Proctor and Gamble - Recession Strategies
While Procter & Gamble's stock per share fell by over 15% during the 2008 economic downturn, the company's earnings remained strong. The recession did not have a significant negative impact on Procter & Gamble. Still, the company went bullish on its advertising and developed cheaper products that consumers who were hit by the recession could afford.
How Procter & Gamble Fared During the 2008 Recession
- During the 2008 recession, Procter & Gamble did not experience any significant decline in sales or profit like most companies did.
- Sales of brands like Tide, Crest, Tampax, and Pampers fell by 5% in 2009. Its earnings also fell by 7%.
- Although the company's stock fell from $70 per share to $45 per share, its dividend increased by 10%, and it was back to its old share price within a year.
- The company's earnings remained strong, as well. As described by CNN, Procter & Gamble was not struck hard by the recession because "consumers rely on P&G products in good times and bad; it is considered a titan even in a rough economy."
Steps Taken to Recover
- Procter & Gamble slashed the prices of some of its products at the time.
- The company's primary strategy involved creating new, cheaper brands that more people could afford, in light of the recession.
- It created a "wide variety of branded products at a variety of price points" so that potential customers could buy from the company, whether they could afford its top-of-the-line products or not.
- Procter & Gamble focused on providing value for money to the consumers who were "strained with cash amid rising unemployment and reduced disposable income levels."
- The company carefully meticulously developed its brands with heavy advertising, such that its daytime TV serials were widely known as soap operas.
- Procter & Gamble offered more coupons and highlighted the value of its products through its marketing.
Preparations for a Future Recession
- The CFO of Procter & Gamble, Jon Mueller, mentioned that he does not see any signs of a recession happening soon or the US consumer slowing down. He stated that if a recession were to happen, the company is better positioned to deal with it that it was in 2007.
- Mueller claims that Procter & Gamble's products are essential regardless of the economic landscape. Procter & Gamble has several brands in its portfolio. Most of these brands carry products that customers need and therefore buy whether there is a recession or not.
- Some examples include personal care brands like Crest, baby care brands like Pampers, family care brands like Bounty, and home care brands like Dawn and Gain. As described by Jon Mueller, consumers will not stop "laundry or shampooing or conditioning or feminine protection during a recession."
- Although the company might risk consumers going for cheaper options, particularly as retailers like Kroger are investing in less expensive store-branded products, Procter & Gamble is tackling this by focusing on innovation. By creating superior products, it hopes consumers will be loyal, which will make it resilient if there were to be an economic downturn.
- If there is a recession in the future, Procter & Gamble claims it will confront it by using tools like performance message, pack sizes, and value messaging. This will help the company remain in the best position for consumers.
Kimberly Clark - Recession Strategies
During the 2008 recession, Kimberly Clark's fell by 39.5%. However, the company's net income and sales increased. The impact the recession had on Kimberly Clark was not significant.
How Kimberly Clark Fared During the 2008 Recession
- While Kimberly Clark was not completely immune to the 2008 economic downturn, it remained somewhat resistant to it. Still, this recession slowed down the company's growth.
- As per its 2008 annual report, its cost inflation was almost double the expected figure. The rapid decline in the currency exchange rate caused by the recession negatively affected its growth as well.
- Kimberly Clark's stock reduced from $68.99 to $41.61 per share during the 2008 economic downturn. In comparison, most S&P 500 companies' saw at least a 55% decline in their stock.
- In addition, demand for some of the company's products reduced. Nonetheless, the company's sales and net income grew during the recession.
- Regardless of the economic situation, people need diapers and tissues - products that Kimberly Clark specializes in. As a result, the company did not suffer at the hands of the 2008 recession. It was named one of the top recession proof companies in 2011.
Steps Taken to Recover
- For supplemental funding, Kimberly Clark relied on credit market, particularly public bond markets and commercial paper.
- To combat the recession, Kimberly Clark focused on developing new and improved products. It also acquired and developed the technology required to make these innovative products work.
- The company also controlled its costs. It achieved cost savings by reducing manufacturing waste and material costs.
- Kimberly Clark leveraged brand recognition and loyalty by its customers.
Preparations for a Future Recession
- Kimberly Clark has a wide range of home care brands in its portfolio including Huggies, Kleenex, and Cottonelle. This places the company in a defensive industry that should be "relatively insulated from the effects of a [future] recession."
- Currently, Kimberly Clark's stock levers products that are recession proof and its financials prove it.
- The company maintains a strong brand portfolio with a high level of product demand, making it an "extraordinarily recession resistant-company."
- In preparation for a future recession, Kimberly Clark has expanded to emerging markets with large populations and economic growth rates; an example is China. If China eventually ends its two-child policy, the demand for the company's baby care products will increase.
Newell - Recession Strategies
Newell went through a rough patch during the 2008 recession. The company's cost structure was bloated. Sales reduced significantly, and its stock plunged. Through its "rise to the challenge" campaign, the company was able to recover from the recession. While the company does not think a recession will happen soon, it has increased its product offerings by acquiring more brands. Newell has also become more consumer-driven. These are qualities that will make the company somewhat resilient to a possible recession.
How Newell Fared During the 2008 Recession
- Newell Brands, which was at the time known as Newell Rubbermaid, took a large hit in the 2008 recession. Prior to the recession, the company reported its highest revenue in a while and its stock price grew.
- In late 2008, consumer spending at the company plummeted, while the company's sales plunged by double digits.
- Its stock reduced significantly from $32 per share to $4.54 per share. It closed 33% of its manufacturing plants, as well. This made investors lose confidence in Newell.
- Newell Brands had to lay off 10% of its employees as employee morale was at an all time low.
- The remaining employees at the company feared losing their jobs and had to do additional work due to the layoffs. These employees also reported feeling unappreciated by the company.
Steps Taken to Recover
- There were doubts that the company could recover from the recession. One of the steps it took to recover from the recession involved phasing out some of its plastic-intensive products such as storage pins.
- Newell also increased some prices. The price of its food storage containers was increased.
- To tackle the recession, the company developed a "rise to the challenge" strategy. It was a four phase campaign put together by the company's senior management and communications team.
- Phase one of the campaign involved engaging its executives at a retreat. Project teams presented case studies on how Newell could deal with its troubles. This was done to educate its leaders.
- The second phase of the campaign involved global education. An intranet microsite was created. Employees were also educated on how their morale affected the growth of the company.
- The third phase was about driving employee adoption through reminder messages to "convert awareness to action." For the fourth phase, Newell published over 20 impactful case studies across all its business divisions and global regions.
- All four phases of the campaign were done with a low budget, due to the economic crisis at the time. After these campaigns, Newell's earnings grew by 8%. In addition, the company's stock tripled.
Preparations for a Future Recession
- The CEO of Newell Brands mentioned that a recession is unlikely, anytime soon. According to this executive, before a recession happens, consumer spending reduces significantly.
- He stated during a quarterly earnings call that customers are not "behaving in a particularly defensive way like they did in 2009 during the recession."
- He also mentioned that Newell Brands is now more customer-focused, which has made it resilient, even if a recession were to take place.
- Prior to the 2008 recession, the company focused on plastics alone. Now, the company has diversified its business through acquisitions and investments in innovative products.
- Newell now has over 40 brands in its portfolio. Some of these brands have products that people need and will buy whether or not there is a recession, some examples being personal care products and products for babies.
- In general, experts have said that if a recession happens soon, consumer-facing goods will fare well while manufacturing goods will most likely take a hit.
Consumer Products - Recession Proof
For the sake of this response, products that are expected to perform best during a future recession are recession proof products. Toptal defines a recession-proof product as one that consumers consider priorities, such that even the most frugal consumers will buy them. Baby products, adult & feminine products, paper products, and beauty products are expected to do well if a future recession happened. In general, experts predict that consumer-focused products will do well, while manufacturing products may be negatively impacted.
Adult & Feminine Care Products
- According to Dividend, feminine and adult care products are recession-resistant.
- During the 2008 recession, companies like Procter & Gamble - which sells feminine & adult care products - did not take a huge hit.
- Most women in the US have periods and need to buy menstrual pads, tampons, and menstrual cups, among others, regardless of the economic situation.
- Despite the recession in 2008, Procter & Gamble saw a 21% increase in net earnings, and a 17% increase in net sales of its feminine care products - including the Always feminine care brand.
- In general, baby products are known to be recession proof and profitable.
- Although America's birth rate is at an all time low, there are still over 3.5 million births annually. These babies do not care about recessions and will need toys, strollers, car seats, and diapers. As a result, baby products are expected to do well if a recession occurred in the future.
- When the 2008 recession occurred, there was a significant increase in the number of visits to stores selling baby products.
- In 2009, the baby care market saw a 7% value growth. This made it one of the most recession proof categories.
- The only recession proof paper products are bathroom tissues and paper towels. Others, including paper dry sheet masks, are not essential products, meaning they might not perform well.
- Bathroom tissues and paper towels are disposable products that consumers cannot cut back on. This means consumers will buy them regardless of a recession.
- According to Paper First, the paper industry in general, will most likely be affected by the 2020 economic downturn.
- During the 2008 recession, P&G - the parent company of best-selling paper towel brands like Bounty - reported that its paper towel sales increased by 7.6%, while unit sales were up 2.9%.