Unilever increases media spend by £220m and shifts more money to digital
FMCG giant says efficiencies in ad production from zero-based budgeting have enabled the company to increase “real consumer-facing spend”.
Unilever has increased how much it spends on media and in-store advertising as it reinvests savings in production costs into “real consumer-facing spend”.
Speaking on a press call this morning (1 February), Unilever’s CFO Graeme Pitkethly said the company’s ‘brand and marketing’ spend was up slightly in absolute terms in 2017. It invested €250m (£220m) more in media and in-store in 2017 than 2016, offsetting that investment with efficiencies in ad production brought about by zero-based budgeting.
Unilever has previously pledged to make efficiency savings of €2bn in its brand and marketing investment, in particular by cutting production costs and the number of agencies it works with. While the company did not detail the specific savings it has made in brand and marketing so far, it did say it will reinvest two-thirds of the savings into “capacity building and in the competitiveness of our brands”.
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“We had too many pieces of traditional TV advertising and we took them off air before they reached full effectiveness. We now make fewer ads, show them for longer and reinvest the savings behind the best ones,” he said.
Unilever is also “stepping up” its investment in digital media and digital capabilities, particularly around programmatic trading. This is despite other firms, such as Procter & Gamble, cutting digital spend over concerns that it is not all performing as effectively as it should or reaching the right people.
Unilever’s direct-to-consumer drive
Unilever is also putting an increasing focus on going direct to consumer as it looks to build direct relationships with its customers. Its ecommerce sales nearly doubled to €2bn (£1.7bn) last year, helped in part by acquisitions such as Dollar Shave Club but also by “investments made in building capability”.
CEO Paul Polman cited the example of the laundry bundles it now sells on Amazon as a sign of its focus on new channels. “By understanding the Amazon search algorithm we can win in search and give a more tailored and valuable offering.
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“New channels give us an opportunity to reach more consumers with more and different propositions than ever before.”
Overall, Unilever saw underlying sales rise by 3.1%, with turnover up 1.9% to €53.7bn (£47bn). Pre-tax profits were up 9.2% to €8.15bn (£7.1bn) despite “challenging” market conditions. All its categories saw growth, with personal care up 2.9%, homecare 4.4%, refreshment 4.9% and food 1%.
Polman said Unilever’s strategy, Connected 4 Growth which it introduced following Kraft Heinz’s failed takeover attempt, is “starting to show results” by addressing “tectonic shifts” in the business landscape including in consumer preference, customer channels and new ways of communicating with consumers.
This is all good, but not revolutionary these days, though what is interesting is that while Unilever puts more into digital, P&G is taking budget back to TV. As are many FMCG brands. The problem with digital is that you are missing large percentages of the population who don’t shop online, or want to engage with a soap power on social media. Research shows that most consumers using social only want offers not a relationship with a consumer brand. Where brands are missing out is in ‘real world’ engagement and word of mouth. For example baby products are most likely to be adopted through WoM recommendation than through social, bloggers or advertising. Community engagement is growing in the US but ignored here and sometimes, brands think that social is the same – it so isn’t. Even the ad industry is behind the curve – there’s only one agency doing it (Connect2). But the challenge is that unlike digital, you don’t have lots of numbers to justify spend by. But unless brands start to engage society at a community level (there are 25 definitions of community from geography to common cause) they will actually become more distant. Pitkethly & Polman should read John Brownes’ book CONNECT (former CEO of BP), as should all CMOs.