Upselling from makeup to diapers
Hieronimus also noted that more than two thirds of L’Oreal’s growth last year came from “valorization,” or getting people to trade up to higher-priced, higher-value products, a trend he believes can continue.
The same holds true in diapers, which long have seen downward sales pressure due to declining birth rates globally, but plenty of growth in dollar sales as families having fewer babies trade up to higher-priced diapers, said Alison Lewis, chief growth officer of Kimberly-Clark Corp., marketer of Huggies. “Diaper dollars per baby,” a metric K-C tracks closely, are rising continuously, she said. Premium and super-premium diapers now account for almost 83% of the global market in value terms, up 7 percentage points in only two years, she said. Developing markets will account for 90% of the projected 1.3 billion global births over the next 10 years, Lewis said. And even though diaper dollars per baby in such markets are only 15% the level of developed markets now, she said that leaves plenty of room for trading people up.
Digital marketing now rules
It’s still de rigueur for CPG executives to tout how digital their companies have become, and how much business they do in e-commerce, even decades into the digital age. Now, digital spending is the lion’s share of marketing outlays for many of the big players, ranging from 61% of marketing spending at Colgate-Palmolive Co. to 67% at Clorox Co. and 70% at Kimberly-Clark, executives said at CAGNY.
Colgate put on the most complete display of its digital prowess, giving much of its presentation time to Chief Digital Officer Brigitte King.
CEO Noel Wallace noted how social listening by the Fabuloso marketing team in Mexico helped the brand capitalize on the #cleantalk video hashtag of TikTok to create global viral dance videos behind the brand. King noted how the U.S. oral care team responded quickly to TikTok queries to produce a video showing how striped toothpaste gets made.
Digital media now delivers 1.6 times higher sales ROI than traditional media, King said, “with strong performance across key focus areas of paid search, programmatic, online video and social.”
Nelson Peltz still looms large
Activist investor Nelson Peltz, founder of Trian Fund Management, didn’t present at CAGNY, but surely his presence was felt. He recently stepped down from Procter & Gamble Co.’s board after nearly four years, a time that saw P&G ditch its old matrix structure and reconfigure its business into six largely independent global business units—a move Peltz lobbied for.
P&G CEO Jon Moeller showed a slide of the company structure adopted in 2018 that looked remarkably similar to one Unilever CEO Alan Jope had shown two days earlier outlining his company’s recently announced restructuring. Like P&G, Unilever is ditching a country-category matrix structure in favor of five largely independent global business units. It so happens Peltz has recently been acquiring shares of Unilever.
Jope did note that Unilever had been talking about adopting this structure since 2019 but delayed implementation during the pandemic given the other disruptions to the business. So perhaps it’s just a coincidence that when Peltz takes a big stake in CPG companies, they end up re-organizing the same way.
Either way, de-matrixing two of the world’s biggest advertisers means more decentralized decisions made by marketers assigned to global businesses and less direction centrally from headquarters in Cincinnati and London. At least for now, both still handle much of their media buying and media agency assignments on a country or regional basis, working across product categories, though P&G has moved toward more business-unit-level media assignments within its markets.
Where everyone is superior
Peltz isn’t the only common thread between P&G and Unilever. Both also were touting their “superiority” at CAGNY. In a packaged-goods world where it became common over the past decade for marketing to focus on more daring creative, brand purpose and social causes, both companies these days are focusing increasingly on product superiority in their ads and investor presentations.
“Product superiority and innovation are key to the success of our brands,” Jope said. More than 70% of Unilever brands now rate “superior” in blind tests vs. competition with consumers, he said, up from less than 50% in 2019.
“We continue to raise the bar on all aspects of superiority—product, package, brand communication, retail execution and value at all price tiers,” said P&G’s Moeller. In fiscal 2016, only 30% of P&G’s portfolio rated superior with consumers, Moeller said. “We’re now at 75%.”
That puts P&G five percentage points ahead of Unilever. But like all the children in Lake Wobegone, they’re both above average.
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