Some of the world’s best known brands are once again aggressively expanding their advertising spend to win back shoppers, after years of restrictions imposed on the marketing budgets of global consumer goods groups.
Executives have in recent days disclosed to investors the scale of the promotional push.
Among the many companies ramping up ad spend are Kimberly-Clark, maker of Kleenex tissues and Huggies nappies, and Colgate-Palmolive, the toothpaste and soap group. Each spent an additional $100m on advertising last year.
A showcase for how some of the enlarged budgets are being deployed in the US will come during this weekend’s Super Bowl, long known as much for its commercial breaks as for the American football game itself.
Hershey, whose fourth-quarter advertising and marketing spend in North America rose 5.1 per cent compared with a year ago, will have its first Super Bowl ad in over a decade with a slot for Reese’s chocolate bar.
America’s most-watched sporting fixture will also have spots for Procter & Gamble’s Olay skincare brand, featuring an all-female cast of astronauts, PepsiCo’s Mountain Dew, which spoofs the horror movie “The Shining”, and Heinz ketchup, with a split-screen piece directed by Roman Coppola.
Analysts said it remained to be seen whether the increased promotion of established staples would be enough to woo back shoppers who have defected to new products and cheaper alternatives developed by retailers.
The upswing in ad spend, both online and in some traditional media, follows a period of cost cutting by several multinational consumer goods groups to protect profitability.
Eight of the sector’s biggest companies tracked by media buying agency GroupM spent a combined $34.5bn on advertising in 2018, equivalent to about 12 per cent of revenues. Yet the proportion changed little over a five-year period despite expansion into growth areas such as China, pointing to cuts in the US and other mature markets.
“Many packaged goods companies aggressively reduced their spending on advertising in recent years,” said Brian Wieser, global president of business intelligence at GroupM, the media buying agency. “After the Kraft Heinz blow up last year, it may be that some companies felt liberated. Those who believed in investing in growth felt like they won the argument.”
Kimberly-Clark’s additional ad spend in 2019 was the biggest annual increase as a proportion of its revenues in at least two decades, according to Barclays.
Mike Hsu, Kimberly-Clark’s chief executive, told analysts that the company had “trimmed back a little bit” of its advertising spending during what had been “a tough couple of years”.
Now the $49bn-market cap group was willing to invest again as market conditions were “very good for growth”.
Colgate-Palmolive on Friday disclosed that advertising spending rose 6.5 per cent in 2019 to $1.69bn.
Church & Dwight, the group behind Arm & Hammer baking soda and Trojan condoms, also on Friday said its fourth-quarter marketing expenses rose 29 per cent from a year ago to $163m.
Advertising is not the only activity enjoying more generous budgets. Cadbury’s owner Mondelez said an additional $150m it invested in the business last year was focused on distribution and logistics, as well as marketing.
Executives said they were closely monitoring the higher ad spend and focusing on resources on consumer-facing campaigns that clearly deliver results. Mondelez has consolidated its use of advertising agencies, focusing on WPP and Publicis.
Kraft Heinz, which last year installed Miguel Patricio — a marketing executive from brewer AB InBev — as its chief executive, has said it will increase its consumer-facing advertising budget in 2020 but will keep a tight rein on agency fees and market research.
Despite Kimberly-Clark’s recent budget increases, Lauren Lieberman, analyst at Barclays, estimated that the company was still spending less on advertising than it was in 2012. The degree to which the higher spending would boost the company’s revenues, she said, was yet to be demonstrated.
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