40TH ANNUAL 100 LEADING NATIONAL ADVERTISERS;TOP BRANDS IN MAJOR PRODUCT CATEGORIES;LEADING ADVERTISERS IN 12 MEDIA;KEY CORPORATE MARKETING AND AGENCY EXECUTIVES;TOP MARKETERS SNAP LULL WITH DOUBLE-DIGIT AD HIKE;PRICING REMAINS A DEFINING FIXTURE, BUT TRADITIONAL AD VENUES REBOUND AT 100 LEADERS

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Copyright R1995 by Crain Communications Inc. Quotation or reproduction in whole or in part without written permission is expressly forbidden.

Advertising expenditures by the 100 Leading National Advertisers in 1994 hit $42.7 billion, up 11.2% for the first double-digit increase in five years, according to Advertising Age's 40th annual report.

Marketers, fighting to bring pricing issues under control across a broad spectrum of brands, turned increasingly to media channels and traditional advertising. As a result, media outlays of the 100 Leaders rose 10.9% to $25.4 billion, including support of more than 573 megabrands with $5 million or more in spending, up from 544 from a slightly different cast of marketers last year.

Thirteen newcomers made the 100 this time-eight from sheer advertising growth, three through acquisition and two as spinoffs of previous ranked marketers. Admission to the group was $120.7 million, anted up by newcomer Bertelsmann AG, No. 100.

At the summit was Procter & Gamble Co. at $2.69 billion in U.S. expenditures, a step ahead of Philip Morris Cos. at $2.41 billion. Together these two were responsible for 12% of the group's ad spending and invested more than $5 million in 85 individual brands.

Spending by the Top 100 is the sum of media expenditures as measured by Competitive Media Reporting and unmeasured advertising-direct mail, promotion, co-op, couponing, catalogs, special events, and the like. This unmeasured element, estimated by Ad Age (see Page 59) typically ranges from as high as 50% of the total for food and personal care companies to 20% at car companies.

As a body, the 100 Leaders are responsible for 46% of total national media ad spending of $55.1 billion. Among the 11 media tracked by CMR, the 100 account for 76.5% of network TV, 66.7% of syndicated TV, 57% of cable and 44.8% of consumer magazines.

Pricing-two-for-one offers, couponing, trade discounting, etc.-persists as a marketing theme among the various key product and service categories reported upon in this issue. Often the nadir of brand-building when it dominates the marketing mix, pricing provides little brand distinction and thrives in categories with product sameness.

A sluggish economy provides a boost to pricing by fostering growth of private-label products, making national brands even more price sensitive.

Neither Kellogg Co. nor General Mills matched private-label growth of 11.5% in the $8.1 billion ready-to-eat cereal market in '94, but both took steps at midyear to boost profitability in the category-saddled by $1 coupons, heavy trade discounting and buy-one/get-one free offers.

Big G pared prices an average 11% on its largest cereal brands and cut spending on couponing and price promotion by $175 million. Kellogg took similar steps. Money is being diverted into new-product growth and advertising. Yearend '94 media spending was up 18.1% over '93.

The results of Philip Morris USA's move in '93 to pare 40 cents off each pack of its top-selling Marlboro brand showed up in the precipitous decline in '94 of discount cigarettes. Discount brands in the $44.5 billion category lost five share points to 32%, as the price differential between discounts and premiums-the rest of the premium market followed Marlboro-became less meaningful. Marlboro in the meantime gained 4.6 share points.

With pricing often dulling growth in a category, service, taste and innovation have revived brand distinction and growth.

Service is the current byword in the $12.5 billion rental-car market, where marketers, hit by rising fleet costs and rental prices kept low by intense competition, are driving from the congested airports to neighborhoods-and higher rates. New growth venues: garages (when the sedan is getting a tuneup), insurance agents (as temporary replacement) and even rental booths in supermarkets.

Taste has regained its flavor in the $3.4 billion frozen dinners/entrees market, seemingly paralyzed until a year ago by deep discount offers and extensive couponing. Focus on pricing made bottom-line chefs out of marketers, who turned to smaller portions and cheaper ingredients to pad their margins.

Pricing bombs are being lobbed by discounters Best Buy and Circuit City in the $3.14 billion electronics retailing market, creating casualties of Sears, Tandy, Kmart, Target and Wal-Mart outlets in that field.

Price has driven a wedge into the $2.41 billion cough/cold/sinus remedies category, where private labels sit atop the highly segmented market with an 18.3% share. Price is likely to be the defining feature years to come as P&G slashes wholesale prices and eliminates outer packaging for NyQuil, DayQuil and Vicks' Formula 44. Other marketers will surely follow.

Aggressive pricing, packaging and heavy advertising have enlarged the market and provided share growth for Coca-Cola Co. and Pepsi-Cola Co. in the $50 billion soft-drink category despite intense heat from the $7 billion New Age beverage segment.

Volume growth in soft drinks outpaced sales in '94, however. One reason: extensive promotional allowances; pricing by any other name. These allowances have become part of the mechanism to establish price and thus are seen as a reduction of sales rather than a marketing cost.

Innovation is expected to revive a stagnant videogame market, valued at $6 billion. Just as sales were about to hybernate for the 16-bit game platforms, Sega of America and Sony Corp. launched new 32-bit systems over the Labor Day holiday. Nintendo plans a spring '96 entry, giving it time to observe its competitors' systems and develop more software.

The stakes are high. The new systems play CDs and threaten to drive the cartridge-playing 16-bit platforms into oblivion.

The healthcare industry is never short of innovation, especially with the line of ethical drugs queuing up to move to over-the-counter sale (See story at right).

Exploding on the $1.12 billion antacid market this year was Pepcid AC, a nonantacid that blocks stomach acid from forming (antacids neutralize acid). This is ulcer territory and Pepcid's early solo flight is believed to have gained the new OTC brand a quick 14% of the market. Now it is being met by a wave of former prescription drugs, led by Tagamet.

Hotels are about to lose their loss leader status among casinos. Free rooms, food and drink-so-called promotional allowances-are part of the dazzle to lure casino customers. Such perks, running as high as 10% of corporate sales, are expected to drop substantially as casinos become more bottom-line oriented now that they're being spun off by their hotel parents. More intense marketing now will have to fill hotel beds with gamblers.

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