"There's blood on the streets," said one health-and-beauty industry executive, who claimed to be bucking the trend and buying more fourth-quarter media, albeit not necessarily across the board. The rapidly weakening scatter market for TV may be intensifying woes for magazines, he added, because it's tempting marketers to shift budgets there at the last minute.
Worse still for magazines, there are reports of bruising 2004 magazine-buying negotiations as the ugly state of the beauty and personal care business exacts a toll on budgets allocated to the media sector.
Unilever VP-Media North America Brad Simmons acknowledged his company has trimmed fourth-quarter media spending in the U.S. but said the cuts aren't confined to magazines. "We made some reductions in magazines proportionate to reductions we've made in other media," said Mr. Simmons, who would not give specifics. "It reflects some of the business challenges we've had this year.
"We continue to support the innovations we launched in 2003, and those brands have been doing very well in the marketplace," he added, citing Dove hair and face care products and Axe body spray in particular, all of which had new-product launches in quarters one through three.
Most of Unilever's sales shortfall came from two areas-Slim-Fast diet products and prestige fragrance, both of which saw sales plummet more than 20% in the third quarter. Despite that performance, Unilever sales were up a relatively healthy 5.9% globally in home and personal care and 1.8% in food and beverage. But executives close to the company said results have been weaker in the U.S.
As for L'Oreal, it wasn't immediately clear whether the cuts were only in magazines-a primary advertising vehicle-or also spread among other media.
One publishing executive said that beyond pulling back print in the fourth quarter, the company was engaged in "brutal negotiations" for 2004. Another said L'Oreal appears to be considering making deeper buys with fewer titles-such as concentrating on only one teen title-to maximize leverage. Among brands where executives see L'Oreal pulling back are Lancome, Matrix, Biolage and Maybelline. Spokesmen for the individual brands could not be reached at press time.
One analyst expressed surprise over the notion of the company paring fourth-quarter outlays, because L'Oreal's product-launch cycle in the U.S. is "back-half loaded" this year.
L'Oreal "continues to aggressively support its business with the people who give us the best support," said Carol Hamilton, president, L'Oreal Paris, though she declined to comment on whether there may be cuts in specific media or titles.
L'Oreal last week reported sales for the first nine months of the year down 2.7% to $12.5 billion. But excluding currency effects, sales were up 6.5% for the first nine months.
The moves have surprised executives at magazines heavily dependent on beauty advertising. "We were caught a little off guard," admitted one. Another worried that the pullback could last into next year, saying: "January looks really quiet."
At last week's American Magazine Conference, executives across several major magazine publishers freely admitted the fourth quarter and particularly December issues failed to fulfill expectations, with women-targeted titles especially soft. The net effect of beauty-marketer pullbacks is prolonging a magazine recession that's already lasted three years.
A weak dollar and strong euro have hurt sales and profits for European package-goods marketers this year, giving them less budget flexibility than U.S.-based rivals. Observers said such marketers as Procter & Gamble Co. and Colgate-Palmolive Co. are doing a better job of "containment," or sustaining sales in the weakening U.S. market while stepping up marketing activity overseas, where currency effects are giving them an extra edge.