P&G Maintains Media Spend

According to a report in AdAge's Daily News (August 6, 2008) Procter & Gamble will not cut its media budget despite rising commodity costs. P&G maintained ad spending as a percent of sales for its fiscal year ended June 30, and plans to do so again in the current fiscal year.

P&G spent 10.4% of sales on advertising, as it had the year before, said Clayton Daley, the company's chief financial officer, on the company's quarterly earnings conference call. The company is expected to post $8.7 billion in global ad spending for the concluded fiscal year, up 9% from $7.9 billion.

Daley states that P&G will have to further cut costs in addition to raising prices to offset an expected $3 billion increase in commodity costs in fiscal 2009, double the $1.5 billion increase last year. Even if cost increases were offset with price hikes, P&G's gross and operating margins would still decrease. In addition, the company has noted signs of consumer trade down, opting for products at lower-price points. In response, the company has shifted its media spend.

P&G financial coverage is available here.

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