P&G Skin, Hair, Fragrance Categories Grow Double Digits In Q3

Procter & Gamble's skin-care, hair-care and prestige-fragrance categories achieved double-digit revenue growth during the third quarter (ended March 31), fueling 8 percent growth in the beauty division, the firm said during a May 1 analyst call.

The beauty division reported net sales of $5.62 billion, while earnings grew 9 percent to $805 million during the period, according to P&G.

The performance of skin care was fueled by double-digit volume growth of the Olay brand, led by the North American and Chinese markets, P&G Vice President and Treasurer John P. Goodwin said.

"Both regions were up due to the successful launch of Olay Definity and continued leverage of the Regenerist franchise," the exec said, noting that the demand for Regenerist accelerated following the January publication of Consumer Reports magazine, which named the line the "best wrinkle cream in the market."

Additionally, Regenerist Eye Derma-Pod became the top-selling eye treatment product on the market, helping to drive Olay's share of U.S. facial moisturizers up nearly four points.

Skin care was weighed down by a temporary halt last year of SK-II sales in China, but P&G maintains that the business will rebound over time ¹ ('The Rose Sheet' Oct. 30, 2006, In Brief).

The hair care business continues to grow on the momentum of key brands, including Head & Shoulders , which is close to achieving $2 billion in sales after reaching the $1 billion mark several years ago, according to President and CEO A.G. Lafley.

The Herbal Essences brand is close to becoming a $1 billion brand and is expected to achieve revenues of $700 million this year, while new initiatives currently rolling out for Pantene are receiving "great" retailer reception, Lafley added.

P&G's fragrance category grew behind the Dolce & Gabanna and Hugo Boss brands during the quarter.

Despite the progress of the skin, hair and fragrance divisions, the beauty business was slowed down by color cosmetics, which advanced only mid-single digits on the performance of Cover Girl .

Lafley addressed analyst concerns regarding the performance of P&G beauty brands against rival L'Oréal. The exec noted that P&G leads the hair, skin and fragrance categories, though L'Oréal is outperforming P&G in hair color and color cosmetics.

"I'm not discouraged by the beauty-care business; we've come a long way, we've built a lot of capability, we have a strategy that's working, we've got a great leadership team there, and we're going to be very competitive," Lafley maintained.

In oral care, third-quarter revenue was up high-single digits, boosted by market share growth in the U.S. toothpaste business and double-digit growth in developing regions, P&G said.

"In the U.S., P&G's all-outlet value share in toothpaste is now at 39 percent, up more than three points versus [the] prior year," due to share gains of Crest 's Pro-Health and Nature's Expressions , which began shipping in March.

Oral care contributed to a 10-percent increase in healthcare sales to $2.19 billion, while healthcare earnings advanced 31 percent to $347 million during the quarter.

P&G's blades and razors business, which includes Gillette , advanced 8 percent to $1.28 billion, and net earnings for blades and razors grew 11 percent to $294 million. Double-digit growth of Mach 3 drove sales in the high teens in developing regions, while the introduction of Gillette Fusion in North America drove volume down slightly in developed regions, the firm reported.

The company provided an update on the Gillette integration, noting that it has completed the fourth and final "major integration wave," including billing systems, sales forces and distribution networks.

P&G now will focus on its Go-to-Market Reinvention, a multi-year project focused on driving incremental top line growth and cost efficiencies. The effort is expected to add two percentage points to top line growth over the next four years, according to the firm.

P&G net sales during the third quarter grew 8 percent to $18.69 billion, while earnings increased 14 percent to $2.51 billion.

- Eileen Francis ([email protected])