Adidas, Apple, Three: Everything that matters this morning

Good morning and welcome to Marketing Week’s round-up of the news that matters in the marketing world today.

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Adidas ‘hurt’ by Yeezy fallout as profits plummet

Adidas’s CEO has admitted the loss of its Kanye West tie-up Yeezy is “hurting us”, while excess inventory in general has led to a high level of discounts which is also having an adverse impact on the brand.

The sports giant parted ways with the rapper following his anti-Semitic remarks last year and now has to contend with a mountain of unsold Yeezy trainers, worth around €1.2bn (£1bn). It says it “continues to review future options for the utilisation” of its Yeezy stock.

Demand for its lifestyle range was also down during the quarter, which impacted sales.

Overall, Adidas’s operating profit was down 82.6% to €60m (£52m) in the three months ending 31 March 2023 compared to the same quarter last year.

Net sales dropped by a more modest 0.5% to €5.3bn (£4.6bn), but sales growth excluding Yeezy was 9%.

Overall, the business says its gross margin is down 5.1 percentage points to 44.8%, which in addition to the “adverse Yeezy impact” it puts down to higher supply chain costs, increased discounting, inventory allowances and negative foreign exchange movements.

Adidas CEO Bjørn Gulden says inventories are “still too high”, something which it is working to normalise during the year. He says: “This is crucial for us to be able to lower discount levels, increase our full price business and re-build brand heat again.”

Apple’s sales down for second consecutive quarter

Apple’s sales have declined for a second quarter in a row as cash strapped consumers hold off purchasing new tech.

The firm says revenue dropped 3% to $94.8bn (£75.4bn) in the first three months of the year compared with the same period in 2022.

But the decline is not as bad as predicted with demand for iPhones picking up in the quarter and the brand attracted new customers overseas.

Speaking to analysts, Apple CEO Tim Cook highlighted growth in India where the firm recently opened its first two stores. He said he was “delighted and excited” for the “enthusiasm” he is seeing for the brand in India.

However, the firm underlined it was facing a “challenging macroeconomic environment” overall.

READ MORE: Apple sales falter again but iPhone demand persists

Heck latest brand to cut vegan range as demand wanes

Sausage company Heck is slashing its range of meat-free products, with its cofounder suggesting consumer demand is “not there yet”.

The Yorkshire-based firm did have 10 plant-based sausage and burgers on offer, but it is canning all but two.

It comes as demand for meat-free alternatives falters, with other firms seeing a similar drop off in demand.

Nestlé axed its Garden Gourmet vegan range in March, less than two years after launch, and plant-based burger brand Beyond Meat saw its sales drop last year citing issues with consumers around taste, price and perceived health benefits.

Data from NielsenIQ supports the trend, with supermarket shoppers spending £37.7m less on meat replacement products in the year to September 2022.

READ MORE: Sausage maker Heck cuts vegan range as appetite drops

Three launches first B2B brand campaign

Source: Three

Three Business has launched its first brand campaign as it looks to attract more small- and medium- sized firms on to its network.

‘Life Happens While You Work’, which has been created alongside Wonderhood Studios, highlights the increasingly blurred lines between work and life that SMEs experience, with work phrases merging into home life.

‘Approve budgets before end of playlist to calm the kids down before bed’ reads one ad, while another says ‘Sign of final Q3 planning this weekend’s romantic getaway’ with the business half of the sentence in black and the life portion in white.

Through the campaign Three is hoping to increase overall awareness of its business offer, which launched in 2019, as well as boost its market share.

Aislinn O’Connor, marketing director at Three says: “This campaign highlights how work life and home life have blurred for busy people and whether you’re approving budgets or sorting a weekend away, you need fast, reliable connectivity. Our campaign shows business decision makers that they can do it all with Three’s super-fast 5G.”

The campaign is running across radio, digital and out of home until 30 June.

Coronation expected to knock £128m off online spend

The coronation is expected to result in UK consumers spending 26.6% less online over the weekend compared to last year.

The data from Adobe suggests people will spend £128m less with online retailers over the bank holiday weekend as many will be out celebrating at events, parties and restaurants.

Adobe’s forecast takes into account transactions and trends seen across the year to date, as well as the impact of recent bank holidays on online spending.

Data from the Easter bank holiday, which covers 7 to 10 April, shows consumers spent 15% less online than the 2022 Easter weekend.

Vivek Pandya, lead analyst at Adobe Digital Insights says: “Bank holidays often drive a drop in online activity as people take holidays, and take the opportunity to meet up with friends and family. This year, the extra bank holiday in May is expected to have a sizeable impact on online spending, despite the many coronation shopping events and offers from retailers.”

Thursday, 4 May

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AB InBev hails investing in the long-term as revenues rise in Q1

AB InBev hailed the benefits of continuing to “invest for the long-term” as it posted a total revenue increase of 13.2% for its first quarter, up from $13.24bn ($10.52) to $14.21bn (£11.29), leading to EBITDA growth of 13.6%. This is despite what the company calls commodity cost headwinds and an increased sales and marketing spend.

Additionally, the combined revenues for global brands Budweiser, Stella Artois and Corona grew by 15.4%. The company attributed revenue growth to a mix of pricing action, premiumisation and other revenue management initiatives.

Gross profit also grew year on year, from $7.25bn (£5.77bn) to $7.69bn (£6.12bn).

“We continue to invest for the long term and these results reinforce our confidence in the resilience of the beer category, the effectiveness of our strategy and the strength of our platform to deliver consistent profitable growth,” says Michel Doukeris, CEO at AB InBev.

Henkel sales grow but volume drops

Henkel’s sales grew by 6.6% to €5.6bn (£4.93bn) in the first quarter of 2023, with the business’s consumer brands growing by 7.3% and its adhesive technologies business rising by 6.8%, but volumes fell below last year’s level.

The laundry and home care business, generated sales growth of 6.3%, while sales growth for its hair category, which includes Schwarzkopf, grew by 9.9%.

“We had a good start to the year – despite a continuously challenging market environment. The very strong sales increase in both business units underlines the strength of our portfolio of successful brands and innovative technologies. In the first quarter, we continued our pricing measures to further compensate for the headwinds from raw material and logistics costs,” says Carsten Knobel, CEO at Henkel.

Henkel also gave detail on its full exit from Russia, following its decision to exit the country last year amid its war with Ukraine. The business sold its Russian business activities to a consortium of local financial investors for around €600m (£528m).

US regulator accuses Meta of putting children at risk

Facebook MetaThe US’s Federal Trade Commission (FTC) has accused Meta of not enforcing proper parental controls for its younger users.

The FTC also says Meta should be banned from generating income from children’s data, saying “Facebook needs to answer for its failures”.

The watchdog’s independent investigation finds “several gaps and weaknesses” in Facebook’s privacy programme, which it deemed to pose “substantial” risks to users. However, Meta called the move a political stunt.

The investigation finds users under 13 are still able to engage in conversations with contacts outside of parental control, and Meta continued to allow third-party apps to access their information despite saying it would cut access if users hadn’t used the platforms in the last 90 days.

Meta’s spokesperson, Any Stone, said th3 business was being targeted while the FTC is “allowing Chinese companies, like TikTok, to operate without constraint on American soil”.

READ MORE: Meta putting child users at risk, says US regulator

KitKat leans into its brand message with out-of-home campaign

A new campaign from KitKat asks consumers to fill in the gaps as the brand leans into the recognition it has for its ‘Have a break, have a KitKat’ tagline.

The new out-of-home campaign shows the words ‘Have a’, asking consumers to fill in the space. Working with agency Wunderman Thompson, the brand found more than half of consumers identified the brand and understood its messaging.

The campaign can be viewed at London’s O2 Arena. “KitKat has famously encouraged people to have a break for decades, and this poster took that one step further, encouraging people to have a break without explicitly saying it,” says Stephanie Scales, senior brand manager for KitKat & biscuits.

“All it takes is five letters to communicate one legendary message,” she adds.

Government cracks down on cold calling

Cold calls selling financial products are set to be banned in the UK in a government move to stop unsolicited sales calls for insurance products and cryptocurrency schemes.

As part of the ban, the government acknowledges this will also impact legitimate sales, however it says this means anyone receiving a call trying to sell these products will “know it’s a scam”.

The government says it will roll out advertising campaigns to warn consumers about the risk of scam calls.

The ban is expected to come into force this summer, with the government growing its division focusing on this from 120 to 500.

Prime minister Rishi Sunak says the new rules will tackle those who “ruin lives within seconds”.

READ MORE: UK to ban all cold calls selling financial products

Wednesday, 3 May

Tinder owner exits Russia over a year on from Ukraine invasion

Match Group, which owns dating app brands such as Tinder and Hinge, has said it will stop operating in Russia, more than a year on from the country’s invasion of Ukraine.

The group said its brands are currently “taking steps to restrict access to their services” in the country and will fully withdraw by the end of June. It cited human rights reasons for its withdrawal from the country.

Other digital services providers, such as Netflix and Spotify, pulled out of the company shortly after the invasion began in February 2022. Match has made little comment on its Russian business until now, except citing the negative impact the war was having on its European business in March 2022.

Tinder and other apps being withdrawn from Russia will make its citizens immediately take notice, said Mark Dixon, founder of the Moral Ratings Agency, a campaign group advocating for brands to leave the country.

However, speaking to the BBC, he questioned why the decision has taken a year.

“What has changed in the last year that made it wake up now? Putin has been relentlessly attacking Ukraine since he invaded the country,” Dixon said.

“Tinder is fast for dating action but slow on moral action. It should just switch it off tomorrow.”

READ MORE: Tinder swipes left on Russia a year after invasion

Greene King sees profits rise as it pushes for value

Greene King has seen its profits grow rapidly in the last year due to progress on its strategic focus of value during the cost of living crisis.

The pub chain reported a full year operating profit of £192.6m for 2022, versus £18.6m in 2021, when Covid restrictions had a negative impact on much of its business. The company’s revenue also increased by over 62% versus 2021 to £2.18bn.

The chain said it focused on adapting its menu to provide value for consumers amid the cost of living crisis. However, its CEO Nick Mackenzie told Sky News consumer confidence has remained “depressed” throughout the year, but that demand was buoyed by events like Christmas and the World Cup.

“We still have the challenges around energy, we still have labour cost inflation in our business as well and food inflation is still high,” he told the broadcaster, but expressed his hope that these pressures would start to ease this year.

READ MORE: Cost of living: Greene King sees some costs start to ease as it toasts bounce in annual profits

Burger King hails progress on digital transformation

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Burger King’s business has been “fundamentally transformed” by its digital transformation, including increased in-app ordering and delivery.

In the restaurant brand’s French and Spanish businesses over seven in 10 orders are now made through digital channels, reported parent company Restaurant Brands International.

“Digital ordering has fundamentally changed the business over the years and will continue to be a major driver of growth for the next several years,” CEO Joshua Kobza told investors during a call today.

He said different markets were seeing digital growth in varying areas, for example, in Spain, delivery is leading growth. He added some franchisees are moving away from digital kiosk ordering due to the progress they’ve seen in in-app ordering.

Kobza added learnings from Burger King’s digital progress were being applied across markets.

In the UK, Burger King rolled out its first-ever loyalty scheme ‘Your Burger King’ in July 2022 after a trial in Scotland. However, only around half of its UK restaurants are participating. Points through the scheme can be redeemed on the Burger King app, which also allows customers to order.

The business, which includes restaurant brands Popeyes and Tim Hortons as well as Burger King, reported its results earlier today for its first quarter, which ended 31 March. It saw system-wide sales growth of 15% year-over-year to $9.38bn.

In the Burger King International segment specifically, which covers all of the brand’s restaurants outside of the US, sales rose by 12%.

Cadbury desserts recalled over listeria fears

Six Cadbury desserts, produced by Müller, have been recalled due to fears the products may contain listeria bacteria.

Listeria causes the rare infection listeriosis. According to the NHS, this is usually not serious, with most people experiencing only mild symptoms for a few days, or no symptoms at all. However, it can be more dangerous for those who are pregnant, over 65, people who are immunocompromised, and children.

The NHS says the bacteria can trigger symptoms including high temperature, aches and pains, chills, feeling or being sick, and diarrhoea.

The products being recalled include Cadbury Flake Chocolate Dessert and Cadbury Crunchie Chocolate Dessert. While these products bear the Cadbury name, they are produced under licence from Mondelez by Müller.

Müller says it will issue full refunds for any of the impacted products. It also reports the incident is isolated, and that it is carrying a full investigation.

READ MORE: Six Cadbury chocolate desserts recalled by Müller over listeria contamination fear

Vice Media reportedly close to bankruptcy

Vice Media, the pioneering digital media platform, which was once valued at almost $6bn (£5bn) is close to bankruptcy, according to reports.

The media company has been seeking a sale to avoid bankruptcy, reports The New York Times, and has been involved in talks with at least five companies. It is reportedly seeking a sale at about $1.5bn(£1.2bn), which is a significant slide from its previous valuation of $5.7bn (£4.6bn) in 2017.

Vice’s assets include Vice News, Motherboard, Refinery29 and Vice TV. The media brand began as a punk magazine in Montreal almost 30 years ago, before expanding into digital media.

Alongside companies like BuzzFeed, which last week announced the closure of its BuzzFeed News operation, it rose quickly to become a pioneer in a digital media sphere which once seemed brimming with potential.

The company had investments from larger media brands such as Disney, which once explored buying Vice. Disney invested $400m (£320m) into the business, which it wrote off as worthless in 2019.

Last week Vice announced it was cancelling its popular news program Vice News Tonight as part of a restructuring which will make 100 people redundant.

READ MORE: Vice Media reportedly headed for bankruptcy

Tuesday, 2 May

HSBC triples profits in first three months of 2023

HSBC has posted a pre-tax profit of $12.9bn (£10.3bn) in the first three months of 2023, an unexpected tripling of profit from $4.2bn (£3.3bn) during the same period last year, according to the bank’s latest trading report.

Revenue jumped by 64% to $20.2bn (£16.2bn) compared to the same period 12 months ago, with the company crediting the rise to higher interest rates across the world, as well as infrastructure savings.

The positive figure has led to the bank announcing its first dividend of 10 cents per share since before the pandemic in 2019, as well as announcing it would buy back $2bn worth of shares.

Part of the increase comes from the purchase of the collapsed Silicon Valley Bank’s British business (SVB UK), which it bought in March for a nominal £1, in a deal partly brokered by the UK government and the Bank of England. It says its profits got a £1.2bn boost from this deal.

Group chief executive Noel Quinn says the “strong first quarter performance” provides further evidence that its “strategy is working” and that HSBC would continue to “meet our customers’ needs” through its internationally connected franchises.

“We remain focused on continuing to improve our performance and maintaining tight cost discipline, but we also saw an opportunity to invest in SVB UK to accelerate our growth plans,” adds Quinn.

READ MORE: HSBC says UK buyout boosted profit by $1.5bn

Walkers healthier alternatives proving popular

Walkers says 30% of its sales now come from “healthier snacks”.

The UK snack company launched an ambition for 50% of sales to come from products classified as non-HFSS (those not high in fat, salt or sugar) or sold in portions of 100 calories or less by 2025.

One year on from launching this goal, and following an investment of £35m to drive innovation and new products launches, Walkers is making progress.

The company says two-thirds of all new product launches last year, including its Walkers 45% Less Salt snack, are classified as non-HFSS.

Jason Richards, general manager of PepsiCo UK & Irelands, says the figures proves there’s “and increasing appetite for healthier choices in the UK” and the company is “confident” it can reach its 2025 target.

He adds: “Walkers has long been a leader in the development of healthier snacks, and last year we stepped up our efforts, setting our boldest ambition yet. I’m immensely proud of how far we’ve come in a year by reshaping our portfolio.”

Qantas appoints first female CEO

QantasQantas has promoted its chief financial officer Vanessa Hudson to CEO.

The Australian airline, which has suffered a rocky reputation of late thanks to perceptions of poor customer service and frequent cancellations, has been searching for a replacement to long-time head Alan Joyce for some time now.

Hudson will be the first woman to hold the position when she takes over in November.

The airline’s chair, Richard Goyder, says the appointment allows for a “smooth transition”.

“Vanessa has a deep understanding of this business after almost three decades in a range of roles both onshore and offshore, across commercial, customer and finance. She has a huge amount of airline experience and she’s an outstanding leader,” says Goyder.

Shares in the company fell by 2% in early trading as investors showed initial doubt that Hudson will be able to turn around the airline’s flagging fortunes.

Hudson, who has worked at Qantas for 28 years, spoke of her great “understanding” of the organisation as to why she will be able to take the airline forward.

“I think the experience that I’ve had, and also recently, in helping manage through Covid, places me in a great position to look forward in terms of all of the investments that are coming with new aircraft, but also continuing to invest in our customers,” says Hudson.

READ MORE: Vanessa Hudson to replace Alan Joyce as Qantas CEO

Food inflation jumps 15.7% year on year

Food prices have continued to rise in the UK as inflation impacts shoppers.

The British Retail Consortium (BRC) has released new figures showing food inflation was up at 15.7% in April compared to the same time last year, up from 15% in March, and despite a general fall in wholesale costs.

This fall is what leads Helen Dickinson, chief executive of the BRC, to claim food prices “should start” to come down in the next few months “as the cut to wholesale prices and other cost pressures filter through”.

She adds that retailers are “committed to helping their customers and keeping prices as low as possible”.

Major retailers, such as Sainsbury’s and manufacturers like Unilever, have been forced to deny in recent weeks they have been profiteering from inflation amid the drop in wholesale prices.

Sainsbury’s boss Simon Roberts said the company was “absolutely determined to battle inflation for our customers” but admitted prices could take months to fall as other inflationary factors, like energy and labour costs, continued to rise.

READ MORE: Food prices jump despite drop in wholesale costs

BP posts better-than-expected first quarter results

BP has posted first-quarter profits of $5bn (£4bn) for the first three months of 2023.

Profits are down from the $6.2bn it made in the same period last year when the energy crisis was at its peak, but is still much stronger than the $4.3bn that had been forecast by analysts.

The results, the second-best in the company’s history, is sure to reignite debate about whether a windfall tax should be placed on the profits of oil and gas firms.

Labour last night called for the government’s energy profits levy, introduced in 2022, to be made tougher in light of the news.

BP says it will increase its dividend and would reward investors by buying back $1.75bn of its own shares.

Oil and gas prices have been falling since last summer but remain high and are expected to remain so until the end of 2023.

READ MORE: Bumper BP profits reignite debate over tougher windfall tax