The report comes as second half results are posted by the majority of companies in the Consumer Staples sector. Deutsche points out that through the downturn and 2009 the Home and Personal Care (HPC) sector has reinvested in marketing the most, followed by food manufacturing, beer and then spirits.
Deutsche Bank highlighted in a note in January the importance of demonstrating to investors the role of marketing in company results.
HPC, which includes companies such as L’Oreal, Reckitt Benckiser and Unilever, has shown the strongest second half performance and delivered the biggest upgrades to analyst’s forecasts, while the reverse is true for spirits.
Deutsch points to AB Inbev, Carlsberg and Pernod Ricard as companies that did not invest as much in marketing and missed analysts’ forecasts for 2009.
The report says: “When we look deeper into possible drivers of the second half profit performance, we can see that the results are well correlated with A&P (Advertising & Promotion) spend in the prior six months (i.e the first half of 2009).”
It adds: “Those companies that increased spend in the first half of 2009 delivered better profits relative to expectations in the second half.”
The report also says that companies appear to be ready to be much more “aggressive” in investing in marketing in 2010 and the majority of US companies, including Hershey and Heinz, have already signalled sharp increases in investment.