Coca-Cola, Iceland, Disney: 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.

Coca-Cola to tap into energy drink market

Coca-Cola has revealed plans to launch a line of energy drinks under its name in a bid to expand its portfolio beyond sugary drinks.

According to Reuters, Coke has not yet unveiled a time line for the predicted launch but the products will be named ‘Coca-Cola Energy’ and ‘Coca-Cola Energy No-Sugar’ which will likely be sweetened by guarana extract.

Monster Beverages’ shares fell 10% following the news. Monster has also suggested Coke’s move might violate an agreement between the companies.

However, a spokesperson for Coke says it has submitted the difference in interpretation to an arbitration panel for resolution, which is the mechanism agreed by the Coca-Cola Company and Monster in the original agreements.

“As a total drinks company, we’re constantly looking for new ways to innovate and meet evolving consumer demand,” the spokesperson adds.

“It would be developed as a preferred option for people who want these types of ingredients in an energy drink; it would also be available as Coca-Cola Energy No Sugar, to provide consumers with a great-tasting no sugar option.”

Iceland’s Christmas ad banned for ‘being too political’

Iceland’s festive ad has been banned from being aired on TV for breaching political rules, after it failed to win over regulators.

The grocer stuck a deal with Greenpeace to rehash its animated short film highlighting the destruction palm oil is having on our rainforests and the orangutan communities. The harrowing film is narrated by Greenpeace advocate Emma Thompson and follows the story of a little girl and a young orangutan named Rang-Tan.

The ad was designed to offer consumers the choice of an orangutan friendly Christmas. It will launch on YouTube instead.

According to Clearcast, the watchdog responsible for vetting ads before they are broadcast, the advert breached rules within the 2003 Communications Act which ban political advertising.

A spokesperson for Clearcast says: “Clearcast and the broadcasters have to date been unable to clear this Iceland ad because we concerned that it doesn’t comply with the political rules of the BCAP code. The creative submitted to us is linked to another organisation who have not yet been able to demonstrate compliance in this area.”

Iceland’s founder Malcolm Walker says the company sought permission to use Greenpeace’s film and remove the logo to replace it with Iceland’s.

“It would have blown the John Lewis ad out of the window. It was so emotional,” he adds.

This year Iceland became the first major UK retailer to pledge to remove palm oil from its products.

Disney reports record profit and flags new streaming service

Disney has recorded a record profit and revealed plans for a new streaming service as it looks to subdue competition from streaming giants Netflix and Amazon Prime.

This year the company made a profit of nearly $12.6bn (£9.7bn) on $59.4bn (£45.7bn) in revenue. While in the three months to 29 September, Disney earned $14.3bn (£11bn) in revenue, up 12% year on year, and profits climbed 33% to $2.3bn (£1.8bn).

According to the BBC, Disney’s performance was bolstered by the studio division, where revenues skyrocketed by 50% in the quarter to $2.15bn (£1.6bn).

Disney’s financial performance can also be attributed to its cruise ships, theme parks and a broadcast division which includes ABC and ESPN.

The company is likely to launch another live Star Wars spin-off in a bid to lure views to its streaming service, while it will also launch Disney Plus, a family-oriented site.

Dyson wins ‘energy labelling’ case in EU court

Dyson has won a legal battle in the European courts over the way vacuums cleaners are labelled regarding their energy efficiency after arguing that ratings favour its rivals and do not reflect vacuums’ real conditions of use.

The electricals giant, which launched legal action in 2013, also suggested that its vacuum cleaners should be tested in real-world conditions where bags generally fill up and can become clogged therefore dropping the energy rating of a product from A to G-grade.

It also suggested that lab tests which only measure the performance of empty cleaners are inaccurate and could mislead consumers.

Initially in 2014 Dyson’s claim was dismissed but was upheld in part two years later. Now, the European Union’s General Court upheld the case.

Dyson has donned the ruling, “a win for consumers”.

The company says: “[Some manufacturers] actively exploited the regulation by using low motor power when in the test state, but then using technology to increase motor power automatically when the machine fills with dust – thus appearing more efficient”.

The current labelling regulations will remain in place for another 10 weeks to allow time for an appeal.

UK’s economic growth tipped to be slowest of all EU nations

The UK’s economic growth is tipped to be the slowest of all 28 nations within the European Union next year.

Joining current cellar-dweller Italy, the UK is said to drop to the bottom of the tally with its economic growth slowing to just 1.2%, even if Prime Minister Theresa May maintains trading relations post-Brexit. However, either way it would be considered a “lose-lose” situation for Britain.

“Private consumption growth is forecast to remain weak as real wages grow modestly and households look to maintain savings. Heightened uncertainty means that business investment growth is likely to remain constrained,” the European Commission says.

The growth rate of a European area which includes 19 countries such as Germany, France and Italy is predicted to slow by 2.1% this year to 1.9% in 2019 and 1.7% in 2020.

However, the UK is still predicted to record an economic growth of 0.6% for the third quarter while economists at HSBC say Germany is likely to record its first drop in quarterly economic output, of 0.1%, for more than three years.

Thursday, 8 November

Sainsbury’s cites proposed Asda merger for 13% drop in profits

Sainsbury’s is blaming its proposed merger with Asda, the integration with Argos and restructuring its store management teams for a 13% drop in profit after tax to £144m during the 28 weeks to 22 September.

Underlying profit, however, grew by £51m driven by synergies with the Argos business.

Overall group sales rose by 3.5% to £16,884m, with retail sales excluding fuel up 1.2%. The hot summer caused grocery sales to rise by 1.2% and general merchandise to increase by 1.5%, with total food transactions up 0.6%. Clothing sales, however, declined by 1%.

Ecommerce is a growing segment for the Sainsbury’s business, with online grocery and convenience sales up 7% and 4%, respectively.

Sixty Argos stores were opened in Sainsbury’s supermarkets during the period, bringing the total to 251. The supermarket retailer said that it was maximising the productivity of its retail space by adding Argos stores and repurposing its food space in a number of stores to drive increased trading density.

Sainsbury’s group chief executive Mike Coupe described the business as having delivered a “solid first half performance”. Despite the boost driven by the hot summer, Coupe admitted that general merchandise margins remain under pressure.

“Our strategy of offering customers a distinctive range of high quality and great value food has driven like-for-like sales growth at Sainsbury’s. Where we have invested to lower prices, volumes and transactions have increased,” he added.

Of Sainsbury’s proposed merger with Asda, Coupe said it will create a “dynamic new player in UK retail, with the ability to further lower prices and to reduce the cost of living for millions of UK households”.

UK ad spend surges 6.4% marking strongest quarter since 2014

UK ad spend rose 6.4% year-on-year to reach £5.6bn in the second quarter of 2018, marking the 20th consecutive quarter of market growth.

Combined with an overall ad spend rise of 7.2% year-on-year during the first half of 2018 to £11.4bn, this was both the strongest second quarter and first half since 2014, according to Advertising Association/WARC Expenditure Report data.

Owing to this record investment the full-year outlooks for 2018 and 2019 have been upgraded to +6.3% and +4.9%, respectively, meaning a projected ad spend of more than £23.5bn for 2018.

The data shows that overall market growth is being driven by increased spend on online advertising, including for newsbrands, magazine brands, broadcaster video-on-demand and radio station websites. As a result the full-year projection figures have been upgraded to 13.3% growth this year, meaning more than £13bn will be spent on online advertising in the UK in 2018.

Mobile accounted for over half of search spend for the first time in the second quarter, while online video attracted half a billion pounds during the three months to June.

The TV market also grew ahead of expectations during the second quarter, with total spend rising 1.9% to £1.2bn. Spot advertising rose for the third consecutive quarter, growing by 1.4% which was ahead of forecast.

While he welcomed the figures Advertising Association chief executive, Stephen Woodford, cautioned that the upgraded predictions for 2018 and 2019 are dependent on getting the right deal from the Brexit negotiations.

“We must also ensure that the unique features that have made the UK the global hub for our industry, such as access to the best and brightest creative talent from across the world, are prioritised as we leave the EU,” he stated.

Warc data editor, James McDonald, added: “Growth in online advertising spend continues to exceed our expectations, resulting in the fifth upgrade to our forecasts in as many quarters. Barring any major shock to the system, this trend should continue to play out over the years ahead, lifting total market value in tow.”

Mulberry blames House of Fraser for 8% sales slump

Luxury handbag brand Mulberry has blamed House of Fraser’s administration, softer UK demand and lower tourist footfall for slumping sales.

The company saw sales drop 8% to £68.3m in the six months to 30 September, as its losses before tax widened to £8.2m. The failure of House of Fraser wiped out more than £2m of profit, as Mulberry was forced to close three concessions within the chain.

While sales at its UK stores were down 11%, Mulberry’s international sales rose by 13%.

According to the Guardian, the collapse of House of Fraser in August resulted in a bad debt and asset write-off of £2.1m at Mulberry, with the fashion brand’s sales made via House of Fraser halving to £1m from £2m in the same period last year.

While Mulberry continues to operate 17 concessions across the House of Fraser chain, the brand has signed a deal open 18 concessions in John Lewis stores, which was previously a wholesale customer.

Chief executive Thierry Andretta said Mulberry might extend the relationship with John Lewis depending on how the situation with House of Fraser develops, reports the Guardian.

John Lewis on the lookout for new chairman

The John Lewis Partnership is on the lookout for a successor to Sir Charlie Mayfield, who will step down as the organisation’s fifth chairman in 2020 after 11 years in the role.

Mayfield described the appointment of his successor as “a key responsibility”, which is why he took the decision to lay out the timetable in order to enable an “open and thorough process” to select the next chairman.

His successor will be announced in the second half of 2019 and the retailer will be considering both internal and external candidates. The decision will be overseen by the nominations committee, which includes deputy chairman Keith Williams and non-executive director Laura Wade-Gery, formerly executive director of multichannel for UK retail and online operations at Marks & Spencer.

Creative Equals launches Government backed ‘Returners’ programme

Creative Equals, the organisation championing diversity in the creative industries, is launching a ‘Returners’ programme backed by a £65,000 grant from the Government Equalities Office.

The two-week programme will run from 4-14 March 2019 during International Women’s Week and is for 35 women returning to work after an extended break. The eventual aim of the programme is to place 24 of them into roles.

Running in London and Manchester, the ‘Returners’ programme is intended for mid-senior copywriters, IX/UX, art directors, producers, strategists, data analysts, designers and concept creatives. Thirty brand and agency founding partners have already signed up to take part.

The first week of the bootcamp will focus on upskilling, getting the cohort up to speed on all the latest creative and tech developments, while the second will see the group working on real briefs set by brand partners including Lego and Facebook.

The returners will then go on a four to six week placement with one of Creative Equals’ founding partners and will be supported by a dedicated coach throughout.

Creative Equals founder Ali Hanan, explained that the programme is a direct response to the difficulties returning carers face when attempting to re-enter the world of work.

“Just when creatives are stepping up to leadership roles, parenthood or caring duties come along. With out-of-date portfolios, a career gap and a biased recruitment sector, the barriers to re-entry are huge,” she explained.

“The most forward-thinking brands and agencies in the UK are our founding partners, helping us build a sustainable programme, which we aim to grow year-on-year.”

Wednesday, 7 November

M&S sees 2% rise in profit as it accelerates transformation

M&S is accelerating the pace of its transformation programme, with all areas of the business, including marketing “undergoing scrutiny and change”.

It comes as the retailer posts a 2% rise in profit before tax and adjusting items of £223.5m for the 26 weeks to 29 September, despite group revenue being down 3.1% to £4.97bn.

Over the past six months the business has implemented a new management structure and changed direction to focus on “hero lines” in clothing and home and broaden the appeal of its food business by increasing value.

Revenue in clothing and home was down 2.7% over the past 26 weeks, with like-for-like sales down 1.1. This has been impacted by more than 100 store closures as M&S looks to grow its online business, which now accounts for 20.4% of its clothing and home sales.

Food revenue also dropped by 0.2% with like-for-like revenue down 2.9%, with the retailer citing tough trading conditions.

M&S chief executive Steve Rowe says this phase is about rebuilding the foundations of M&S, “leaving no stone unturned and reshaping our business, its organisation and culture”.

“We now have a largely new, very determined and energetic management team in place. M&S is becoming a faster, more commercial and more digital business.

“We are on track to restructure our store portfolio with over 100 full-line closures and expect to see newly remodelled stores open next year. We are fixing the basics of our online channel and there are very early signs of improvement. Every aspect of our ranges, how we trade, our supply chain and marketing is undergoing scrutiny and change.“

Facebook showed users ‘disturbing level of disrespect’ over data, ICO investigation finds

Facebook must “significantly change its business practices” in the wake of the Cambridge Analytica scandal, according to Information Commissioner Elizabeth Denham.

Giving evidence to a parliamentary inquiry into fake news yesterday (6 November) as the ICO launched its investigation into the use of data analytics in political campaigns, she said the tech giant and others involved in the controversy showed a “disturbing level of disrespect” for the personal data of voters and she was “astounded” by the amount of data held by these firms.

In October, the Information Commissioner’s Office (ICO) fined Facebook £500,000 for its involvement in the scandal, the maximum fine permitted.

Denham has also called for the UK Government to introduce a tougher regulatory model that is “fit for purpose in the digital age” to ensure misinformation and harmful content doesn’t slip through the net.
“The time for self-regulation is over. That ship has sailed,” she said.

She talked of the need for Ofcom and the ICO to draw up a combined code of practice, admitting that “no country has tried this yet. It’s quite controversial and the need to balance freedom of expression with the harms of the internet is hard”.

Three launches programmatic ad platform

Mobile operator Three UK is offering advertisers anonymised customer data for targeting purposes via a new product called Relevant Advertising, through which it hopes to create additional revenue.

Through the service, which is being offered in partnership with global data platform Zeotap, the mobile network will sell anonymised data such as age, gender and location on customers who have given their consent.

Currently, one million of Three’s 10 million subscribers have opted-in and Three will now offer the service to the rest of its customer base.

Brands can then use this data to deliver ads programmatically across mobile devices, which it claims will enable it to deliver advertising that is up to six times more accurate.

Primark sales rise as it discounts need to go online

Primark saw its sales slip 2.1% in the year to 15 September on stores that have been open for more than 12 months, down from a rise of 1% the year before, blaming three periods of unseasonable weather.

However, overall sales, including 15 new stores across nine countries, were up 5%. The UK continues to perform well for the chain, which is owned by Associated British Foods (ABF), with like-for-like sales rising by 1.2% as its share of the clothing market increasing “significantly”. Sales in Europe, though, dropped 4.7% for the same period.

Primark is one of very few retailers that doesn’t sell online, with ABF CEO George Weston telling the BBC, “We don’t see the business need to go online… it’s too costly at our price points”.

ABF’s retail division accounted for just under half its revenues of £15.6bn, which rose 1% compared to the previous year. Its sugar, ingredients, grocery and agriculture divisions contributed the rest. Adjusted pre-tax profit rose 5% to £1.37bn.

New Look store closures to pass 100

New Look is set to close around 100 stores – 40 more than it outlined earlier this year – as it looks to cut costs and improve profit.

It also aims to do that by selling more items at full price and expanding its online business.

The retailer had originally planned to shut 60 stores resulting in around 1,000 job losses, but it yesterday said it had already closed or was in the process of closing 85 stores, and was in talks with landlords to close a further 13. The outcome for another 26 stores, which are currently trading rent-free isunclear.

The closures come as New Look saw sales fall 3.7% for the 26 weeks to 22 September, better than the 8.6% drop for the same period last year. Underlying operating profit improved though, reaching £22.2m compared to a loss of £10.4m last year.

Executive chairman Alistair McGeorge says: “Clearly the wider retail environment remains challenging and we are not expecting that to change anytime soon. However, we are on the right track and continue to drive further efficiencies across the business,” he said.

Tuesday, 6 November

Morrisons has strong growth period but retail slows

Morrisons’s is now in its third consecutive year of growth, with like-for-like (LFL) sales excluding fuel up 5.6% for the 13 weeks to 4 November, comprising contributions from retail of 1.3% and wholesale of 4.3%.

Retail LFL sales growth eased slightly quarter on quarter without the impact of the good weather and World Cup which benefitted Q2. Total sales were up 6% excluding fuel (6.4% including fuel).

“After another period of strong growth, and with more customers enjoying shopping at Morrisons, we have now completed three years of positive like for like,” says chief executive David Potts.

“Our exceptional team of food makers and shopkeepers are providing good quality food at great prices, and building a broader offer in store, online and for our wholesale customers.”

Verizon to rebrand Oath

Verizon is undergoing a structural refresh that will bring its digital media business Oath under the parent brand identity.

Set to come into effect from the beginning of next year, the new operating structure will focus on three customer-facing areas: Consumer, Business and Verizon Media Group / Oath.

It has been designed to deliver “new best-in-class customer experiences” and to “ensure first-to-market leadership” in the 5G era.

“This new structure reflects a clear strategy that starts with Verizon customers,” says CEO Hans Vestberg.

“We’re building on our network transformation efforts and the Intelligent Edge architecture to deliver new customer experiences and optimize the growth opportunities we see as leaders in the 5G era. We’re focused on how our technology can benefit customers’ lives and society at large.”

Verizon Media Group / Oath sits at the intersection of media, advertising and technology, helping people access and receive media, entertainment, gaming, news, commerce and other services. It will be led by Guru Gowrappan, who was previously announced as Oath CEO.
All of Oath’s media assets, which include the Huffington Post, TechCrunch, Engadget and Tumblr, will continue under the new name.

Pinterest hires first CMO

Pinterest has appointed Andréa Mallard as its first chief marketing officer.

Mallard joins from Gap-owned Athleta where she has overseen marketing and ecommerce for the past two years. She will be responsible for Pinterest’s global marketing and creative teams and growing the brand globally.

“[Mallard’s] wealth of experience in building great brands will be an asset to our company as we continue to expand globally. says Francoise Brougher, Pinterest’s chief operating officer, who Mallard will report to.

“She is exactly the right leader to help us illustrate why hundreds of millions of people rely on Pinterest to get inspiration and do what they love.”

Mallard adds: “It was clear from my first conversation that this is a purpose-led company with the heart, mind, and values needed to become an iconic, global brand.

“Pinterest inspires people everywhere to create a life they love. I believe it can be one of the truly positive corners of the internet and I’m excited about the great possibilities to come.”

Prior to Athleta, Mallard spent four years as CMO of digital health company Omada Health. She will be based at Pinterest’s headquarters in San Francisco.

Consumer spending remains low in October

Cautious consumer spending is continuing into the final quarter of the year, with sales up 1.3% in October. While this is an increase on the 0.2% the previous year, it is still low by historical standards.

Over the month, UK retail sales increased by 0.1% on a like-for-like basis, when they had decreased 1% from the preceding year.

“Brighter weather and the anticipation of better deals in the Black Friday November sales have dampened demand for discretionary purchases. Moreover, low real wage growth over an extended period has left consumers with less money in their pocket, squeezing retailers’ margins in the face of higher costs,” says Helen Dickinson OBE, chief executive of the British Retail Consortium.

“Furthermore, the very real possibility of a no-deal Brexit presents a huge challenge for retailers who must contend with the prospect of higher import prices, and further drops to consumer demand. Time is running out and it is essential that the Government, the EU and the UK Parliament come to an agreement on the backstop and delivers a Brexit deal detail which gives confidence to both consumers and retailers, and avoids squeezing real wages further.”

Over the three months to October, in-store sales of non-food items declined 2% on a total basis and 3.3% on a like-for-like basis (above the 12-month average decline of 2.4%), while food sales increased 2.3% on a total basis and 1.2% on a like-for-like basis (below the 12-month average growth of 3.5%).

Meanwhile, non-food retail sales decreased 1% on a like-for-like basis and increased 0.1% on a total basis (above the 12-month average decrease of 0.2%). October non-food sales saw growth for the first time in four months.

Online sales of non-food products grew 7.6% in October, against a growth of 4% in October 2017, the lowest growth of 2017. This is above the 3-month and 12-month averages of 6.7% and 7.4% respectively. Online penetration rate increased from 25.7% to 27.6% in October 2018.

Lloyds bank to cut and create jobs in digital overhaul

Lloyds Banking Group is gearing up to cut 6,000 jobs and create 8,000 new ones as more people use online banking instead of going into branches.

The job losses are expected to happen in corporate and retail banking divisions, while the new roles will focus on digital services.

Lloyds, which is the UK’s biggest high street lender, has already earmarked over 60 branch closures this year following 54 closures in 2017.

Monday, 7 November

Marks & Spencer’s sales expected to fall

Marks & Spencer’s is expected to report another quarter of falling food and clothing sales this week, but insists its strategy is still on track.

Analysts expect the high street chain to post a 2% decline in like-for-like food sales and a 1.2% drop in its clothing and home division. Pre-tax profits are expected to be down by around 7% to £203m, midway between its forecast range.

The falling sales reflect the impact of a five-year strategy to transform M&S. The retailer is set to close almost a third of its shops and is investing in digital and new technology to improve performance.

M&S reports quarterly sales on Wednesday (7 November).

Government launches inquiry into online pricing

The government is launching an inquiry into online pricing that will look into how personal data can be used to set individual prices for items such as holidays, cars and household goods.

The research, conducted by the competition watchdog, will consider the use and prevalence of ‘dynamic pricing’ and how data such as location, marital status, age or travel history can be used to set prices. The concern is that technology, including artificial intelligence and bots, could be used to charge some shoppers more than others.

Online prices often fluctuate during the day depending on demand, Uber’s pricing is a clear example of this.

Andrea Coscelli, chief executive of the Competition and Markets Authority, says: “With more of us shopping online, it’s important we understand how advances in technology impact consumers … so we can understand how best to protect people from unfair practices where they exist. We will also use the results in our ongoing efforts to help vulnerable consumers.”

Uber launches subscription service

Uber is launching a subscription service in the US as it looks to convince people to use its service more often.

The scheme, called Ride Pass, costs $24.99 (£19) a month in Los Angeles and $14.99 in Austin, Denver, Miami and Orlando. It allows members to avoid price surging, the rise in price that Uber instigates during at-demand times.

Uber plans to launch the service in other US cities next year, but according to the BBC has no plans at present to introduce it in the UK.

“One thing we hear a lot from riders is that changes in price – however small – can make it tough to plan their day with Uber,” says product manager Dan Bilen.

“The daily commute is a classic example, and it goes something like this: you pay one low price for the ride to work, only to find the ride back home is a different story.”

He added: “We want to make Uber a reliable alternative to driving yourself – an affordable option people can use for their everyday transportation needs.”

Business leaders call for second vote on Brexit

More than 70 business figures are calling for the public to be able to vote on the final terms of Britain’s exit from the European Union. According to the Sunday Times, firms are warning the country faces “either a blindfold or a destructive hard Brexit”.

There are growing concerns among business leaders that a deal will not be reach or that if one is, it will limit access to the EU. The group ‘Business for a People’s Vote’ aims to put more pressure on the government to get a good deal for business.

The group includes former Sainsbury’s boss Justin King and James Daunt, the Waterstones’ CEO.

A letter to politicians says: “We are now facing either a blindfold or a destructive hard Brexit. Both these options will further depress investment.

“They will be bad for business and bad for working people. Given that neither was on the ballot in 2016, we believe the ultimate choice should be handed back to the public with a People’s Vote.”

Weight Watchers vows to improve UK performance

Weight Watchers has vowed to improve its UK performances after the company was forced to lower revenue expectations due to a “challenging and competitive market”. Weight Watchers has about 400,000 subscribers in the UK, but CEO Mindy Grossman says the company is “behind” in several key areas, including brand strength.

Overall, subscribers were down 4.2 million in the third quarter, from 4.5 million in the prior quarter. Quarterly revenue and profit also came in below analyst expectations.

Weight Watchers is attempting to turnaround its business. In September, it rebranded as WW in a bid to refocus on the wellness market and better appeal to younger consumers. However, it faces growing competition from digital rivals.