Marketing Spend Pays Off for CPG Giants
According to an article on Adage.com, Unilever, L'Oreal, Colgate-Palmolive and Kimberly-Clark Corp. all beat analyst expectations for sales growth last quarter as they met or beat earnings forecasts and hiked marketing spending despite a slowing global economy.
Three of the four said they stepped up marketing spending last quarter or in the first half as they recently announced quarterly results, while L'Oreal has previously indicated plans to hike spending about in line with sales.
Their results stood in sharp contrast to the picture painted by industry heavyweight Procter & Gamble (P&G) when it last month pulled down organic sales and earnings forecasts for the quarter due to market share, economic and currency woes. Neither the economy nor currency seemed to hurt P&G's rivals much, as they appeared to benefit from its share losses.
UBS Investment Bank Managing Director, Nik Modi, comments, “We believe Colgate's impressive results this quarter (along with Kimberly-Clark, Unilever, Natura, L'Oreal) confirms our thesis that P&G's competition is likely to benefit from internal distraction/disruption at P&G due to its current restructuring initiatives. We do not expect this trend to reverse over the coming quarters soon.” Modi is the Household Products, Cosmetics, and Tobacco Global Consumer Staples Coordinator.
Companies are looking to marketing to make a difference. According to the Adage.com article, Kimberly-Clark executives said on an earnings conference call that "strategic marketing spending," which excludes price promotion, was up 25 percent or around $100 million, bringing it to near the 5 percent of sales where that measure stood in 2010 before K-C pulled back on spending amid rising commodity costs last year.
Colgate-Palmolive said ad spending was up 4 percent last quarter from a year ago, with plans to accelerate spending growth in the back half of the year.
Unilever said advertising and promotion spending rose by $400 million, led by digital spending that rose 50 percent. The company added that it would increase full-year spending at least as fast as sales.
Unilever CEO Paul Polman attributed the company growing ahead of its markets to "advertising that meets tougher action standards before we actually put it on air, faster global rollout of some of our bigger bets, better people, better trained and [with] better tools for the job, and encouraging and rewarding great performance and no longer tolerating mediocrity."
Digital marketing is helping companies make consumer connections and meet overall business objectives. Don Scheibenreif, vice president Industries Research, Manufacturing - Consumer Experience for Gartner, Inc., said, “We view digital marketing as not merely a collection of digital communication channels, but as a way to compete. While the [Adage.com] article underscores the importance of digital marketing in the consumer goods industry, it is important to remember that results come from the right combination of strategy, people, process, and technology, as Unilever deftly articulates. Clearly, the companies mentioned are figuring out how to leverage digital marketing and this formula to their advantage, and at the expense of larger rivals.”
Supply Chain Insights Founder, Lora Cecere, comments on the supply chain angle and the need for follow-through. “I continue to be impressed with Kimberly-Clark's execution of demand-driven principles and Colgate's understanding of how to act regionally while managing global operations. The key for both, in my opinion, is focus and execution.”
The strong results, upbeat forecasts and marketing spending hikes from key competitors add to pressure on P&G, which reports its quarterly results Aug. 3, 2012. As part of a five-year $10 billion restructuring program, P&G plans to reduce marketing spending by $1 billion over prior projections by holding growth below that of sales.
P&G's board last week took the unusual step of announcing unanimous support for Chairman-CEO Bob McDonald and his turnaround plan, which includes focusing more on the biggest countries and categories, cutting costs and stepping up innovation.
To read the Adage.com article in its entirety, click here.