Group 1: Market Overview - China's birth rate was 5.6 births per 1,000 people in 2025, down nearly 13% from 2023, with only 7.9 million babies born last year, indicating a worsening fertility crisis [1] - The U.S. birth rate was 10.7 babies per 1,000 people in 2023, highlighting a significant disparity in birth rates between the two countries [1] Group 2: Company Strategy - Procter & Gamble has managed to grow its China baby care business by a double-digit percentage over the past 18 months despite the declining birth rate by focusing on premium products that align with Chinese cultural values [2][4] - The Pampers Prestige line, which uses silk as a key material, exemplifies the company's strategy to cater to Chinese parents' desire for high-quality products [4] - Premium disposable diapers account for 35% of the Chinese diaper market, with sales growing at nearly four times the rate of standard disposable diapers, indicating a strong market for premium products [5] Group 3: Innovation and Future Outlook - Procter & Gamble is undergoing a long-term reinvention, emphasizing innovation and productivity gains to fund new product development while managing cost pressures from tariffs and inflation [7] - The success of the Pampers Prestige line serves as a blueprint for the company's other businesses as it seeks to adapt to changing market conditions [8]

Core Insights - Procter & Gamble (P&G) reported weak demand for its grooming products, with volume declines across three out of five product categories [1][2] - The company’s overall revenue fell short of expectations, but shares increased as investors look to new CEO Shailesh Jejurikar for a turnaround [3] Group 1: Product Categories Performance - The feminine and family care products category, including brands like Pampers and Charmin, saw a 5% volume decline last quarter [2] - The grooming segment, which includes Gillette and Venus, experienced a 2% drop in volume, while the healthcare segment (Oral-B, Vicks) fell by 1% [2] - The haircare and beauty category was the only segment with sales volume growth last quarter, attributed to high-end acquisitions like Ouai and Farmacy [7] Group 2: Consumer Behavior and Economic Factors - Consumers are staggering their purchases to save money, opting for less frequent grooming routines, which has impacted demand [4] - The government shutdown affected lower-income shoppers, leading to sales declines in December [4] - P&G's sales rose 1% to $22.2 billion last quarter due to higher prices, but overall demand fell as consumers sought deals [5] Group 3: Market Trends - The K-shaped economy is influencing consumer behavior, with higher-income consumers also looking for deals, particularly in luxury products [5] - The "Lipstick Index" theory suggests that when consumers cut back on some purchases, they may splurge on small luxuries like high-end makeup [5] - In China, despite a declining birthrate, P&G's premium Pampers Prestige line is experiencing double-digit growth [7]

With birth rates down around the world, Procter & Gamble is leaning into premium diapers to bolster sales figures. Specifically, the conglomerate is planning to sell diapers made with silk fibers in China, the company’s second-largest market, in hopes of attracting new parents. Most Read from Fast Company The news came out of Procter & Gamble’s earnings conference call on Thursday, during which president and CEO Shailesh Jejurikar discussed the logic behind leaning into the premium diaper category with ...

Financial Data and Key Metrics Changes - The company reported organic sales growth of nearly 3%, with volume down one point and pricing up one point for the quarter [3][4] - Core earnings per share (EPS) were $1.88, in line with the prior year, while core gross margin decreased by 50 basis points and operating margin fell by 70 basis points compared to the previous year [5][6] - Adjusted free cash flow productivity was 88%, with $4.8 billion returned to shareholders, including $2.5 billion in dividends and $2.3 billion in share repurchases [6] Business Line Data and Key Metrics Changes - Seven out of ten product categories held or grew organic sales, with hair care growing mid-single digits and skin and personal care, personal health care, home care, and oral care each up low single digits [3][4] - Baby care and family care were down low singles, with family care specifically down approximately 10% due to base period dynamics [4] - Organic sales excluding family care were up 1% for the quarter [4] Market Data and Key Metrics Changes - Organic sales in North America were down 2%, with volume down three points, while European focus market organic sales were up 1% [4] - Greater China organic sales grew 3%, driven by Pampers and SK2, each up mid-teens or more [4] - Latin America organic sales were up 8%, with solid growth across Mexico, Brazil, and other smaller markets [5] Company Strategy and Development Direction - The company is focused on strong innovations supported by sharper consumer communication and retail execution, with a commitment to integrated growth strategies [11][12] - The strategy includes a long-term reinvention of P&G to adapt to changing consumer preferences and market dynamics, emphasizing the importance of brand building and consumer engagement [12][15] - The company aims to leverage superior data, technology, and capabilities to create competitive advantages and drive market growth [15][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in stronger growth in the second half of the fiscal year, despite a challenging start due to softer consumer markets and aggressive competition [22][25] - The company anticipates organic sales growth of in line to plus 4% for fiscal 2026, with expectations for improved performance in the U.S. as interventions take hold [22][23] - Management highlighted the need for continuous adaptation to the evolving retail landscape and consumer behavior, emphasizing the importance of innovation and execution quality [12][13] Other Important Information - The company is undergoing a restructuring program aimed at improving operational efficiency and focusing on higher growth segments [22][41] - There is an expectation of modestly higher interest expenses and a core effective tax rate in the range of 20%-21% for fiscal 2026 [23] Q&A Session Summary Question: What gives confidence in near-term acceleration? - Management noted strong growth outside the U.S., particularly in Latin America and Europe, as evidence of underlying acceleration [27][28] Question: What excites about the longer-term "reinvention" of P&G? - Management highlighted growth opportunities in changing media and retail landscapes, leveraging unique strengths and capabilities [32][33] Question: What are the most important priorities for driving better execution in the U.S.? - Key priorities include adjusting to the new media landscape, focusing on stronger core products, and enhancing consumer value across categories [46][49]