The investment bank has published a research note on the effect of marketing on “consumer staples”, taking in sectors such as food, soft drinks and alcohol, which highlights the lack of understanding investors have about advertising and promotion.
In an analysis of 30 large European and US food and drinks companies over more than 15 years, Deutsche found that companies which increase their marketing spend grow sales 30% faster than their peers and also increase profits 50% faster than their peers.
Companies reviewed in the report include Nestlé, Reckitt-Benckiser, Carlsberg, Danone and Diageo.
The document, believed to be the first of its kind, found almost three quarters (73%) of investors did not have a “good idea” how the food and drink industry spends its marketing budget, while 83% of the 50 investors polled said that there are aspects of marketing they do not understand or need to know more about.
The firm found investors feel there is a lack of disclosure about marketing spend and initiatives across the sectors, with 83% of investors stating that companies do not give enough information on marketing in their financial reports.
Deutsche says investors understand what capital expenditure is but that advertising and promotional spend is less widely understood. It adds that “investors should be paying much more attention to this topic than is currently the case”.
The investment bank also argues that marketing spend “builds and protects the value of consumer brands” and is critical to the health and valuation of companies.
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