Please ensure Javascript is enabled for purposes of website accessibility

Procter & Gamble's New Look for Old Spice

By Demitri Kalogeropoulos - Apr 10, 2013 at 4:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Is there room for innovation in this 75-year-old brand?

Old Spice is getting some new digs. Procter & Gamble (PG -6.23%) just unveiled a line of bar soaps aimed at freshening up the 75-year-old grooming brand.

Source: Procter & Gamble.

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 (UL -3.62%) 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Procter & Gamble Company Stock Quote
The Procter & Gamble Company
PG
$145.04 (-6.23%) $-9.64
Unilever PLC Stock Quote
Unilever PLC
UL
$44.20 (-3.62%) $-1.66

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
349%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.