Lucozade has brought its creative and production services in-house as it looks to cut back on costs following the Brexit vote, but insists its marketing budget will not be touched.
The move follows the appointment of Jon Evans as marketing and business development director at Lucozade Ribena Suntory (LRS) a year ago. While he has been responsible for communicating big changes at the company, including the introduction of low-calorie options and launching its new brand purpose ‘Made to Move’, which looks to inspire one million people in the UK to get more active, he has also had to deal with the fallout of the vote to leave the EU.
Despite being a British company, LRS had been hit by a rise in inflation and business costs. A lot of its production materials are bought in euros, and so it has been impacted by price increases due to the weakening pound.
And it is not alone. Rising costs are hitting a range of businesses. Some are reacting by increasing prices while others are looking to cut costs, including marketing, that includes FMCG giants.
Unilever and Procter and Gamble, which are cutting marketing by either reducing the number of ads they produce or cutting the number of agencies they work with. LRS has been forced to make similar moves, but insists its marketing budget will remain intact.
“What’s exciting about LRS as a business is that we’re very marketing-led, and really believe in long-term brand building. We protect our marketing and creative investment as much as possible, it’s probably the last place we’d go for cuts per se,” he says.
What Evans has tried to do, however, is to change its split when it comes to working versus non-working spend. It launched its own in-house creative and production agency, TED, in April last year, in a move to “reduce fixed costs”. While it was launched before the Brexit vote, the team has since grown “significantly”.
Making its marketing work harder
The change has meant Lucozade is producing outdoor and magazine advertising more “quickly and efficiently”. It has also helped with its digital ambitions. TED was behind the launch of its fitness app in April this year, which rewards users for doing different types of exercise. According to Evans, producing the app in-house meant it cut down on development times and reduced the number of handovers.
“With cost increases from Brexit we face challenges keeping our costs under control, so the TED team was originated around what we could do in-house to be more efficient and save costs, to improve agility and move quickly,” he says.
“By having an in-house agency, we’ve reduced fixed costs compared to costs that go on consumer activity. That’s been the main driver. We spend £50m a year on advertising and promotion, and we haven’t changed that level of investment. We’ve just made that investment work much better.”
That doesn’t mean, however, that LRS no longer sees a need for outside agencies. It still has “two or three” strategic agencies on its books, which Evans says are crucial for providing “a global perspective on what’s happening in market”.
“They add a lot of value. When it comes to producing assets later, we can then rely on our own teams. Hopefully we get the best of both world; external agencies give us the best creative talent and strategy, and then TED gives us the ability to go and execute it,” he concludes.