Mars is in the process of reassessing its balance book to open up more budget for its marketers. In the meantime, the conglomerate’s Petcare division is testing e-commerce integrations in a bid to find the sweet spot between DTC consumer trends and the traditional CPG model.
A slowdown in CPG marketing spend over the past three years has had repercussions on brands and their agencies alike. Publicis cited a dip in such budgets as a headline cause of its disappointing North American growth for its fiscal year ending February 2018, for instance, while Kraft’s super-drive for efficiencies led many analysts to blame its poor financial performance on its marketing disinvestment (it denied this was the case).
Although still privately owned, Mars has fallen under the same scrutiny and pressures as its publicly traded counterparts. Melodie Bolin, marketing director of Mars Petcare in the US, attributed a cutback in CPG spending at large to “profitability pressure” sparked by increasing costs in other areas of the business.
“Logistics ... and input goods have become much more expensive — our cost of goods has gone up and our cost of serve has gone up,” she said. “[Mars] haven't done a great job of being able to effectively price in the marketplace to compensate for that.
"So, when you're looking at a total balance sheet, advertising is, unfortunately, the place where it's easy cash to offset some of those increased costs.”
The good news for all involved is Mars is actively seeking to rebalance the books in order to level up marketing spend again. Bolin said the company is reassessing operations to negotiate supplier relationships and hurdle cost increases so its marketing teams can “return to higher levels of investment that we know are necessary to be more sustainable in the long run”.
In any case, Bolin’s team appears to have successfully tread the line between reach and innovation during this slightly squeezed period. In fact, it’s pushed the pet care business to think more strategically about where its ad dollars are spent.
Mars Petcare continues to roster BBDO, DDB and Adam&Eve/DDB, the raft of Omnicom agencies Bolin describes as “true business partners”. However, the team has increased investment in measurement and effectiveness internally to calculate ROI on above-the-line spend as accurately as possible.
This means a TV ad, for instance, can be monitored for how many sales it generates. Only when these sales start to slide does Mars Petcare take an ad off the air.
“We have ads that we've run for five or six years that are still generating great sales lift and doing a really good job for the brand,” said Bolin. “So we're able to keep that running and then redirect some of our other production dollars — since we don't need to keep making new TV — into more flexible custom content, digital-first work.”
Reach is critical to Bolin, a self-professed disciple of Byron Sharp. Nevertheless, her team has been spring cleaning the Mars Petcare digital ecosystem to drive sales and capitalize on growing trend for ordering pet supplies directly.
According to Nielson, 21% of pet food sales in the US have shifted online. The trend makes sense — animals’ tastes do not vary as wildly as their owners’, who need pet food in the house at roughly the same time every week. This makes the Mars Petcare portfolio the perfect case study for a direct-to-consumer model adoption.
However, Bolin does not want to become a DTC brand.
“We still want to stay a CPG business and we have very close and deep relationships with the retail environment,” she said “So ... we have [put] a lot more people, money and focus on our brand's digital ecosystem.”
Alongside a revamp of its websites — assets Bolin believes are “super important ... as sexy as it does not sound” — Mars Petcare is finding the balance between selling directly to consumers and appeasing the big retailers. It is currently testing integrations that allow customers to purchase directly through its brands’ sites but choose which retailer fulfills the order.
Partners include Chewy, Target and Walmart, as well as Amazon.
“I think for me, that's the key bridge from where we are today to where we might be someday a bunch of years from now,” said Bolin. “I don't promote any other retailer, but I want to give you the consumer the opportunity to say, ‘This is where I want to buy this product’, and then complete the transaction without having to leave our zone.”
Petcare spend is growing in almost every market, driven by premiumization in the US and other developed countries, and education and adoption in places where it’s still currently commonplace to cook a pet a dinner made of “human food”, according to Bolin.
Grand View Research predicts the global pet care sector will be worth almost $203bn by 2025. So, when Mars does open up its marketers’ budgets again, it will be interesting to see if Petcare will be handed a larger piece of the pie.