Squeezed fmcg brands move out of television

Media inflation and squeezed margins are forcing traditional marketers to rethink television ad spends.

Tight retail trading margins and TV price inflation – driven by financial institutions, telecoms companies and now dot-coms – are forcing packaged goods companies to reassess their commitment to TV.

This is nothing new – brands have been and gone since TV launched in the Fifties – but the trend could lead to manufacturers of larger ticket items, such as cars, slashing their TV spend.

Claims of “Rip off Britain”, and Vauxhall’s decision to sell cars over the Internet, are all hitting margins, according to Colm Feeney, broadcast director at Western International. “Perhaps the car sector will be next to reallocate its spending,” he says.

But it is the more immediate plight of housewife and family targeted advertisers – food, beverages, petfood and washing powder, generically called “food advertisers” – which is concerning John Billett, chairman of the Billett Consultancy.

He claims TV companies have overlooked food advertisers’ core housewife audience to lure the new wave of advertisers which want a young, male and upmarket audience.

Billett adds: “As a result, broadcasters have not made enough investment in programmes to reach housewives.

“When they’ve got programmes that appeal to housewives, such as ‘Who Wants To Be A Millionaire’, the category is priced out of court.”

According to Billett research, food’s share of UK TV advertising expenditure has fallen from 27 per cent to 21 per cent between 1995 and 1999, while its share of all UK advertising has dropped from 16 to 13 per cent.

During the same period, the press’ share of UK food advertising has risen from ten to 12 per cent and outdoors’ share from three to nine per cent.

Billett’s figures also show an increase in the cost of airtime, with food advertisers paying an average housewife cost per thousand of £7.97 across all channels for 1995, rising to an all-time high of £10.59 last year.

Jerry Hill, chief executive of ITV airtime saleshouse TSMS, admits TV price inflation presents a challenge to food advertisers, but claims the rate of inflation is lower than in other media and is on a par with the retail price index (RPI) for the period 1989 to 1998.

He claims TV companies are committed to housewife targeted advertisers, citing ITV Network Centre’s £800m investment in programming, its increased audience share in peak from 37.8 to 38.8 per cent for 1999, and a rise in housewife TV audiences of 5.2 per cent in 1999 over 1998.

Hill adds: “ITV is increasing its spend on Taylor Nelson Sofres TVSpan, a survey which enables advertisers to get more bang for their buck and helps them understand how effective TV is.”

But Feeley counters: “Many housewife targeted advertisers have to pay a higher rate if they want to get across to key programmes. If they want the discounts they enjoyed in 1957, then they are stuck with Emmerdale or shoddy bits of peaktime.”

But MediaVest chief executive Jim Marshall does not think packaged goods brands are being forced off TV. He believes they are just subject to a demand-led economy that comes with TV’s expansion of its advertiser product base.

“Packaged goods are still at the heartland of TV and ITV and I don’t think there’s much evidence that they are being forced off.”

Food marketers are in no doubt that media inflation is as high as it has ever been. Lower margins than hi-tech and financial companies, are making them feel the pinch. But while marketers agree that smaller brands are struggling to maintain a presence on TV, is it a simple case of ITV capitalising on demand rather than a conspiracy to squeeze them out?

Paul Cousins, former marketing director of The Jacobs Bakery, says: “Media inflation has got to the stage where prices are extortionate. Small food companies are finding it harder and are disappearing from the screens. I think that’s where the drop of food’s share of TV advertising comes from.

“In a way I don’t blame the TV companies. It’s a simple matter of them putting up prices while there is demand from organisations with higher margins than food manufacturers.”

Jim Reynolds, marketing director of Diageo-owned Pillsbury (UK), which makes Green Giant products and Häagen-Dazs ice cream, adds: “Media inflation is the highest anyone can ever remember. Dot-coms are certainly having an effect. It’s harder to get on TV than it was two years ago.”

But marketers are uniting to issue a warning to ITV about the rising prices.

Reynolds says: “It will need to rethink. As more media options become available, it will be easier to move money elsewhere and reduce the impact of TV.

“The search for value for money is not just a small company phenomenon. Procter & Gamble and Unilever are reducing their TV spend to put their budgets into alternative channels.”

And Nestlé UK’s media manager Matthew Pilcher agrees: “We have been far-sighted enough to realise what was going to happen to prices. In the past ten years we have been producing a mixed-media schedule, switching money from TV to radio, press, outdoor and new media projects.”

Cousins adds: “With fragmentation of TV and other media such as outdoor becoming more professional, broadcasters need to be careful. If prices continue to rise, marketers will look at other media.”

Billett maintains that 125 food brands have been forced off TV in the past five years. Whether this is down to TV inflation or reduced ad budgets is open for debate.

One thing that is certain, however, is that more brands will come off TV. Equally, others will enter the market afresh – even in the food sector.