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P&G sees 'forever-altered' focus on its products from COVID-19

The Procter & Gamble Co.'s third-quarter sales benefited from consumers staying at home and cleaning more as the novel coronavirus spread. The longer-term changes to the company's operations are already coming into view, its CFO said April 17.

U.S sales rose 10% during the company's third-quarter as purchases of over-the-counter medications, paper towels and cleaning supplies rose in North America during the company's third quarter, Proctor & Gamble said in results released before U.S. markets opened. At-home consumption of paper goods and laundry detergent has spiked as consumers avoid going outside and comply with stay-at-home orders across the U.S., Vice Chairman, COO and CFO Jon Moeller told analysts during a call to discuss the quarterly results.

But the pandemic is likely to result in more sustained shifts, both in the company's strategy and consumer habits, he said. With experts predicting months or even years before some aspects of society return to pre-pandemic norms, demand for P&G's products is likely to remain higher well into 2020, Moeller said.

"We will serve what will likely become a forever-altered health, hygiene and cleaning focus" among consumers in the wake of the pandemic, Moeller told analysts.

Already, Moeller said that there has been a "permanent shift" toward sales of Procter & Gamble's products through e-commerce channels during the crisis. The development requires the company to revisit its packaging to better protect items as they make their way directly to consumers' homes, he said.

Procter & Gamble has also been reexamining its product lineup, using the increased demand at retailers to determine which products sell best and which it might be able to drop. "This is a reset opportunity for us and our retail partners," he said.

Moeller said the Cincinnati-based company is better prepared for a global recession than it was during the last downturn since it has shifted its product portfolio to focus on items consumers use daily. But he cautioned that a prolonged recession, coupled with unemployment rates that could rival those seen during the Great Depression, would weigh on the company's business.

For the quarter, consumers stocking their pantries as the virus spread provided a boost, though at the expense of future sales. Moeller said that about 2 percentage points of sales growth were pulled into the third quarter that would have been booked in the fourth quarter without the pandemic.

Sales of large packs of paper towels and toilet paper, such as those sold at club retailers like Costco Wholesale Corp., contributed to the sales bump during the quarter but were less profitable for Procter & Gamble than smaller packs, the company said in its earnings release.

At its factories, which have ramped up production to get more items to retailers whose shelves have been cleared as consumers stocked up, Procter & Gamble has also implemented social distancing measures for employees, Moeller said. The company has also had to find new ways to accommodate employees affected by travel restrictions. In the Philippines, for example, the company is lodging workers in a dormitory near one of its plants to comply with local limits on movement and keep production running, he said.