Apple’s presence with China is perhaps the defining relationship of the Tim Cook era.” Read more here.
Overheard
"I try to have a work-life balance but it’s super hard. Weekdays are especially hard to disconnect so I try to disconnect at least one of the weekend days."
—Kathryn Bricken, founder of Doughlicious, a multi-million-dollar sweet-treat brand, told Fortune in an interview. Bricken started over at age 50 and worked 20-hour days to build the cookie dough empire that produces more than a million cookie dough and gelato bites every single week.
