The personal-care and household/grocery products marketer plans to boost its advertising budget this year by 16% to as much as $300 million.
"We've got to spend more on advertising so that we can focus on building our brands," said President-CEO Howard B. Bernick. "We'll do it even if our earnings growth slows for a time."
For now, Mr. Bernick is more concerned about slowing revenue. From 1977 to 1997, Alberto-Culver's sales rose an average 13.2% a year on a compound basis, with earnings up 19.2% annually.
But in the fiscal year ended Sept. 30, sales advanced a scant 3% to $1.83 billion, while earnings (before a non-recurring gain) rose 10% to $83.1 million. There was little improvement in the quarter ended Dec. 31, when sales rose 4% to $464.6 million and earnings retreated nearly 6% to $18.6 million.
PRESSURE FROM UNILEVER
Alberto-Culver faces pressure from Unilever, which launched its new Thermasilk shampoo more than a year ago with an $80 million ad blitz. And Procter & Gamble Co. countered that with aggressive promotion and price cuts for its Pantene shampoo line. Bristol-Myers Squibb Co.'s Clairol division brought back its Herbal Essences brand with a big splash (AA, Feb. 22).
"We've seen these new introductions come and go and make a big noise for a while," Mr. Bernick said. "Our VO5 is 44 years old and we've shown we can keep an older, mature brand alive, even if it hasn't been growing as fast as we'd like."
NEW SHOPS ON BOARD
The marketer has been beefing up its agency roster in preparation for the marketing boost. In January, Alberto hired Avrett, Free & Ginsberg, New York, to handle the entire VO5 haircare line; Partners & Shevack/Wolf previously handled the VO5 hot oil line, while other VO5 products had been getting little ad support.
Campbell Mithun Esty, Minneapolis, picked up the St. Ives Swiss Formula hair and skincare line in late 1998; there was no previous agency of record. Lois/EJL, Chicago, handles the other Alberto brands, including Tresemme haircare, FDS feminine deodorant, Static Guard anti-static spray and Mrs. Dash seasonings.
VO5 sales are estimated at $250 million annually, while Alberto-Culver's St. Ives line, acquired three years ago and due for a doubling in ad support this year, came in at close to $150 million last year.
The marketer had hoped Cortexx shampoo, a gelatin-enhanced formulation launched two years ago, would become a core brand, but it hasn't caught on. However, the gelatin feature may be transferred to other products.