• by David Goetzl , Karl Greenberg , January 30, 2009

Procter & Gamble's top executive gave indications again Friday that the country's largest advertiser appears to be on track to continue in that role. CEO A.G. Lafley said marketing outlays have remained at their traditional levels, and P&G is looking to take advantage of the turmoil in the ad market to build share of voice.

In a call with investors, Lafley said the marketer of Tide and Crest is "absolutely not" trimming ad dollars. In fact, what's really going on is that the advertising markets are softening--and for the same dollars, we're buying more delivery." That, in turn, has led to "improving our shares of voice" in multiple categories, he said.

Lafley first spoke about the opportunity for company dollars to go farther in December. As the country's largest advertiser, P&G spent some $5.2 billion in 2007, according to Ad Age.

P&G's steady marketing investment comes as the company said Friday that it's looking to cut costs--to the tune of perhaps $1.2 billion a year. It cited opportunities in reducing the number of well-paid senior executives abroad, and even cutting travel expenses and opting for more video conferences.

Lafley also said P&G is shifting more dollars into coupons, hoping to dovetail with customer behavior in a recession. Spending has also gone up for in-store, point-of-purchase promotions. In some categories, digital spending has increased to some effect, he said.

"We do market-mix modeling--we actually calculate the return on investment on every brand on every element of the mix--and we move the dollars around to where the dollars are more effective and more efficient," Lafley said.

In the recently completed October-December period, P&G's net sales were down 3% to $20.4 billion, although exchange-rate issues played a role. Organic sales rose 2%.

In 2009, the company expects organic sales growth of 2% to 5%.

"We're actually fortunate we're still in an industry that's growing," Lafley said. "It's slow. It's a slog. But it's still growing."

P&G posted a 61% increase in earnings per share in the third quarter, including gains from the spinoff of the Folgers brand last fall to J.M. Smuckers. The company said its sales revenue was up 2% on price increases and positive product mix, although net sales--at $20.4 billion--were 3% off the same quarter last year.

Lafley said that even with the economy staggering, the company grew organic sales 2%. "We expect the environment will remain difficult and highly volatile--at least in the near term," he said. The company said increases were led by products in the baby and family care, snacks and pet care portfolios.

The company said sales volume dropped 3% in the fourth quarter because of trade inventory reductions and consumption declines. But price increases added 4% and product mix added one percent to net sales.

P&G reported that net sales within its beauty-products portfolio decreased 4% to $4.9 billion last quarter. Within the segment, P&G's retail hair care-product sales volume grew by single digits because of growth in developing regions. P&G said every product in the category grew in global sales, led by Head & Shoulders, Herbal Essences, Rejoice and Nice 'N Easy. The company said skin-care product sales decreased by mid-single-digit percentages because the company spun off its Noxzema brand.

Grooming product sales decreased 7% to $2.0 billion, per the company--which said declines were driven by a double-digit decline in sales of Braun products, although price increases across premium shaving systems boosted net sales by 4%. The company says Braun volume declined because of market contraction, the exits of Braun's U.S. home appliance and Tassimo coffee appliance businesses and trade inventory reductions.

P&G says its grooming category could have been worse: strong sales and product line expansions within the Gillette Fusion line--now the largest brand in P&G's U.S. market for shaving systems--bolstered the category. The brand saw double-digit growth offset by a high-single-digit decline of Mach3. It also posted a 1% increase in global market share of blades and razors.

Health-care products dropped 6% because of the double-digit decline of Prilosec OTC reflux medication, which lost marketplace exclusivity in North America and because of the company's divestiture of the ThermaCare brand. Also off were net sales of Snacks and Pet Care by 1% to $0.8 billion, and fabric and home care products by 4% to $5.8 billion for the quarter.

The only category that saw sales gains was Baby Care and Family Care, whose net sales increased 3% during the quarter to $3.5 billion on 1% volume growth. The company said price increases to recover commodity costs helped drive a 7% increase in sales growth. Baby Care product sales were driven by Pampers in developing regions, while Family Care decreased by low single digits because shipments of Charmin tissue offset gains made by Bounty.