PG vs. Inflation: How Long Can Price Hikes Offset Input Costs?

The Procter & Gamble Company PG has relied on price increases in recent years to offset inflationary pressures on input costs, but sustaining this strategy indefinitely presents challenges. While fiscal 2025 saw balanced contributions from volume and pricing, management has acknowledged that consumer behavior is shifting as inflation, tariffs and macro uncertainty weigh on purchasing patterns. In some categories, especially in North America and Europe, category growth has slowed, and consumers are seeking value through smaller packs, promotions or lower-priced tiers. This creates a ceiling on the effectiveness of repeated price hikes, as further increases risk driving trade-down or reducing category growth.

PG’s ability to maintain pricing power depends heavily on its brand superiority and innovation pipeline. Management emphasized that categories where performance has slipped below consumer expectations have seen share pressure, but regaining superiority quickly reaccelerates growth. Examples such as innovation in Pampers, SK-II and Swiffer demonstrate that when product performance and value are clearly communicated, the company can command premium pricing even in a cost-sensitive environment.

PG is working on cutting costs, improving its supply chain and focusing on its most profitable products to handle ongoing inflation. The company is aiming for up to $1.5 billion in yearly savings and is removing less important products so it can invest in the best ones. But with $200 million in extra commodity costs and $1 billion in tariffs expected in 2026, PG will need more than just price hikes. It plans to combine smarter pricing with cost savings and innovations to stay ahead.

PG’s Peers: How CL & CHD Tackle Inflation

In an increasingly inflationary and volatile macroeconomic environment, leading consumer goods companies like Colgate-Palmolive Company CL and Church & Dwight Co., Inc. CHD are leveraging strategic price increases and premium innovation to help offset rising input costs.

Colgate has been using price increases alongside its premium innovation strategy to help cover rising input costs, including higher raw materials, like fats and oils and the impact of tariffs. In second-quarter 2025, pricing added 80 basis points (bps) to its gross margin, but this was more than offset by a 420-bps hit from raw and packaging material inflation. The company is also relying on “funding-the-growth” productivity initiatives, which delivered a 250-bps benefit, and is planning further pricing actions in key international markets.

For Church & Dwight, price increases have been an important tool to help offset higher costs from raw materials, packaging and tariffs, but the benefit is becoming more limited. In second-quarter 2025, the company saw solid volume gains, yet pricing and mix had only a small positive impact on sales, and inflationary pressures still weighed on margins. Management is balancing selective pricing with productivity improvements, cost controls and innovation to protect profitability, acknowledging that there is a limit to how much consumers will accept higher prices before switching to cheaper alternatives. This means future margin protection will rely more on efficiency gains and premium product growth rather than relying solely on price hikes.

PG’s Price Performance, Valuation & Estimates

Procter & Gamble’s shares have lost around 7.5% year to date compared with the industry’s 4.3% dip.

From a valuation standpoint, PG trades at a forward price-to-earnings ratio of 22.01X compared with the industry’s average of 19.79X.

The Zacks Consensus Estimate for PG’s fiscal 2025 and 2026 EPS indicates year-over-year growth of 2.3% and 6.3%, respectively. The company’s EPS estimates for fiscal 2025 and 2026 have moved downward in the past 30 days.

Procter & Gamble currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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