Survey of Top 12 Markets Show Companies May Spend More in '94

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The world's 12 largest ad markets, battered by the global recession, are showing positive signs of growth for the first time in years.

Especially encouraging is the prediction of a 6.5% jump in U.K. ad spending this year, coming three years after the industry hit bottom with more than a 10% freefall from the previous year. Even in Japan, where measured media spending dropped 6.1% last year, ad industry execs are looking for some gains.

According to an Advertising Age International survey, industry execs also expect robust growth in South Korea and Brazil. Optimism in many countries stems from renewed consumer confidence and special events, such as this summer's World Cup soccer championship.

Even in some Western European countries where the outlook is dimmer, no big declines are expected. The worse reports come from Germany, France and Spain, where flat spending is expected due to low consumer confidence and high unemployment.

In Spain, for example, budgets can't go much lower, said Jose Ganazo, customer service manager, Nielsen/Repress. Many advertisers have already cut to the limit, he said.

Japanese prognosticators are keeping their fingers crossed for ad spending to recover even though consumer caution is expected to hold back buying.

"Consumption is not active," said Yoshiharu Fukuhara, chairman of the Japan Advertisers Association. "Corporations are re-examining the effects of advertising ... The economic outlook for 1994 seems that it will not turn around soon."

Advertising Age International selected the top 12 markets based on data from a variety of sources, relying heavily on figures from Zenith Media Worldwide and Robert Coen, senior VP-director of forecasting, McCann-Erickson Worldwide.

The figures indicating year-to-year changes are from correspondent reports using estimates from industry execs and research companies within each country.

All figures, except where indicated, are in real terms, and estimates on year-to-year changes have been calculated in local currencies.


This year's expected hike in the U.K. is well beyond the smaller increases of recent years, and several points higher than the 3.7% gain last year. The increase will parallel the British economy's growing momentum, said Keith Donaldson, media research manager of Saatchi & Saatchi Advertising, London. "But it's taking time; it has to do with [public] confidence" that will be tested by sales and value-added tax increases in April.

Indications of optimism are appearing everywhere. Tabloid newspapers are publishing Sunday color magazine supplements, attracting new business as well as luring ads away from other media. And it's believed that the debut of the country's first National Lottery late this year will contribute to a boom. Agencies are part of eight consortia bidding for the license to operate the lottery, which may spend as much as $60 million in advertising.

"[If we win] we are planning to mount one of the largest and most dramatic promotional programs ever seen for any product in this country," said Richard Wheatly, chairman of Leo Burnett, London. Despite a recession and rising unemployment, Germany still saw a 5.4% rise in ad spending last year, but forecasts for 1994 are gloomier.

"We expect no growth at all," said Georg Baums, president of the German agency association GWA and chairman of Publicis Germany.

Some large advertisers, such as Henkel and Kraft Jacobs Suchard, plan budget hikes, Henkel about 10% and KJS 35% for its chocolate, but these boosts aren't expected to compensate for cuts from other major companies.

The outlook is bleak despite local, national and European elections this year that would be expected to increase ad spending.

Ad spending in France last year rose only 0.3%, and predictions for 1994 are averaging the same, ranging from media broker IP bracing for a 3.5% slip and polling group IPSOS forecasting 3.5% growth. A French Association of Advertising Agencies spokesman says growth will probably stagnate or shift only tenths of a percentage point: No major sports or cultural events are on the drawing boards this year to attract additional spending.

Spain's ad spending slide of 7% last year continued the downward spiral from the double-digit growth of the go-go '80s. This year, however, the tide may turn, but it's seen as a year of no-growth.

"It's a transition year," said Carlos Lozano, director general of Tapsa/NW Ayers' media buying center CICM.

Though analysts are grim about 1994 prospects, opinions are divided on whether ad spending rates will remain steady or decline slightly. Such advertisers as Telef¢nica de Espa¤a and Coca-Cola de Espa¤a plan to maintain their 1993 budgets, but many others are tightening their belts. "We're working with conservative budgets," said Victor Font, Coke's ad director. "Advertising is always the first to suffer."

Ad spending in the Netherlands rose between 2% and 3% in 1993, and a similar gain is expected this year.

Both last month's Winter Olympics in Norway and the Netherlands' national soccer team's place in the upcoming World Cup finals in the U.S. have encouraged spending. "Clients are spending the same as last year, and sometimes a little more," said Walter Huzen, media director and managing partner of The Media Exposure, Amsterdam. "Most of our clients plan to do something with the World Cup on TV and the dailies."

Weakened by media magnate Silvio Berlusconi's foray into politics and the future of unwelcome media legislation, Italy's media and ad industries are uneasy about what this election year brings. Last year, ad spending slipped 0.1%, but predictions for this year are a modest 1%.

"Until March 27 [election day], everything is on standby,"said Fidelio Perchinelli, director at ad agency association AssAP.

Asia Pacific

A sluggish economy and low consumer confidence, resulting in low product sales, knocked down Japan's measured media spending by 6.4% in 1993. Though ad spending in the first quarter of this year, [the end of Japan's fiscal 1993] continues to slip, forecasts for 1994 edge upward to 2%.

This encouraging boost is based on a tax reduction that will spur consumers to spend a little more, said Gus Iizuka, president of J. Walter Thompson Japan, Tokyo.

But much may depend on the outcome of Japan's current trade negotiations with the U.S. and what new foreign goods and services will become available in the market.

In South Korea, analysts at Cheil Communications foresee a 25% growth in ad spending for 1994 as the country awakens from a recession that stunted 1993's growth-a still-healthy 14.7%, but down considerably from 1992.

"Our advertising spending will increase slightly this year, mainly due to the higher cost of advertising space in the major newspapers," said a spokesman at Hyundai Motors. "It's a seller's market when it comes to TV and the major newspapers."

Chac Soo-Ho, general manager of advertising at Asiana Airlines added, "The ad rate for the national dailies has been rising 20%-30% annually, doubling every two to three years."

In Australia, advertisers, agencies and researchers are rejoicing. The three-year recession has ended. Consumers seem to agree, and public confidence may be high enough to encourage an ad spending hike of 5% this year, led by packaged goods, finance, tourism and beer marketers.

Only seven of George Patterson Advertising's 83 clients are decreasing product budgets this year. Last year, a majority reduced their budgets, said Chairman Alex Hamill. "Our clients' budget increases vary from 5% to 15%," he said.

"The best way to quantify Australia's optimistic mood is to look at the television market," said Gawen Rudder, director of corporate affairs, Mojo Australia. "TV rates are up by an average of 5% for 1994 .*.*. print rates are up 7% and radio is static after a 6% rise last year."

The Americas

In the U.S., national ad spending is expected to increase 6.5% in 1994, fueled by the Winter Olympics and election advertising, said leading spending prognosticator Robert J. Coen, McCann-Erickson senior VP. "The U.S. advertising outlook is clearly brighter than it has been for years," he said. "Corporate profits are at all time highs and many marketers will be turning their attention to expanding revenues rather than just controlling costs."

The jump is a significant improvement from 1993's national spending increase of 3.9%, he said.

Ad spending in Canada is forecast to grow only 2% this year, said Peter Swain, president of Canada's media placement and planning agency Media Buying Services. But that figure is slightly above the 1.1% hike last year.

As Canada slowly emerges from recession, new specialty programming TV channels starting this year are expected to bring more ad money into the market, offsetting declines in print and outdoor.

In July, Canadians will choose long-distance telecommunications companies, potentially sparking ad wars among Bell Canada, Unitel and Teleroute-all spending heavily on TV-Mr. Swain said.

An unexpectedly successful tax reduction in Brazil pumped the country's ad industry in 1993. Rather than declining by an anticipated 25.5%, ad spending grew by 19.4%, and advertisers predict a slightly lower, but still very healthy 15% increase for this year. In addition to the tax reduction, which contributed to a 45% boost in automotive sales and is expected to push ad spending higher this year, the World Cup soccer championship and general elections in November will have a positive effect on the ad industry.

Ronald Rodrigues, corporate director for Unilever's local subsidiary Industrias Gessy Lever, said if Brazil can bring down inflation-still raging at 37% monthly-to single digits within the next two to three months, consumers will spend, and the country will be well on the road to recovery.

Written by Todd Pruzan from correspondent reports.

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