|Title:||United Kingdom top 10 fast-moving consumer goods categories by retail advertising expenditures, change in retail advertising expenditures, and share of retail advertising expenditures in pounds sterling and percentages for 2010|
Start of full article - but without data
TOP XX FMCG SECTORS spend % of all FMCG retail SECTORS advertising spend TOP XX FMCOG 2010 Y-X-Y SECTORS ([pounds sterling]m)
X Household - XXX.X -X XX.X stores
X Confectionery XXX.X XX X.X
X Drinks - XXX.X XX X.X alcoholic
X Food - dairy XXX.X XX X.X
X Haircare XXX.X X X.X
X Skincare XXX.X X X.X
X Drinks - XXX.X X X.X non-alcoholic
X Food - cereal XX.X -XX X.X
X Fragrances XX.X X X.X
XX Cosmetics XX.X X X.X
TOTAL (of top XX X,XXX.X X.X XX.X fmcg sectors)
TOTAL FMCG BRAND X,XXX.X X.X XXX SPEND
There is a war raging. It's being fought over the hearts, minds and wallets of shoppers on our TV screens and in the pages of our newspapers. And the charge is being led by Britain's biggest supermarkets, which last year significantly upped their advertising budgets in a bid to woo shoppers, according to research into the country's biggest advertisers carried out exclusively for The Grocer by Ebiquity.
The research shows a momentous swing in the balance of power, with retailers shelling out more on advertising space than fmcg brands for the first time ever. In 2010, retailers poured [pounds sterling] X.XXbn into advertising, up XX.X% on 2009, compared with brands' spend of [pounds sterling] X.XXbn, up X.X%. The tipping point came as Britain's XX biggest supermarkets forked out [pounds sterling] XXXm on advertising during the year, up XX.X% on 2009. So why have the multiples been so aggressively advertising and what does it mean for the future of the market?
The figures relate to the space bought by retailers and brands in TV, press, cinema, radio and outdoor media. Retailers now account for one in every five pounds spent on advertising space in Britain and the big four supermarkets dominate, making up XX% of total spend. Five of the six biggest spenders in retail are grocers - third-placed furniture giant DFS is the only exception I and, tellingly, the only player among the half dozen to have cut its budget.
All of Britain's XX biggest supermarkets bar one (Iceland) increased their advertising budgets last year. Tesco is the country's biggest spender on advertising space and increased spend by X% last year, forking out [pounds sterling] XXXm. With new CEO Marc Bolland backing marketing director Steven Sharp, M&S delivered the largest year-on-year increase of any of the biggest retailers - XX% - to [pounds sterling] XXm.
"Unlike many other advertisers, supermarkets profit as much in tough times as they do in good times," explains Craig Mawdsley, joint head of planning at advertising agency AMV BBDO, whose clients include Sainsbury's. "We can all choose to drink fewer lattes, postpone replacing our family car, eat out less often, but we all still need to shop for groceries. For Salisbury's, in particular, the strategy of high ad-spend has proven especially successful through the recession when teamed with smart marketing to create universal appeal in-store."
On the suppliers' side it's a different story. Six of the top XX fmcg advertisers actually cut their spend. Coca-Cola popped up to the number one spot by virtue of a X.X% reduction, leapfrogging Kellogg's Special K, which slashed its advertising investment by nearly a quarter. Conversely, Danone Activia rocketed up the rankings to third on the back of a XX.X% rise in spend while Galaxy more than doubled its spend on the previous year to [pounds sterling] XX.Xm, putting it in seventh place.
It's the increasing dominance of retailers - particularly the supermarkets - that's defined the past few years in advertising, however. Healthy margins, high penetration and frequency, and national reach, makes the supermarkets particularly ad-friendly businesses, says Mawdsley.
He adds that only telecoms comes close to the supermarkets' ability to exploit the various forms of mass media to their full potential. And press advertising is particularly valuable for them.
"Supermarkets themselves and retailers in general are single-handedly propping up a few of our national newspapers - Richard Desmond will feel a chill wind if Tesco, Asda and Sainsbury's suddenly decide the national press doesn't deliver decent ROI," says Mawdsley.
That seems unlikely however. In 2010 the supermarkets accounted for almost XX% of all advertising in tabloid and mid-market titles in 2010, up from roughly XX% in 2007.
The attractions of press advertising, used by the supermarkets primarily to drive footfall, are clear.
Newspapers allow retailers to reach a large audience quickly, and their flexibility allows for the swift adjustment of messages and prices. Consequently, a lot of grocery press advertising features pricing-driven 'call to action' messages. The majority is booked to appear in the latter part of the week with the intention of generating footfall in store over the weekend. Protecting and building market share is a prime objective.
Television advertising, meanwhile, is used by the supermarkets to cement their brand messages. While the leading fmcg brands spent, on average, three quarters of their budgets on TV last year, the average for supermarkets was just XX%, with XX.X% being allocated to press and outdoor, and radio ads mopping up the rest. Significantly, in 2010 Asda invested some [pounds sterling] X.Xm in branding ads - as distinct from product specific ones - a massive rise on the [pounds sterling] X.Xm it spent in 2009 as overall ad spend rose to [pounds sterling] XX.Xm. Most of this activity focused on its price comparison basket and Refund the Difference campaigns. The impact on sales was negligible (see box).
Conversely, the money spent by Waitrose - which doubled its budget to [pounds sterling] XXm - was well spent publicising the introduction of: its Essentials range, the Tesco price match campaign and, in particular, its deal with Heston Blumenthal and Delia Smith.
"Our strategy has been incredibly effective," asserts Waitrose head of marketing and communications Sarah Fuller. "The investment in that campaign has been instrumental in boosting like-for-like sales. There's [pounds sterling] XXm in incremental sales that can be attributed to the campaign, When we look at transactional data related to recipe buying we can see that X.X million customers responded to the campaign."
And press played a particularly important role in Waitrose's media schedule because, as Fuller puts it, the brand's relatively upmarket audience tends to "under-index" on commercial television viewing, though, of course, it was the broadsheets that benefited the most in its case.
The supermarket battle has extended far beyond the confines of food and drink. The dramatic diversification in product range implemented by the top supermarkets is mirrored in their advertising. Asda more than doubled its investment in advertising electrical products to [pounds sterling] Xm last year, while Tesco tripled its spend in the category to [pounds sterling] X.Xm. "Last year the big four supermarkets doubled their advertising spend on technology and electrical products to more than [pounds sterling] XXm," says Ebiquity's Andrew Challier. "This gave supermarkets a significant share of voice compared with specialist retailers like Comet, who spent [pounds sterling] XXm." This upping of the ante has not gone unnoticed by the electrical specialists. Comet and Currys/PC World spent [pounds sterling] XXm more on advertising in 2010 than they did in the previous year. Competition in this category has intensified and has the potential to spark a full-blown price war.
"Grocery retailer advertising spend has marched upwards pretty much every year for the past XX, and shows no sign of abating," says Danny Donovan, MD of retail at media agency MediaCom, who until recently worked at Tesco's media buying agency. That's because the outlay is relatively small. "The big four still put a relatively small proportion of turnover into advertising, so arguably there's room for growth, but more likely Asda and Tesco have topped out and the others will gain some ground in the next couple of years."
Tesco's UK ad spend in 2010 stood at just X.XX% of its UK turnover of [pounds sterling] XXbn. Spend by M&S was relatively high at X.XX% while, even after doubling its spend, Waitrose's was X.XX%. Meanwhile, fmcg brands have to fork out a lot more on advertising as a proportion of annual sales. The biggest spender, Coca-Cola, devoted X.X% of its UK off-trade sales to advertising. Kellogg's Special K spent a whopping XX.X% of its 2010 sales on securing advertising space.
Manufacturers also need to meet the retailers' increasing demand for promotions, which limits the brands' ability to invest in advertising and marketing.
As a result, retailers generally see higher ROI on spend than fmcg brands due to their turnover, and the advertising effect on a wider basket as opposed to just a single product purchase. Improvements in econometrics and advanced sales analytics for retailers have shown them how to improve further. And Donovan therefore takes the view that, with retailers having overtaken brands in terms of spend, the trend is unlikely to be reversed in the near future, irrespective of economic climate.
There is also growing co-operation between retailers and fmcg manufacturers, but tensions abound. Brand owners have some deep-seated concerns as to the power of the big supermarkets and the potential damage their advertising clout and discounting power may have on brand equity. "Retailers have been getting brands to fund their advertising for many years and this has increased along with the pressure to run more and more promotions," explains Donovan. "For the big four this [funding] will make up a significant chunk of the supermarket's press advertising budget. The retailer takes this money and spends it supporting the brand's promotion, usually in conjunction with other producers.
However, brands are taking some of this control back, and we are seeing more exclusive promotional ads from brands combining with an 'available at' message.
The stronger retailers still exert a lot of influence over the look and feel of these ads, and obviously how their logos are used, Donovan adds. "But this still makes up only a tiny percentage of the spend in the market."
The [pounds sterling] X.XXbn spent on advertising by fmcg brands was a return to 2008 levels, following a dip last year. The top XXX brands represent just XX% of this spend, demonstrating the vast number of brands jostling for recognition. Household remains the most heavily advertised category despite manufacturers spending X% less on this than in the previous year.
Procter & Gamble remained the biggest overall advertiser, upping its spend XX% to almost [pounds sterling] XXXm. Spend on its Max Factor brand accounted for the largest share, with the new Ariel liquid also heavily promoted. And its Pringles Originals and Super Stack products benefited from [pounds sterling] Xm in extra advertising support.
In the meanwhile, spend by Unilever, L'Oreal, and Reckitt Benckiser was down.