SPENDING '95: INCHING UP INTERNATIONAL ROUNDUP

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The good news is that worldwide advertising spending was up in 1994 and will also rise this year. The bad news: The increase in some markets won't be as aggressive this year as in '94.

The Americas

Spending in Canada in real terms was up by 3%, partly due to the $100 million telephone ad wars touched off by government deregulation of long-distance service.

"The first six months were fairly tough for a lot of the media," said Ann Boden, president of McKim Media Group, Toronto. "But with the second six months I think a lot of them have been thrilled."

In Mexico, '94 wasn't an easy year, said Sergio Lopez, Mexican Association of Advertising Agencies executive director. Spending, originally forecast to rise at least 13% last year, was depressed by political uncertainty, including the fall of the new peso, guerrilla war in the state of Chiapas, a presidential election and political assassinations.

In Argentina, competitive local sectors felt a pinch. Daniel Waltuch, commercial director of Garbarino Articulos, a home appliance and electronics retailer, cited small retail bankruptcies. "These companies got comfortable with the growth rates in 1991 and 1992 and weren't ready to compete [with advertising] when volume began to go down."

An anticipated increase of less than 10% in 1995 spending is attributed mainly to the May 14 presidential elections, in which President Carlos Saul Menem, a proponent of foreign investment, is favored to win.

Brazil's record '94 spending increase of 43% (one of the few figures not in real terms since it was impossible to factor out inflation given the country's wild economic swings) was largely due to two one-time events: The World Cup and Brazil's currency change to the real.

Projections for this year are for a 20% hike, including inflation. "We're betting the economy will stay stable," said Juan Pablo Fernandez, marketing manager for Coca-Cola in Rio de Janiero.

Asia Pacific

The biggest news here last year was Japan's clawing its way out of recession. The 1% increase in advertising spending measured by Advertising and Economics was a huge turnaround from the 9% downturn in 1993. "I guess after three years in recession, that's it-you've got to go up," said Steven Bretschneider, president-CEO, Gray Daiko, Toyko.

Factors included a cut in the Japanese income tax (which increased consumption), an improved economy and Japan's summer heat wave-the hottest in half a century-which fueled ad spending on beer, soft drinks, ice cream and air conditioners.

Australian spending should be up anywhere from 2% to 7% in 1995, depending on who you ask. "1995 could be the turning point for the advertising industry," said Alex Hamill, chairman-CEO of George Patterson Bates, citing the Sydney 2000 Olympics.

While 1994 ad spending was up 20% in India, according to Everest Advertising, Bombay, media inflation was 18%, making real growth only 2% despite a host of multinationals rushing into the developing market. In just less than two years, an estimated 14,000 investment proposals worth more than $94 billion have been filed with the government.

India's spending growth prospects for 1995 are good, pegged at 25% to 30% including inflation.

In South Korea, ad spending rose 13% excluding inflation for the first 10 months of 1994, according to the government-run Korea Broadcasting & Advertising Corp.

The rise was attributed to increasing ad rates in the country's major daily newspapers and high ad spending surrounding the World Cup and October's Olympic-style '94 Asian Games held in Japan.

South Africa

Ad spending was up 18.5% in 1994, according to IBIS Media Services' Adindex. But media inflation was at 14 to 15%, said Tony Banahan, media director at Lindsay Smithers, Johannesburg, leaving real growth at 3% to 4%.

"A lot of slow growth was due to uncertainty about the elections," he said, referring to South Africa's first free elections in history.

Affecting the '95 landscape will be the deregulation of TV and radio expected this year. There are no fewer than 128 broadcast applications before the Independent Broadcasting Authority, a newly created entity to approve licenses.

Europe

The French and Italian industries were the bleakest in Europe, with spending down 2.5% and 3%, respectively, in real terms. But in France the expectation for1995 is 3% to 4% growth as the modest economic recovery continues.

Propelling spending will be the May presidential elections in which Prime Minister Edouard Balladur-seen as a stable economic influence-is favored.

Italy has been battered by political uncertainty, a corruption scandal and the investigation by Italian magistrates of recently resigned Prime Minister Silvio Berlusconi. "Deep political uncertainty is worrying us all," said Alberto Contri, president of ASSAP, the Italian ad agency association.

In Germany, the European Union's largest market, spending in 1994 finished flat, thanks to 2.8% media inflation. Renewed spending by many advertisers, including Procter & Gamble, Unilever and the auto and media industries was counterbalanced with lower spending by retailers.

This year won't offer much relief, either, with the ZAW agency association predicting a minimal increase. "I don't see a new boom in advertising," said Georg Baums, president of GWA, the local ad agency association.

Although the U.K. is coming out of recession, '95 spending will be up only 3%-three points lower than 1994's 6% increase-due to media inflation, according to Zenith Media Worldwide. "I believe this year's momentum will be maintained for the most part of next year. But growth may start to slow down as 1996 approaches," said Nick Phillips, director general at the Institute of Practitioners in Advertising.

Spain's flat performance in 1994 is actually a consequence of the end of the boom years. "Never again will there be such spectacular growth," said Alfredo Garcia-Valdes, president, McCann-Erickson, Madrid.

Spending last year was impacted by TV rate-cutting, where discounts approached 80%.

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EDGING UPWARD

WORLDWIDE ADVERTISING SPENDING CHANGE ESTIMATES, EXCLUDING INFLATION. (CHART)

1995 1994

Brazil* 20.0% 42.6%

Argentina 10+ 17.5%

Mexico 7.5% 5.0%

India 7.0% 2.0%

Australia 0-7.0% 3.0%

South Africa 5.0% 3.5%

Canada 4.0% 3.0%

Spain 4.0% 0.0%

France 3.5% -2.5%

U.K. 3.0% 6.0%

Germany 2.5% 0.0%

Japan 2.5% 1.0%

Italy 0.0% -3.0%

*Includes inflation. Source: Advertising Age International

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