How the world’s biggest advertisers are spending (or not) as the pandemic grinds on

Digiday analyzed the most-recent earnings updates from the top 10 ad spenders in the world (according to RECMA data from 2018; 2019’s ranking isn’t available until September) to see how they are adapting their marketing strategies to the ongoing crisis.

1. Procter & Gamble: Supporting public health measures

Much like the previous quarter, the world’s largest consumer goods maker continued its strong pandemic sales performance as consumers stocked up on cleaning products like Mr Clean, Tide and Charmin toilet paper. E-commerce was also a particular bright spot as organic sales were up 6% in the latest quarter, its fiscal fourth.

The company said it increased marketing investment by 270 basis points — or around $480 million — though this increase was partially offset by 230 basis points of overhead and marketing expense savings. 

On the earnings call last week, P&G CEO David Taylor said the company was “using our marketing and communications expertise to encourage consumers to support public health measures, to help flatten the curve and slow the spread of the virus.” Taylor said its educational TV advertising and the use of additional in-store navigational and educational signage helped deliver “an immediate lift” to its homecare category.

P&G said it expects to record sales growth of between 2% to 4% for the current fiscal year — citing challenges with the economy and the ongoing health crisis. Organic sales rose 5% in its 2019 fiscal year.

2. Unilever: Readying a ‘purposeful’ push

Unilever reported a 0.3% dip in second-quarter sales growth, but its shares still soared when it reported earnings last week as analysts had expected a bigger decline. With hygiene front of mind for consumers, sales of products like Dove soap, Domestos bleach and new Lifebuoy sanitizer shot through the roof.  Still, with much of the world under lockdown conditions, food service sales declined by almost 40%, while out-of-home ice cream sales declined by almost 30%.

As consumer habits shifted, Unilever said it adapted and reallocated its brand and marketing investments “week-by-week.” That, coupled with declining ad prices in most media markets, led to the company’s brand and marketing investment declining by 100 basis points during the period — but also improved efficiency.

However, Unilever said it expects to increase its marketing investment in the second half of the year as lockdown restrictions ease and it puts advertising heft behind new products designed for the new normal. “We’re investing more of our marketing spend on communication, which is explicitly purposeful,” such as campaigns for brands like Lifebuoy and Domestos which also provide coronavirus-safety messages, said Unilever CEO Alan Jope on the company’s second-quarter earnings call.

3. L’Oréal: ‘Entering the second half with confidence’

L’Oreal’s sales dropped 19% in the second quarter as lockdown conditions weakened demand for makeup and cosmetics. Still, there are some signs of a recovery: Chief executive Jean-Paul Agon said the company’s sales rose in July for the first time since January.

Much like its consumer goods counterparts, L’Oreal’s e-commerce business has grown rapidly during the pandemic, up 64.6% over the first half of the year. The company’s China business also marked a swift recovery, with sales up 30% in the second quarter.

L’Oreal spent €3.98 billion ($4.7 billion) on advertising and promotional expenses in the first half of the year — down 10.9% in absolute spend terms versus last year, but up 30 basis points as a percentage of sales.

Agon said the company is “entering the second half with confidence.” The company has new product launch plans for each of it divisions and Agon said it is increasing its media investment “everywhere” to grow its market share.

4. Renault Nissan Mitsubishi alliance: A rough road ahead

Renault plunged to a record loss in the second quarter as the pandemic ruptured car sales and the company continued to feel the negative effects from its troubled alliance partnership with Nissan, of which it owns 43%. Renault’s sales fell 35% in the quarter. Meanwhile, Nissan has warned investors it will likely record its biggest ever operating loss in the year to March 2021. Global vehicle sales in the current quarter were down 48% on last year. Meanwhile, Mitsubishi reported a ¥176 billion ($1.7 billion) loss in the period covering April to June. 

The alliance is now embarking on a turnaround plan that involves wide-ranging jobs and production cuts.

On the marketing front, Nissan last month introduced a new “flat” logo. Meanwhile Renault is planning to make its e-tech hybrid engine technology one of the “key pillars” of its strategy this year, said Renault CEO Luca de Meo. “We shouldn’t be as shy as we have been in the last years” about showing off the performance of the technology, he added.

5. Amazon: The unstoppable money printing machine

Unsurprisingly, the pandemic has been a boon for Amazon’s sales as consumers dodged the shops and ordered items straight to their homes. Net sales soared 40% to $88.9 billion in the second-quarter and the company booked a record quarterly profit. Still, Amazon laid out $4 billion in “covid-19” related costs, such as purchasing personal protective equipment and paying out bonuses to its front-line employees and delivery workers.

The company expects sales next quarter to grow between 24% and 33% versus the prior year. Amazon’s “other” segment, which primarily includes revenue from advertising, grew 41% to $4.2 billion.

Its marketing costs in the period nudged up 1% on the year-ago quarter to $4.3 billion.

Amazon is planning to host its Prime Day shopping event in the fourth quarter this year, rather than the third, so as not to affect service to its customers who are relying on its service throughout the prolonged coronavirus crisis.

6. Coca-Cola: A narrower focus on its biggest brands

Coca-Cola’s net revenue slid 28% in the quarter ended July 2 as lockdown conditions hit beverage sales in restaurants, bars and other out-of-home venues. CEO James Quincey is more optimistic for the future: “We believe the second quarter will prove to be the most challenging of the year,” as sales trends improved as the months progressed. Coke pulled back heavily on marketing expenditure in the period — its selling, general and administrative expenses were down 34% — just over $1 billion — versus the year-ago quarter.

Quincey said Coca-Cola is now refocusing its marketing investments around its biggest brands and being more disciplined in its experimentation. One example of that is its new global ad campaign, “Together Tastes Better,” demonstrating how its drinks can be paired with meals. Coca-Cola is also launching the next iteration of its “Open” campaign this summer, a push that “invites the world to enjoy the simple and important things in life,” as Quincey put it.

At the same time, Coca-Cola is re-evaluating the return on investment across all its marketing channels — “everything from ad viewership across traditional media to improving effectiveness in digital,” Quincey said. Ultimately, even though marketing spend will step up from the second quarter, there will be cost savings.

7. GlaxoSmithKline: Working on a covid-19 vaccine

Pharmaceuticals giant GlaxoSmithKline typically doesn’t talk too much about marketing and advertising on its earnings calls. The company suffered a 2% dip in revenue in its second quarter as global lockdown situations slowed down the number of people using its vaccines, with visits to healthcare professionals limited.

The company is working with France-based Sanofi to develop a covid-19 vaccine. So far the U.K. has signed up for 60 million doses of the vaccine, while the U.S. has agreed to secure 100 million doses.

GSK has been making a number of divestments of some of its products, such as Horlicks, as it looks to position itself as “the world’s leading pureplay consumer healthcare company with the most competitive portfolio possible,” said CEO Emma Walmsley. GSK has also been “winning share in an accelerating e-commerce channel” in its consumer unit.

Looking ahead, GSK is aiming to make £500 million ($656 million) in savings between now and 2022.

8. Volkswagen: ‘Full-blown task force mode’

Volkswagen chief finance officer Frank Witter described the first half of 2020 as “one of the most challenging in the history of our company.” Revenue dipped 23% in the second quarter. 

Still, he said the Germany automaker was “cautiously optimistic” about the rest of the year, thanks to the launch of new models and the “positive trend exhibited in our business over the past few weeks.”

The company maintained its “full-blown task force mode” from the previous quarter, which included cutting back budgets in areas including external consultancy and marketing. Witter said Volkwsagen has been “even stricter” with its brand efficiency programs and its platform rollouts.

Volkswagen’s U.S. unit was among the advertisers joining the #StopHateForProfit Facebook boycott in July.

9. McDonald’s: Cooking up a big push

With many restaurants closed and consumers staying indoors, McDonald’s global comparable sales declined 23.9% in the second quarter. Things are on the up now: As of June 30, McDonald’s said “nearly all” of its restaurants around the world were open.

U.S. marketing spend was down 70% in the quarter as McDonald’s chose to conserve resources until the coronavirus situation stabilized. That budget will be reallocated in the third and fourth quarters. The company said it will spend more than $200 million on additional marketing to support its franchisees get tills ringing again.

Some of the efforts will also be directed towards a “rededication” to breakfast, which the company said had been the most challenged part of its menu due to coronavirus — especially as some new competitors had stepped up their breakfast offerings at the same time. 

Having removed scores of menu items to ease its operations during the height of the pandemic, some will be returning — but not all, the company said. The bulk of McDonald’s marketing efforts in the second half of the year will be towards core menu items and drawing attention to some of its service channels — like online ordering — rather than new innovations

10. NBCUniversal/Comcast: A tricky quarter, but room for Peacocking

While Comcast’s broadband business continued to mark an uptick in customers as the coronavirus crisis continued to keep people at home viewing and surfing in record numbers into the second quarter, the rest of its empire was in a slump. Many of its theme parks remain closed, cable customers continued to cut the cord, advertising revenue was down and many movie releases are up in the air. Overall, revenue for the June quarter dipped by 11.7%.

On a positive note, Peacock —the company’s ad-supported streaming service it rolled out in April to Comcast customers, followed by a wider national U.S. launch in July — has picked up 10 million customers, the company said. Despite the Peacock push, advertising, marketing and promotion costs were actually down on the prior year — falling 29% to $1.3 billion. 

Advertising revenue, sold across its local cable, national cable, broadcast television and Sky networks, fell 30.4% in the quarter.