Masso Group

"Kraft, P&G, General Mills Plan to Increase Investments in Advertising, In-Store, Coupons". Consumer package-goods companies found a rare point of agreement at the Consumer Analyst Group of New York conference this week: the need for continued increases in marketing support. Marketers battling private label from Kraft to Procter & Gamble and General Mills promised bigger investments in advertising, in-store promotion, shelf signage, coupons and packaging. Hershey and Heinz, which have lagged the package-food industry in marketing spending, are racing to bridge the gap. Heinz CEO William R. Johnson noted "the industry's renewed focus on innovation

and marketing in response to the challenge of store brands."

"Nothing like the thought of hanging to concentrate the mind," he quipped. Heinz increased marketing spending by 40% for the most recent quarter. Overall, Mr. Johnson said Heinz's marketing has increased by 60% over the last four years. He added that Heinz has significantly increased its coupon program in the U.S. and U.K. as consumers are redeeming them more. These investments aren't included in the marketing budget.

Hershey boosted spending by 50% in 2009, and expects to increase spending by another 25% to 30% in 2010. That's on top of a 26% increase in 2008. In addition to new marketing, advertising and myriad promotions, Hershey is also partnering with certain grocery chains to redesign aisles for ease of shopping, changing the way lines are formed at the front of store, and gathering more information about consumers' emotional and physical responses while shopping.

P&G Chairman-CEO Bob McDonald said the marketer would increase media impressions by 20% for the fiscal year ended June 30, which is up substantially from the "at least 10%" that Chief Financial Officer Jon Moeller estimated in November.

That doesn't necessarily imply a 20% increase in spending, which declined 13% last year to $7.6 billion globally. But much of it will come in the April-June quarter behind launches such as Pampers Dry Max diapers, Gillette Fusion ProGlide razors and a restage of Pantene hair care products -– the latter two launching in June and the former launching in March. Mr. McDonald said P&G's multibrand Winter Olympics effort alone is expected to generate 4 billion consumer impressions.

Changing focus
P&G competitor Clorox Co. also plans to ramp up marketing spending this year, as it has consistently since 2004, said Chief Financial Officer Dan Heinrich. For fiscal 2010, ended June 30, Clorox expects reported advertising spending to rise around 6% to $530 million.

But the focus of the spending is changing fairly rapidly, he said, with 40% of Clorox's marketing spending now on non-traditional media such as public relations, social media, branded content and trade marketing, vs. only 10% in 2006.

Kraft CEO Irene Rosenfeld described the company's commitment to higher marketing spending as "incremental." She noted the company spent 6.7% of sales, or $2.8 billion on marketing in 2008, and 7.2% of sales, or $2.9 billion in 2009. Total sales declined year over year, by 3.4%, primarily due to currency fluctuation. Ms. Rosenfeld also stressed the company's determination to spend more, despite cheaper media rates.

General Mills and Kellogg, which led the package-food pack in spending gains two years ago, are posting smaller increases, but are nonetheless dedicated to beefing up the marketing purse. Kellogg CEO David MacKay said the company spends twice what many peers do on advertising.

"Not only do we spend a high level of money on advertising, we're actually spending more over time," Mr. MacKay said. The company increased its spending in 2009, he said, but also benefited from media deflation and other cost-saving initiatives like bundling and diverting more dollars to digital. In 2010, he said the company will increase spending again, and continue to benefit from media deflation, boosting impressions even higher. Mr. MacKay added that social-media spending is beginning to show some returns, particularly with Pop Tarts and Special K.

"We have a lot of consumers come to our websites, interact with our websites as they think about their weight management programs, and we get a much deeper involvement with that consumer through this form of media," he said. Kellogg has tripled its online spending in the last three years, and they "see that continuing in the future."

General Mills CEO Kendall Powell also vowed continued increases to marketing and advertising. To drive growth in the next five years, General Mills will focus on Hispanics, baby boomers, and millennials.

Campbell, which unveiled a new package design for its soup that is the result of a multi-year neuro-marketing initiative, is also in the process of redesigning grocery aisles with an attractive, gravity-fed shelving system, and it is working hard to get consumers to eat more soup. Following sodium, fat and calorie reductions to many of its products, Campbell will pit its products against higher-calorie lunch and dinner options in a series of ad campaigns.

 

(Source: Advertising Age)