Unilever ups ad spend by €200m to keep customers on side amid 11% price hike
Unilever has said it is increasing its advertising and marketing spend in an effort to stop customers from switching to supermarkets’ own brands as it feels the effect of increasing the price of products by 11%.
Unilever ups marketing spend as consumers switch to supermarket own-brand products
Finance chief Graeme Pitkethly said the price hikes mean that consumers are increasingly opting for supermarket own-brand products, taking market share from Unilever branded goods, especially in the US and Europe.
Brands including Cif, Hellmann’s mayonnaise and Wall’s ice-cream saw prices rise by an average 11.2% in the second quarter of the year. Sale volume fell by 2.1% as a result.
He described the current state of play as “truly unprecedented” as the company battles inflation, supply chain pressures and ever-tightening margins.
To keep consumers onside, he’s turned to Unilever’s marketing department.
In the first half of the year, the FMCG giant raised its ad spend by €200m (£169m, $202m) to take its total brand and marketing expenditure (BMI) to €3.7bn.
“We’ll continue to invest behind our brands. We think it’s extremely important to do that in driving growth and keeping that brand equity high. The reason for being early and pricing proactively is to protect the shape of our P&L in order that we can invest back in our brands. And we did that in the first half with €200m of more BMI investment,” said Pitkethly.
“And as far as the second half is concerned, we’ll continue to invest more in brand and marketing investment. In terms of the basis points, it’s hard to say because a lot depends on the pricing and what happens with the top line in terms of what the actual basis point movement will be. But you can expect that we’ll continue to invest more behind our brands.”
Taking price hikes into account, it’s expecting sales growth to remain 4.5% to 6.5% for the year.
News of increased ad budgets by one of the industry's biggest spenders will be welcome after the IPA's Bellwether report last week predicted a significant downturn in the sector's growth as inflation bites. With CMO's pessimistic on the outlook for the remainder of the year, the trade body cut its ad growth forecast to 1.6% (from 3.5% previously), while the forecast for 2023 has been cut from 1.2% to 0.5%.
It’s added pressure on a marketing team that felt the full weight of investor frustration earlier this year when Terry Smith slammed the FMCG-giant’s purpose-“obsessed” advertising.
He said “publicly displaying sustainability credentials at the expense of focusing on the fundamentals of the business” was hampering the bottom line.
At the time, marketing boss Conny Braams disregarded his criticism, saying the marketing approach was a clear “accelerator of growth.”
Braams recently changed her role to include global sales ahead of the FMCG giant ushering in a new operating model. It came into effect on July 1 and puts day-to-day marketing responsibility in the hands of category heads.
Chief executive Alan Jope said though it was early days for the new model, there’s been a marked difference in the “focus, the energy and the urgency” that the new model has created.