How the world’s biggest advertisers are spending (or not) as industries adapt to the coronavirus pandemic
There are good signs from the first-quarter earnings season.
So far expectations of a fast and sharp rebound have been justified. Companies smashed forecasts despite rising costs. And the future looks just as bright. From further relaxations of lockdowns on both sides of the Atlantic to the protracted recovery of the beleaguered travel sector, it’s clear that the global economy is mending — even if the recovery will come at a substantial cost.
Digiday analyzed the most recent earnings updates from the top 10 ad spenders in the world, according to COMvergence data, which is based on net estimated offline paid media monitored data for 2020 combined with digital paid media estimates based on its own proprietary methodology.
Procter & Gamble: Balancing marketing efficiencies with growth (total net media spend 2020 — $7.9 billion)
The world’s largest advertiser is squarely focused on making its marketing dollars count coming out of the pandemic. It increased marketing spending, which is primarily padded (padded?) media, by $270 million over the first quarter. The investment was somewhat offset by overhead and marketing savings, which totaled $160 million. This is in line with how P&G has managed its ad spending throughout the pandemic; making cuts in some areas to fuel ad spending elsewhere. Put another way: P&G is trying to balance growth, particularly as profitability swells, against sustainable marketing spending in a post-pandemic world.
Take online sales: P&G’s e-commerce business is one to watch. Online sales for the company rose by 50% in the first quarter versus the same period last year.
Unilever: Coming out of conservation mode (total net media spend 2020 — $4.3 billion)
The company warned investors that its margins would take tank in the first half of the year as it doubled down on marketing to capitalize on pockets of growth. That said, inflation will also squeeze those margins and make the prospect of finding sustainable growth easier said than done. Still, Unilever believes aggressive marketing will come through for the business over the coming months — not least for online media. Indeed, Unilever has the second biggest dataset on Amazon’s cloud, said CEO Alan Jope on the company’s latest earnings call who added that the company is stepping up efforts to make sense of it all.
“We’re now really learning how to extract value from that and we’ll continue to invest in the digital transformation of Unilever,” said Jope. “But it won’t be net incremental because we’re making savings elsewhere.”
L’Oréal: Convenience is the driver of e-commerce growth (total net media spend 2020 — $2.8 billion)
The cosmetics giant has got off to an encouraging start in 2021 thanks in part to gains in China, where consumers have seemingly put the pandemic behind them, and online sales have taken off. In fact, e-commerce sales, which cover both sales on the advertiser’s own sites as well as other retailers, rose 47% in the first quarter.
These sales now account for 26.8% of group sales. It’s a validation of the company’s digital nous, which saw online sales compensate for 50% of its revenue from brick-and-mortar stores last year. It’s no surprise, then, that the advertiser plans on pouring more of its media dollars into those platforms where people are buying goods, from retail media networks set up by some of the biggest retailers to social commerce on platforms like Instagram and TikTok.
Amazon: Another blowout quarter (total net media spend 2020 — $2.7 billion)
Amazon’s influence over e-commerce seems to get stronger with every passing quarter. The company’s sales for the first three months of the year jumped 44% over the same period last year to $108.5 billion. Interestingly, the company’s growth rate in the first quarter was the same as the one before that benefits from festive shopping.
Nevertheless, Amazon has never been the type of company to rest on its laurels. It dropped $6.2 billion on marketing in the quarter, up on the $4.8 billion it spent over the same period last year. The company seems all too aware that the growth of e-commerce is a double-edged sword. Yes, it opens up a lot more sales to the business, but it also opens it up to a lot more competition, whether it’s companies like Walmart setting up their own media businesses or supermarkets and other platforms building their own e-commerce businesses.
Nestlé: A strong start but wary of a shaky finish (total net media spend 2020 — $2.6 billion)
Nestlé’s sales benefited from a caffeine shot in the first quarter when sales grew 7.7% compared to the 4.3% over the same period last year. A large portion of the growth was thanks to a surge in home coffee drinking. Sales of Nespresso products, alongside a jump in demand for instant coffee and its Starbucks-branded coffee range, rose 17.1%.
Despite these gains, Nestlé isn’t getting ahead of itself. After all, there’s still the matter of inflation it needs to navigate, which will have an impact on its marketing.
As its CEO Mark Schneider warned: “We now see broad-based inflation across our various commodities, packaging materials and transportation costs. Not all of these items can be hedged, and our hedging cover for a number of commodities will run out over time. We are raising prices where appropriate, but usually, there’s a time lag associated with pricing. We are on top of the situation and my raising this issue should not give you alarm.”
Volkswagen: prepping e-commerce to drive sales forward (total net media spend 2020 — $2.5 billion)
Volkswagen is on the road to recovery. Sales in the first three months of the year rose 13% compared to a year earlier to nearly $79 billion. Like many other companies, the company believes more of those sales will come from online stores now that more people are accustomed to buying a variety of products online.
“We intend to significantly increase our share of digital sales, although we consider them, let’s say, omnichannel sales,’ Christian Dahlheim, head of group sales at Volkswagen.
Even so, its unlikely there will be many purchases made entirely online. As Dahlheim explained “we won’t see many exclusive digital or off-line customers. Most customers will use both channels. It absolutely provides opportunity for a reduction of cost of sales.”
Renault-Nissan-Mitsubishi Alliance: Stuck in the slow lane (total net media spend 2020 — $2.3 billion)
It was an uneven quarter for the automotive trifecta.
Renault’s sales slumped 1.1% to €10 billion over the period.
Nissan’s admitted its production output was likely to drop by 500,000 vehicles between April and September because of a semiconductor supply crisis that has kneecapped rivals including Volkswagen, Ford and Stellantis.
Meanwhile, Mitsubishi reported a $12.6 billion revenue loss for its fiscal year to March. The downturn continued in the first quarter of 2021, with revenues sliding to $25.5 billion, a 32% plunge on the same period last year. Nevertheless, the advertiser seems to determined to spend its way out of the slump.
“We will aggressively invest in growth from this fiscal year such as advertising cost for new car launches and new product development to launch from 2023 onwards,” said Mitsubushi Motors CEO Takao Kato
General Motors: Pandemic puts moral philosophy to the test (total net media spend 2020 — $2.1 billion)
The automotive advertiser expects a strong first half of the year despite a wobble in the first three months. Revenue was down slightly from $32.7 billion in the first three months of last year to $32.5 billion for the same period this year.
Unsurprisingly, the company will rely on marketing to pick up the pace. Plans are already underway to return its marketing spending to pre-pandemic levels. The advertiser cut its annual marketing budget by $1 billion last year as it looked to manage its cash flow through a turbulent time. But coming out of this period won’t be straightforward. Not when General Motors has come under fire from critics who believe its pledge to spend more dollars with black-owned media owners is nothing more than virtue signaling. The pandemic is putting profound moral questions to the test for the business.
Reckitt Benckiser: Covid disinfected boom continues (total net media spend 2020 — $2 billion)
Sales for the consumer goods company rose 4.1% in the first quarter, down on the 13.3% rise during the same period last year. The business looks set to benefit from how the pandemic has changed people’s attitudes toward hygiene, having expanded Dettol and Lysol into new markets like Austria and Belgium as well as added business customers like WeWork.
Sales of hygiene products, like the disinfectant brand Lysol, were up 28.5% over the period. As ever, more of those sales are happening online. So much so that there was a 25% jump in e-commerce sales to push it 13% of its net revenue. Understandably, Reckitt Benckiser spent considerable time over the period searching for specialists in the area to pinpoint the opportunities.
GlaxoSmithKline: Waiting for the shot in the arm (total net media spend 2020 — $2 billion)
As Covid-19 cases are rising in some markets, people are increasingly worried about the outbreak of new variants. And yet these are uncertain times for the companies tasked with developing treatments for the infection.
Revenue for GlaxoSmithKline (GsK) fell 18% across the group leading to total sales of £7.4 billion ($10.4 billion). Surprisingly, the company’s pharmaceuticals arm saw a 12% decline in turnover to £3.9 billion (5.5 billion).
These falloffs will put even more pressure on GsK’s marketing over the coming months. Like other advertisers, GsK made various tweaks to branding and media buying during the peak of the pandemic, from reorganizing its brand portfolio to tweaking its e-commerce plans. Needless to say, the company’s problems are far from over.
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