Who's Next to Fall? Unilever's Massive Job Cuts Put Other Marketers on Notice

Analysts Say More Downsizing on the Way; Coke, Pepsi, Avon Among Those Seen as Vulnerable

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Hold tight: Unilever's announcement last week that it's slashing more than 800 marketing positions is an acceleration of a widespread downsizing of marketing departments, analysts say.

The announcement by the world's second-biggest marketing spender comes little more than a year after rival Procter & Gamble Co. announced a 5,000-person reduction in "overhead" positions that included around 1,000 marketers. The Cincinnati-based company said it would cut 2% to 4% of its workforce annually, though it hasn't specified if marketers would be targeted in the same way.

Unilever Chief Marketing and Communications Officer Keith Weed
Unilever Chief Marketing and Communications Officer Keith Weed

Colgate-Palmolive Co. and Energizer Holdings, among other companies, have also had restructurings in the past year in which marketing departments were significantly involved, said Sanford C. Bernstein analyst Ali Dibadj. Heinz, after being taken private earlier this year, also cut marketing jobs as part of a broader move to thin executive ranks. And Johnson & Johnson previously reduced consumer-marketing positions as part of a reorganization.

Mr. Dibadj expects sales trends in the U.S. to lead Coca-Cola Co. and PepsiCo to make similar moves. Another analyst said he expects Avon Products, which already announced a round of job cuts earlier this year, to soon announce more that will hit the marketing department hard. Representatives of those companies either declined to comment or didn't respond to emails and calls by deadline.

'A scary notion'
Marketing departments have been relatively unscathed by prior rounds of restructuring; indeed, some have grown as other departments bore the brunt of headcount reductions, analysts say. That's unlikely to continue as top-line growth remains difficult to come by.

"Companies have cut everything else to the bone," said Deutsche Bank analyst William Schmitz. "So there's nothing much else to go after."

As marketers have consolidated global rosters, he said, it stands to reason that they'll need fewer people to work with the remaining agencies.

Bottom-line pressure, or efforts to ward off activist investors, is helping to fuel cuts, Mr. Schmitz said. And tightfisted private-equity investors, notably 3G Capital at Anheuser-Busch InBev and Heinz, have also focused on trimming marketing and other executive positions, he said.

Executive recruiter Barbara Pickens, who focuses on marketing and marketing-oriented general-management positions, expects recent deep cuts by Heinz to ripple through the food industry as others try to mimic its low-cost approach.

"The definition of lean is going to be reframed by these guys," she said. "This is a scary notion, but this is where the food business is going."

Credit: Taylor Callery for Ad Age

The heightened focus on marketers and their related costs will spur marketers to better use analytics, Mr. Dibadj said. It's no longer just about justifying media budgets or outside expenses -- now it's about marketers saving their own jobs.

"Many of these companies have become more analytical, and when your top line isn't growing, it's hard to prove what your marketing department is doing for you," he said.

Local cuts
Also behind the recent wave of marketing-department cuts: Companies are trying to unravel the overlapping duties of the global and local organizations set up in the 1990s. Global marketers are winning at the expense of regional ones.

The cuts by P&G and Unilever are virtually identical in that regard. P&G Chief Financial Officer Jon Moeller said after a company investor gathering last year that most of its marketer cuts were among regional or local positions.

Unilever Chief Marketing and Communications Officer Keith Weed said at his company's investor meeting last week that the 12% cut in its 7,000-person marketing organization would focus on the regional level, too, as global marketers more often "go direct to big countries rather than through regional hubs."

"Even Colgate, which has arguably been one of the leanest companies, is looking to cut people in the local area," Mr. Dibadj said.

That movement goes hand in hand with increased use of global advertising, something both Mr. Weed and P&G Global Brand Building Officer Marc Pritchard have championed in recent years. That's led to fewer, bigger initiatives by both companies and efforts to cut or control their agency and production fees. Fewer initiatives means less need for marketers.

Unilever has been most vocal about the need to reduce these "non-working media costs," which the company said have fallen to an expected 24% of advertising and promotion spending this year from 32% last year. The goal is to reach 20% eventually.

Despite cutbacks by big consumer-product companies, Greg Welch, senior partner at SpencerStuart who works on its global consumer goods and services practice, said he isn't seeing signs of a broad slowdown in marketing hiring.

To be sure, even as Unilever looks to cut marketers, it's still bringing on new ones with a focus on candidates with information-technology experience, according to people familiar with the matter.

A Unilever spokeswoman couldn't be reached for comment by deadline regarding the hiring. But at the investor meeting Mr. Weed spelled out a vision that wasn't just about paring costs. "The marketing world has changed dramatically," he said. "There's an awful lot we can do to tailor our organization."

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