BATAVIA, Ohio (AdAge.com) -- Package-goods and beauty marketers slashed U.S. measured media spending 14% in the fourth quarter, a sharp reversal from a 3% year-over-year increase in the third quarter, as marketers appeared to tighten belts rapidly in a deepening recession, according to a report this week from Goldman Sachs.
Spending down full year
The fourth-quarter cuts helped pull spending down 10% for the full year for the 10 U.S.-based companies covered by analyst Andrew Sawyer, including Procter & Gamble Co., Kimberly-Clark Corp., Colgate-Palmolive Co., Clorox Co., Estee Lauder, Avon Products, Church & Dwight Co., Chattem, Energizer Holdings and Alberto-Culver Co.
Of that group, only Colgate, one of the smaller spenders, increased measured media spending in the fourth quarter, according to data from TNS Media Intelligence reported by Goldman. Colgate, along with two of the other smaller spenders of the group -- Chattem and Church & Dwight -– were the only ones to hike spending for the full year.
If that money was shifting to trade promotion, that wasn't showing up in display and feature data from Nielsen Co., also tracked by Goldman. The Nielsen data showed trade support by the companies flat in the fourth quarter after a 5% year-over-year decline in the third quarter. Trade-promotion activity, however, appears to have increased sharply early this year, according to recent Information Resources Inc. promotion data reported by Deutsche Bank.
The measured-media data show some disconnects with reported global spending by the marketers, particularly K-C, which showed a 44% decline in fourth-quarter media spending and 15% decline for the full year. K-C has shifted at least some spending to nontraditional media, but a reported increase 9.4% in ad spending for the full year companywide appears to reflect a step up in spending overseas, particularly in developing markets, rather than the U.S.
Colgate, meanwhile, shows an increase in media spending in the U.S. in the fourth quarter, though CEO Ian Cook acknowledged on a January conference call that the company had trimmed fourth-quarter spending globally amid cutbacks by competitors and rate reductions of as much as 25% in some overseas markets.
Far from uniform
Even in the U.S., the spending cuts were far from uniform, and marketers appeared to increase spending aggressively in paper-products categories most threatened by rising private-label threats. Goldman reported category ad spending was up 24% in toilet paper and 27% in diapers.
P&G, while still cutting measured spending 11% overall in the fourth quarter, ramped up outlays in some categories, including hair care and diapers, apparently with positive results. The company increased its media share of voice in hair care 10 points from a year ago to 52%, as rival Unilever largely pulled the plug on category advertising in the back half of the year, according to Goldman data. That move coincided with P&G last quarter starting to reverse more than a year of share losses in the category, per Nielsen and IRI numbers excluding Walmart, club and dollar stores.
Broadly, however, the pullback in industry ad spending amid recession could signal tough times ahead for package-goods and personal-care marketers and good news for retailers' private labels, whose share gains have accelerated in recent months.
Research presented by University of North Carolina marketing professor Jan-Benedict E.M. Steenkamp on a Sanford C. Bernstein conference call on Wednesday shows companies that didn't tie their ad spending to business cycles showed annual stock price growth 1.3 percentage points higher than those that did between 1986 and 2006.
|Media Spending||Trade display & feature|
|Church & Dwight||-1%||+33%||-11%||-9%|
|Procter & Gamble||-11%||-8%||+4%||+1%|
|Source: Goldman Sachs, based on data from TNS Media Intelligence and Nielsen|