Buyer's Market

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Unilever saved $280 million. Campbell Soup Co. expects to save $20 million. The two are reaping rewards of soft media rates, moving money formerly earmarked for advertising straight to the bottom line or to other corporate priorities. Others as diverse as Kimberly-Clark Corp., L'Oreal and Wendy's International also are taking advantage of bargain rates, some to maximize their media presence.

The media recession is translating to opportunity for advertisers, who are once again in control as the advantage shifts to buyer from seller. Unilever Co-Chairman Niall FitzGerald told analysts last week that while the company reduced ad spending as a percentage of sales last year, "in real terms, advertising spend is up" because falling media rates helped it remain competitive with rivals in "share of voice."

Ad prices came down at many media outlets over the past year as advertisers pulled back and as the bubble burst for once-hot categories, such as tech and dot-coms. Now that prices are down, advertisers face some choices: maintain share of voice and pocket the savings; keep spending level to gain share; or boost spending to make even more noise.

Unilever pocketed some savings. The package-goods giant said a media rate drop of 10%, as well as media-buying efficiencies that contributed another 5% reduction, played a large part in a fourth-quarter earnings rise of $789 million, vs. a year-ago loss of $337 million.

Campbell, meanwhile, reported during its second-quarter earnings conference call Feb. 13 that because of lower ad rates, it will spend slightly less than the $200 million in incremental marketing money it had pledged for 2002. "We have kept our ad weights on target, but taken the rate savings and moved some of it over to the infrastructure side of the coin," including spending on systems upgrades, R&D and employee costs, said Robert Schiffner, senior VP-chief financial officer.

UBS Warburg analyst John O'Neil estimated Campbell will spend $180 million on incremental marketing, applying the $20 million to the infrastructure investments.

media pain = gain

Mr. O'Neil said Campbell cited other companies that had similarly spent less on ad expenditures because of lower ad rates recently, but that didn't help alleviate Wall Street's concerns over Campbell's move. "Campbell is in a turnaround ... and it seems they could take the opportunity to maintain dollar spending and increase consumer communication," he said.

Other companies are looking to use the media's pain for their gain. Ronald C. Wagner Jr., VP-brand management at mortgage provider GMAC Residential, said his company is increasing its budget to $90 million from $80 million and taking advantage of lower media prices to gain share of voice.

L'Oreal, too, plans to take advantage of reduced rates to buy more media. "We want to gain share of voice so we can gain market share," said Carol Hamilton, president of L'Oreal's North American hair and beauty care business. Wendy's has said it will boost its ad budget by 30% and launch its first national Hispanic push, in part due to more favorable ad cost and availability.

Wayne Sanders, chairman-CEO of Kimberly-Clark, told Ad Age in a December interview that he expects to use bargain media rates to increase reach with consumers this year. With products coming, including a second-quarter launch of improved Huggies Pull-Ups diapers aimed at fending off Procter & Gamble Co.'s launch of Pampers Easy Ups, Mr. Sanders said,"If media rates drop off, we'll just increase the weights."

new opportunities

Smaller advertisers are eyeing a more affordable ad landscape for new opportunities. Candy marketer Brach's Confections, which relies primarily on in-store displays to drive sales, plans a fourth-quarter TV campaign for its new Popz chocolate-covered caramel popcorn. "We won't be spending incremental funds, but the rate drops offer us the opportunity to use forms we haven't in the past," said Andy Jacobs, director of marketing at Brach's.

Not everyone buys the explanations of those marketers that connect falling marketing spending to lower media rates. Banc of America Securities analyst Bill Leach said his data show that in November, all but a few food companies slashed advertising at a higher percentage than media rates had fallen. "I can only surmise that, with the soft economy, they got to the end of the year, they weren't going to make their numbers and they cut their spending," he said.

Media executives, pointing out that it was reduced demand from pinched marketers that caused media rates to drop initially, are skeptical that today's lower prices will result in them buying more. "I'm not seeing increases in dollars over what [companies] historically spent," said one media agency executive, offering that at the most, "We're seeing clients coming back to spending levels that are starting to resemble what they've spent in the past."

Keith Faust, media-services director for Publicis Groupe's Fallon Worldwide, Minneapolis, said: "We're seeing a buyer's market, and we're getting more value for the dollar, but we're not getting clients as a result to spend more money."

contributing: kate macarthur and jack neff

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